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House to consider pot marketplace, taxation law

We sort of found that 20% (tax rate), which is what Massachusetts does, is a good place to land. I think there might be some tolerance for being a little higher than that, but not much.
— Rep. Janet Ancel, D-Calais

MONTPELIER — The House Ways and Means Committee advanced legislation this past Wednesday that would legalize a marketplace for marijuana and set a 20% combined tax rate on sales of the substance.
The action means the bill, S.54, will likely see a full vote on the House floor in the coming weeks. It represents major movement for the legislation, which stalled in the Ways and Means Committee when it arrived there last year.
Under the House bill, which was reported out of committee on a 7-3 vote, cannabis purchases would face a 14% excise tax and a 6% sales tax. The excise tax would send revenue to the state’s general fund, and the sales tax would feed the education fund.
According to a mid-range estimate from the Joint Fiscal Office, the state could expect to see about $13 million in tax revenue about four years after dispensaries start selling to consumers in 2022. Of that revenue, $8.9 million would be sent to the state’s general fund, and $3.8 million would go into the education fund.
In determining how marijuana should be taxed, lawmakers sought to ensure that the rate was high enough to generate substantial revenue for the state.
But they were also cautious about making sure the tax wasn’t so high that users would be discouraged from buying the drug at dispensaries, and continue to heavily use the black market.
Other states that have recently legalized cannabis have seen thriving black markets, even after dispensaries have opened.
“We sort of found that 20%, which is what Massachusetts does, is a good place to land,” committee chair Rep. Janet Ancel, D-Calais, said after the vote. “I think there might be some tolerance for being a little higher than that, but not much.”
The version of the bill to tax and regulate marijuana that passed the Senate last year had a lower, 16% combined tax rate.
The committee also jettisoned a 2% local option tax that would have allowed municipalities to collect revenue from cannabis dispensaries.
Karen Horn, a lobbyist for the Vermont League of Cities and Towns, urged lawmakers to keep the local option tax in the bill, and said that towns are going to need additional revenue to cover the costs of managing a new legal cannabis market.
“Municipalities are going to be responsible for enforcement at the local level so we’re going to need to address zoning issues,” Horn told the committee Wednesday morning.
“We’re going to need to address complaints about odor about secondhand smoke … security concerns and hours of operations and events,” she said.
Ancel said she preferred a sales tax that would provide money for the education fund, “which benefits every town in the state, rather than individual towns.”
Sen. Dick Sears, D-Bennington, the chair of the Senate Judiciary Committee and a longtime proponent of marijuana legalization, said he believes that 20% tax rate is a “little too high.”
The reason: “Because we want to compete with the black market,” he said.
He added that he supports keeping a local option tax for municipalities, because it gives them an incentive to allow dispensaries and other cannabis facilities to open up.
After passing the Ways and Means Committee, the cannabis bill now moves to the House Appropriations Committee, and will likely see a vote on the House floor soon.
While there is broad, tripartisan support to legalize marijuana sales in the House, Speaker Mitzi Johnson, D-South Hero, has been reluctant to back the measure and has reservations about expanding legalization. But she has said she won’t stand in the way of the measure if it earns the 76 votes it needs to pass and addresses concerns about roadside safety, youth usage and the impact a marijuana industry could have on the environment.
Gov. Phil Scott has also said he could support a bill to tax and regulate marijuana if it addresses similar concerns and has even pitched using marijuana revenue to fund his proposal to offer universal after-school programs to children in Vermont.

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