The Alaskan House of Representatives recently voted on May 10 in a 36-3 vote to approve a bill that implements much needed tax reform.
House Bill 119 would change its $50 per ounce tax on cannabis to just a 7% tax, which was a recommendation from an Advisory Task Force on Recreational Marijuana. If HB-119 passed in the Senate and was signed by Gov. Mike Dunleavy, it would take effect starting July 1, 2024.
Many cannabis business owners begged for relief from the current tax situation, according to a report from Alaska Beacon in September 2023. Alaska Marijuana Industry Association legislative liaison Lacy Wilcox described business owners’ situations as “desperate,” while she spoke with the House Labor and Commerce Committee last year.
The $50 per ounce tax has been in place since Alaska adult-use cannabis was legalized in 2014. According to a report written by the Tax Policy Center, which was released in September 2022, Alaska has one of the highest cannabis taxes. “Alaska’s $50-per-ounce tax exceeds all other weight-based tax rates and the remainder was a local percentage-of-price excise tax (Anchorage),” the report stated.
As a result, many cannabis businesses have been forced to close. “We are all in survival mode, and we are coming together to share our pain with you,” Wilcox added.
One of the task force members who attended the committee meeting in September added that the high taxes makes it hard for legal businesses to compete with the illegal industry. “I can tell you with a high degree of certainty that [marijuana] is still much cheaper on the black market. Alaska’s taxes and the burden on businesses from the Marijuana Control Board is causing prices to stay high and businesses to be uncompetitive,” said task force co-chair Brandom Emmett. They presented an estimate that 40%-50% of cannabis sold in Alaska is from the black market.
The law’s current $50 per ounce tax applies just to cannabis flower, while lower taxes exist to apply to “immature/seed/failed” flower at $25 per ounce and trim at $15 per ounce, according to a fiscal analysis from the House Finance Committee published in April 2024. The report projected that Alaska’s legal cannabis industry has matured, with “total volumes will only grow at 1% per year going forward (FY 2025+),” and that current trends show that flower “will continue until stabilizing at 15% of total ounces.”
The Alaska Advisory Task Force on Recreational Marijuana was created by Gov. Dunleavy in September 2022, which was tasked to “review current marijuana tax and fee structures, regulations applicable to marijuana operators, and to provide recommendations for improvements to the Office of the Governor.”
The task force of 13 members met six times between December 2022 and January 2023 to discuss matters of tax reformation as well as adult-use businesses collaborating with state government and possible enhancements to public safety. The recommendations were published in a final report that was released in January 2024.
According to Alaska Beacon, originally the task force presented a 3% sales tax, but Rep. Jesse Sumner claimed that it was too low and instead proposed a 10% tax (this was later lowered to 6%, followed by the one percent amendment increase to 7% in the most recent House discussion). Sumner added that the current 7% tax proposal will be more enticing to the Senate for possible approval.
In its recommendation, the task force also proposed changes to seed-to-sale plant tracking as well as license fees.
Earlier this month, the House also approved House Bill 228 in a 36-4 vote, and if fully passed it would establish a task force to analyze psychedelic-assisted therapies such as psilocybin or MDMA. The sponsor of the bill, Rep. Jenny Armstrong, said that HB-228 is a bill that would adapt well to the possibility of the federal government rescheduling those substances. “This August, it is widely anticipated that FDA will approve the most significant medicine for the treatment of mental health in decades,” said Armstrong on May 2. “House Bill 228 before us today would create a task force that would put forth recommendations for the next legislature to consider as it relates to this treatment. Whether you are excited about the idea of psychedelics getting approved, you’re neutral or you’re flat-out against it, I think we can all agree that if it is coming, we should be prepared and be thoughtful in how we approach it.”
Alaska has the most veterans per capita compared to other states, and also has one of the highest rates of violence in the country.
Most House representatives were supportive of the bill, such as Rep. Laddie Shaw who formerly held the title of director of Alaskan Veteran Affairs. “This task force gives us an opportunity to move forward with some productivity on behalf of our veterans,” Shaw explained. “We haven’t done anything for the last 50 years. Let’s move forward with something.” However, some representatives who opposed the bill called it “premature,” and preferred to wait until the federal government has made moves to reschedule psychedelic substances with medical potential.
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