Alaska’s marijuana tax rewrite moves from House committee

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A bill to cut the tax on marijuana growers, and instead enact a sales tax for consumers, left the House Labor & Commerce Committee on Friday for House Finance Committee, after proponents made a compelling case that growers are being harmed by the current tax regime.

Marijuana cultivation and marketing was legalized by Alaska voters in 2014 and the industry started growing, regulated by the Alaska Marijuana Control Board.

HB 119 reduces the tax on cultivated marijuana from $50 an ounce to $12.50 an ounce. At the same time, a 6% sales tax would be levied on consumers who purchase cannabis at retail stores in Alaska. Proponents believe that a lower tax and restructuring will take some of the wind out of the sales that are currently being done on the black market.

Lacy Wilcox, owner of a cannabis business in Juneau, said that the tax is eating into profits.

“It’s a $50 An ounce tax, that translates to $800 a pound. If the going rate of wholesale cannabis sold to a store from my farm is $2,000, you do the math. It’s not very much leftover to pay for the lights, the water and the people who grow it. The margins [are] pretty slim,” she said.

Bailey Stuart, chief operations officer of The Green Jar and adjunct professor and developer of the CannaBasics Course at the University of Alaska Anchorage, explained some of the market dynamics at play in a letter to the committee:

“HB 119 will provide the State of Alaska with future revenue. As the excise tax stands, upon legalization, most cannabis will be imported into the state of Alaska and with our current tax structure will not incur taxation on the state level. The Department of Revenue is already reporting a decline in marijuana excise tax. When federal legalization occurs this drop will be substantial and as a resident of Alaska, I would hate to see programs under funded or completely terminated due to a lack of funding that could have been prevented with HB 119. Additionally, HB 119 will facilitate a more fluid working Alcohol & Marijuana Control Office. Per the request of the Director and Board this will change statue lanuage to establish biannual licensing. This is in par with the Alcohol industry and will facilitate in the operations of AMCO,” she wrote.

The Reason Foundation, a libertarian and free-market think take, also sent a letter in support of the change, saying “the tax reduction proposed in House Bill 119 could induce more marijuana transactions to shift to the legal market. A rate reduction from $50 per ounce to $12.50 per ounce should reduce revenues on existing transactions substantially but at least partially be offset by the additionally captured transactions.”

One of the more persuasive arguments was that if and when the federal government legalizes marijuana, it will be far cheaper to import it from out of state, if Alaska growers are being taxed at the current rate. Federal officials have already moved to work on reclassifying marijuana, a big step toward legalization.

There was no voice vote on the bill, which moved out of the committee without objection. Watch the hearing and hear the testimony at this link.

33 COMMENTS

  1. Interesting to note that push back from agencies on tax reduction on weed growers . I read Alaska had $17 billion dollar surplus in 2022 ? Could this misinformation ? I read it in an article on how each individual state was managing its money . Alaska was no. 1 in money management . They need to get rid of the taxes on the weed industry . Several operations have closed and cannot pay the grow taxes . Ridiculously high !

    It also calls into question on why the permanent fund checks are minimal ? The governor authorized a larger check and the folks we send to Juneau don’t want to fund the governors wishes . Jerks , all of you !

    If we were able to produce more oil on the North Slope , could easily double the amount in the Permanent Fund . 500,000 barrels per day of production is stupid low nowadays . Easily 500,000 barrels per day of production sitting in ground . Why , no money available for small company’s to produce the oil they found in the last several years . It takes big company’s that are listed on NYSE to finance in house . Ridiculously slow process . The oil needs to be produced for the people of Ak for the benefit of all Alaskans !

    • How can the State of Alaska have a surplus of $17 billion when the total budget for FY2023 was $13.9 billion and FY2022’s total spending was $14.6 billion.

      I think you need to find that article again and show your sources because the number you are stating seems pretty off considering that your supposed surplus is more than the entire budget has been in the each of the last 10 years.

      Now on the topic of cannabis taxes, these proposed changes are spot on. The proposed changes still get tax revenue to the State, they keep businesses in business and they are setting up Alaska to be ready for when federal legalization occurs. The proposed regulations also reduce the pull of the black market for cannabis as it makes it more feasible for small businesses to continue to do business.

      With regards to Oil Taxes, the major producers are not going to increase production when they make money hand over fist at the current levels. Why should they increase production when the price is so high now? Additional supply will ease the demand for more and thus reduce the amount they can sell their oil for. Their only incentive to increase production is if they were told the price would be not go down.

      Personally, I think we need to revisit SB21 and the tax credits we are paying out while those same companies make record profits. But that is just one man’s opinion

      • Not sure how they came up with it . It might have been in this paper . Maybe it was Permanent fund earnings plus oil revenues and Federal spending in Alaska combined ? I was surprised . And the numbers did not add up .

