New Report: Legalized Marijuana Could Generate up to $82M for RI

Wednesday, April 09, 2014

GoLocal News Team

A new report by Open Doors estimates Rhode Island could bring in between $21.5 million to $82 million in revenue from the current legislative proposal to tax and regulate marijuana.

Read the report HERE

According to OpenDoors' new report “Estimated Effects of the Tax and Regulate Legislation in Rhode Island," the current tax and and legalization legislation, H 7506 and S 2379, which would create a $50/ounce excise tax on all marijuana sold at wholesale and impose a 10% special sales tax on all marijuana and marijuana products sold at retail, would result in taxes that would generate $7.6 to $21 million for alcohol and drug abuse treatment and education, $10.5 to $50 million for the general fund, and $1.9 to $5.2 million for medical marijuana research.

Estimated tax revenue was calculated using research methods developed by the federal government, economists at the RAND Institute, and Harvard University. Dr. Angela Dills, Ph.D., Associate Professor of Economics at Providence College, said, "The revenue calculation in this report is based on a well researched and standard methodology, and Rhode Island can expect taxes somewhere in the range of this $21.5-$82 million estimate."

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The report takes into account the various estimates for how much marijuana is currently being consumed in Rhode Island; predicted changes in price and their impact on levels of consumption; the level at which marijuana will be taxed; and the amount of marijuana that will be taxed. According to Professor Dills, "The policy report by Open Doors translates previous research to the particulars of legislation introduced in Rhode Island and provides a reasonable estimate for tax revenue."

Open Doors on Implications

Nick Horton, a policy specialist at OpenDoors and author of the report, stated, "Passage of this legislation means tens of millions of additional revenue for necessary Rhode Island programs, including those that treat alcohol and drug abuse. While multiple variables makes it impossible to know for certain how much money Rhode Island will see, but we can be pretty confident that the state will realize between $21.5 and $80 million a year as a result of this policy change." Mr. Horton previously served on the Senate's Special Commission on Marijuana Prohibition in 2010, for which he helped conduct research on the predicted impact of the marijuana decriminalization legislation that took effect in April of 2013.

OpenDoors also worked with the Department of Corrections, Research, and Planning to estimate there are about 42 sentences issued per year in which marijuana delivery is the controlling charge. While the overall financial cost to the state is relatively low, the report highlights the human burden of each of these incarcerations for a nonviolent crime. The report also points out that blacks and Hispanics are sentenced disproportionately for these offenses; the rate of incarceration for marijuana delivery for blacks and Hispanics is two times greater than their percentage of the population.

According to Pat Oglesby, former chief tax counsel of the U.S. Senate Finance Committee and founder of the Center for New Tax Revenue, “we are at the beginning of figuring out how marijuana might be taxed. The taxes in H. 7506 and S. 2379, the proposed Rhode Island Marijuana Regulation, Control, and Taxation Act, would be a significant improvement over the marijuana taxes in Colorado and Washington, the two states where marijuana is already legal. In Colorado and Washington, excise taxes are based on price. But prices can go down, so price-based taxes may prove too volatile. And prices can be artificially gamed. The Rhode Island bill’s per-ounce tax base is more stable and harder to manipulate. It’s a better tax plan.”