State taxes on recreational marijuana estimated at $64M in first year

 In Financial, Legalization, National News, Recreational Marijuana

The Department of Revenue estimates that the legalized recreational marijuana market could produce an estimated $64 million in tax revenue in the first year alone.

The figure was mid-range given during Monday morning testimony to the Committee on Marijuana Policy, a Legislative group compiled to analyze the state’s emerging recreational marijuana market. Massachusetts legalized recreational marijuana by a ballot vote in November.

According to the DOR analysis, in the first 12 months of the program, Massachusetts could expect to see between $45 million and $83 million in tax revenue from the sale of recreational marijuana — with an estimated $64 million in the middle of that range. In the second year, Massachusetts could expect tax revenue between $93 million and $172 million, on sales ranging between $707 million and $1.3 billion.

Those figures stem from the local 6.25 sales tax, a 3.75 percent excise tax imposed on marijuana and include an optional 2 percent local option sales tax.

Mike Heffernan, commissioner of the Department of Revenue, said the figures are rough estimates based on changing variables, including how many people might purchase marijuana, at what price, and how those stats might change over time.

“Assessing the revenue impact of legalized marijuana is especially difficult. It requires us to establish the size of a market that has been… heretofore illegal and not subject to measure,” Heffernan said.

Beyond the first two years, Heffernan said estimates would be purely speculative and the uncertainties were too great to provide accurate estimates.

State Treasurer Deb Goldberg said during earlier testimony to the Committee that the 3.75 tax rate “is an immediate cause for concern.”

“It stands in stark contrast to the excise rates applied in in other states, such as Washington at 37 percent tax rate, Colorado at 29 percent, and Oregon and Alaska at 25 percent,” Goldberg said. “Our tax rate is even less than the other three states that legalized recreational marijuana in November. Our tax rate is just one policy area that must be considered carefully as changes to this law are discussed.”

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Photo: W. Marc Bernsau