        I think the problem is that small oil company’s have no access to capital for developing their finds . I can site several examples , Pikka is probably one of the biggest examples . Armstrong drilled and found field at least twelve years ago . It may go into production in the next few years . He could not find capital to produce it . He sold prospect to large company that had the cash do so . Very patient capital

  2. Jeff , crude oil is turning into sin tax . BlackRock , VanGuard , WellsFargo and Carlile group will not finance oil and gas extraction in Alaska . And even the Alaska Democrat platform is looking at denouncing the extraction of oil and gas in their Alaska platform ! ( good luck with that one dummies) . These Real nice company’s that manage a large percentage of Permanent fund is invested with these woke investment groups . No one wants to talk about it speak about it ?

  3. If you choose to impose taxes on any legal industry, it should be administered without regard opinion or personal preference. In the case of a potentially harmful substance, legality should be considered the tool to control the harmful effects to humanity. This has many examples, just the flavor of the day. The only reason for this substance being legal is because of the tax revenue, it was never about personal liberty. Embrace the taxes that made it possible on every street corner and so very available to all. Pretend to use the revenue to counter the damage caused by abuse. Taxing affects every business’s profit margin, evidently. Even necessities are taxed.

    • It’s legal because putting people in jail for weed is ridiculous. Alcohol is and always has been much more destructive than weed.

      Teetotalers prohibited alcohol once upon a time, and it led to rampant crime and corruption.

      Freedom isn’t always pretty, but it beats the alternative.

    • So you have no issue with taxes being so high it puts people out of business and forces more cannabis sales into the black market?

      Didn’t our founding fathers have a big tea party in Boston protesting unfair taxation?

      $12.50 per ounce plus 6% sales tax is a good, fair compromise. That is still $200 per pound flat rate plus 6% of all sales. It keeps money flowing to the state and cities as well as allows businesses to continue to do business thus employing more people and adding to the community

      Legal cannabis sold in licensed retail stores not only generates tax revenue for the state and cities, but it stops underage kids from getting access to it.

      No drug dealer on the street is checking IDs. None of that cannabis sold on the black market has been tested. Both of those things happen for any legal cannabis sales in Alaska.

  4. The marijuana growers should never have been given the right to grow weed in Alaska. Sorry, guys, I have NO sympathy for you. A drug is a drug is a drug.

    • Probably same goes for booze sales and bars . The poor drunken folks come in from the villages all summer and sleep in the bushes around Anchorage . I think it’s more about personal freedom and choices . I had parents that drank and smoked , never smoked and don’t drink much .

      For Christ sake Anchorage was literally built on bootlegging back in thirties . Bootleggers cove is where the brought the “Hooch “ up from CookInlet that was ferried across from the village of Hootchanyia . Russian Indian village where they put whiskey in tomato cans to smuggle in to Anchorage. Some of the wealthiest families in Anchorage were involved .

  5. Legalized Weed is a complete scourge on our State. The short and long term “negative” affects are being ignored and only continue to accelerate.
    INDEED(!), we need to develop more oil from the entire North Slope and maximize the TAPS infrastructure. But, if you plan on getting an honest and meaningful job on the North Slope or along the TAPS line, you will need to be “weed free” and, remain so. Otherwise, you’ll simply pizz-away a six figure income … what a waste!

    • Rob, I agree with you. In fact, I would go further, and state that we as a state and a society DO need a “war on drugs”, permanently. It is just that illegalization was the wrong way to wage that war. More than that, illegalization was, and is, simply a reflection of the ignorant and arrogant statist mentality of “pass a law, automatically change reality”. Sorry, it is not that simple.

      Now, how exactly to wage that SENSIBLE war on drugs, I am not sure. I am not a radical leftist extremist, so I cannot claim to have all the answers.

      • How much we should do to discourage vice in our society is a valid discussion.
        I just don’t believe leftists are interesting in having that discussion in good faith.
        They just want to corner the market.

        Don’t consume any nicotine products, but from the outside vaping seemed to have very little downside – product that delivers the ‘hit’ without the tobacco – yet that industry was demonized overnight. Its not just about ‘secondhand vapor’ – because they are after chewing tobacco as well.

        Marijuana, if anything, appears worse. Burned substances in the lungs and addiction, with the added bonus of brain damage. Dispensaries have multiplied like mushrooms in Anchorage, but now Democrats are telling me that this industry needs ‘a helping hand?’ Sure.

    • Really and what would thise be other than your made up rhetoric?

      At some point a reasonable adult accepts they were duped.

      It is clear you haven’t actually observed the effects of legalization across the US or have relationship with consumers.

      All these anti-cannabis “conservatives” are about small goverment and state’s rights until it comes to a plant God made… wow.

      It not ok for the governemnt to be totalitarian unless it is against an industry you don’t like…hypicrites and ignoarant.

    • A scourge?? Hahaha please tell of the public crime and health stats that demonstrate this…really go ahead… we will wait.

      Self-ignorant hypocritical low thinkers are far more dangerous.

