A stalemate had developed between the Senate President and the Governor of New Jersey regarding how the marijuana industry will be taxed once an appropriate law is passed. However, a new plan has reignited the legalization debate and a compromise may be reached to move forward on this long-awaited matter.
Previously, Stephen Sweeney (the Senate President) had dug his heels in that he would not go along with any marijuana legalization law that set the tax rate at more than 12 percent. Meanwhile, the Governor (Phil Murphy) was adamant that the tax rate should be in the region of 25 percent.
The disagreement between these two influential leaders had driven the legalization debate to a standstill and there seemed to be no hope for a way out of that stalemate.
Now a new proposal to tax marijuana products by weight rather than by each item sold appears to be providing the much needed compromise between the two parties. While there are disagreements on various issues, the different opinions on tax matters were the biggest bone of contention between the lawmakers and the Governor.
Proponents of the new tax proposal see that plan as beneficial in two major ways. The first, as already mentioned, is to build consensus between the two sides on the tax rate.
Secondly, taxing marijuana by weight has the added long-term benefit of protecting the state’s tax revenue from the effects of marijuana price fluctuations.
You see, in states where marijuana taxes are based on the sales made (excise tax), falling marijuana prices have caused tax revenues to take a hit.
For example, Colorado reported in 2018 that marijuana prices had fallen by approximately 70 percent from what they were in 2014 when recreational cannabis was legalized.
Such a huge drop in prices can cause serious funding shortfalls for states where an excise duty is imposed on all marijuana products sold.
The plan to tax cannabis by weight shields the state from such tax income drops since the taxes collected will stay the same regardless of which trend marijuana prices take. As historical data shows, prices inevitably go down as more players enter the industry and new production methods cut costs for cultivators.
Taxing marijuana by weight may therefore be a masterstroke that gets legalization back on track while also ensuring that the state will have a sustainable source of revenue. Such win-win solutions are what everyone in the industry, including Earth Science Tech, Inc. (OTCQB: ETST) and Choom Holdings Inc. (CSE: CHOO) (OTCQB: CHOOF), wants for all jurisdictions where marijuana is legalized.
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