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New Jersey Legalization Effort Makes Headway

February 26, 2019

After months of stalled negotiations, New Jersey’s push to legalize recreational cannabis is again moving forward. As previously noted, the dispute has hinged on Governor Phil Murphy’s desire for a tax rate above 20%, with State Senate President Stephen Sweeney refusing to go above 12%. The two parties have finally found a path forward with a plan to tax by weight rather than price.

The plan would reportedly impose a $42 tax on each ounce of marijuana sold. Alaska is the only state that currently taxes solely by weight (though California employs a hybrid system), requiring $50 per ounce of flower, $15 per ounce of trim, and $25 per ounce of immature flower. Last year, Alaska’s cannabis revenues more than doubled to $15.7 million. That’s tiny compared to other states but reflective of Alaska’s small population and younger market.

New Jersey’s blueprint has the notable advantage of insulating tax revenue from falling market prices. Colorado’s legal market, for instance—which levies a 15% excise tax—has seen prices drop over 60% from their peak in 2015. A tax on weight can take advantage of the still-growing appetite for legal weed, without falling prey to other market forces.

The other sticking point in New Jersey—industry regulation—is now planned to be headed by an independent Cannabis Regulatory Commission, with three of the five members to be appointed by Murphy. Sponsors of the bill are confident that with these amendments it has the ability to pass both chambers and be signed into law.—Danny Sullivan

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