      Sure you have no issue with alcohol, coffee, tea, coke…

    • Working back in the seventies on the pipeline , it literally took cargo planes full of whiskey and Cocaine to build pipeline . Saw it all living in Fbks in the seventies . It’s amazing they were able to build it with all those drug crazed kids working on it .

      • Modern Day Anti-Scourge in Fbks (i.e. places of Grandeur, High Character, Esteemed Prominence, etc.) continues to be … Club Soda, Pump House, Turtle Club?

  6. Just say no to drugs. Take care of your children and grandchildren so they don’t end up self medicating with drugs as a coping tool for dysfunctional family upbringing.

    Put the drug dealers out of business because of no need

    • Well, cannabis is a healthy plant God made, not a drug, so you are saying God is a drug dealer?

      How about protect your kids from rhetoric and low brow thinking that makes them automatons.

      You sure are assuming a lot about people…sure says a lot about who you are.

      • To all of my arrogant self-centered pothead neighbors: the “God made it so I can get wasted” argument has no logical end – God made strychnine, just so I could get a buzz, destroy my brain, and die – and therefore I’m free to commit that painful suicide. Right… Let’s legalize and sell on every corner and encourage “acceptance” (and boost sales…) of heroin and fentanyl. The issue is what constitutes abuse and what is harmful. God made all these things, each for their proper use, and warns us in Scripture about abuse.
        To the whining pot industry: my sympathy is found in the dictionary somewhere between sh** and syphylus.
        No marijuana tax change unless it is revenue neutral. “6% sales tax” is a trial balloon for a sales tax on everything. CUT the budget. Boost oil production.

        • Well cannabis is a healthy plant whether you want to accett that or not is your self-ignirance but doesn’t make it true.

          You are comparing a healthybplant Gid made and things that kill you.

          So, your argument is moot and rather silly. You probably think you have a well thought reasoning.

          Your selective prejudice against a plant that is not a drug shows more of brainwashing then good reasoning.

        • Your level of brainwashed hubrus just makes you sound really ignorant.

          You sound as crazy as people who think a boy can be a girl.

          You are so conditioned you deny reality and hate your nieghbor for it.

          You are a sad, strange, and small individual.

  7. The public has spoken on weed, legalizing it several times. I think that ship has sailed. OTOH, we can do what they used to to in Texas with alcohol sales. Down there, sales are legalized at the city, town, village, even precinct level. There were decades of legalization campaigns in local elections. The Baptist preachers would get nicely spun up giving regular sermons on the evils of Demon Alcohol before the election. Vendors would respond. Both sides would spend a lot of $$$. Some would win. Some would lose. The wet / dry areas would shift a little bit. And they’d be back at it a year later accomplishing absolutely nothing in the process outside spending a lot of $$$ better spent elsewhere.

    The only thing I’d be careful about with taxes on pot is we don’t end up like Cali, driving legal trade back into the black world. Cheers –

  8. Most of the problems everyone argues about in Alaska are based on lack of revenue.
    To replace the marijuana tax revenue, Alaskans should demand that the legislature pass an oil tax bill that gets maximum value for our resources as required by our state Constitution.
    As Robin Brena explains, every other oil region is awash with cash but Alaska

    ‘https://twitter.com/i/status/1749521793684226346

  9. Camel and nose. Ten years ago it was ‘legalize it, but we know it makes a mess so tax/regulate it heavily’. Now they are pushing to remove the taxes and regulations – a first for Democrats. Its clear they recognize their donors and voting bloc.

    I wouldn’t care, if Democrats weren’t so busy simultaneously adding restrictions to the sale of every other ‘socially costly’ product they don’t like. (Vapes, tobacco, guns, etc.) When a group of habitual control freaks suddenly start channeling Milton Friedman – you have to ask yourself why.

    If free samples are so harmless, why did the federal government just ban them for tobacco and vape products a few years back? If flavoring your product is so harmless, why are they busy banning menthol cigarettes and flavored vapes?

    Answer: it has nothing to do with public health or safety – its simply crass market manipulation. Remember – these people champion ‘fat’ pride, nasty sexual behavior, and public drug use. Suddenly they are worried about the state of your lungs? Come on. Also explains why they lump ‘e-cigs’ in with tobacco – despite there being no tobacco involved. Its not the product – its the producers they don’t like.

  10. Once again, taking valuable time during the session to work on special interests instead of the job they were hired for. We need to tell them what we think about this.

  11. So they lower the tax on growers, but they want to tax the consumers? Does that mean the cannabis shops are going to lower their prices? If not, then arent they just pushing people to buy from the local dealers rather than the cannabis shops? Seems like that would invite alot more problems

  12. The cultivators are carrying all the tax burden at a set amount (not a %) even though the price has dropped.

    This is unsustainable. Their reduced taxes makes it less expensive to the retailers who can add the sales tax without real raises to prices.

    Like all businesses, taxes and costs are carried by the consumer regardless of how many.

    This will balance the liability.

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