New Tax Structure Proposed for Recreational Pot in Massachusetts

Marijuana sales would be taxed at a maximum rate of 18.75 percent under legislation being developed by the House in preparation for a Thursday vote that would also alter the oversight and local control of an industry legalized by voters last November, according to sources within the Legislature or close to the process.

The new tax structure for recreational marijuana, which would increase the rate by 6.75 points from the maximum 12 percent tax imposed by the ballot law, would put Massachusetts somewhere in the middle of rates among the eight states that have legalized recreational marijuana, but far below the ceiling set by Washington where there is a 37 percent sales tax on pot.

The taxes paid by consumers would come in the form of the state's current 6.25 percent sales tax, a new 6.25 percent excise tax on pot (up from 3.75 percent in the ballot law) and a 6.25 percent local option tax that can be levied by cities and towns that allow dispensaries to open in their communities, according to legislative sources.

The ballot law allowed communities to tack on a 2 percent local option tax. Lawmakers have said they want to strike a balance between creating an appropriate revenue stream for the state without encouraging the continuation of a black market for marijuana.

After avoiding marijuana policy issues for years, lawmakers vowed to review and rewrite parts of the ballot law after its passage last fall. Lawmakers said they hoped to preserve the intent of the legalization law while changing some key aspects that they worried were poorly written by ballot activists.

The bill's details, which are always subject to change before Thursday, have been held tightly by those writing the legislation, which is set for release on Wednesday. Officials who spoke to the News Service requested anonymity because they had not been authorized to discuss the details.

The Marijuana Policy Committee, co-chaired by Rep. Mark Cusack and Sen. Patricia Jehlen, has scheduled an executive session for noon on Wednesday where members of the committee will vote on whether to recommend the bill, which has been crafted quietly after a series of public hearings around the state.

The legislation is also widely expected to also address the oversight structure and the process by which cities and towns can choose to opt out of hosting marijuana dispensaries in their communities.

Sources inside and outside the State House who have spoken with members of the Marijuana Policy Committee say House leaders are leaning toward a change in local control that would allow the governing body in a city or town - the board of selectmen or city council - to approve a ban of retail marijuana sales rather than require a community-wide referendum, as is required under the ballot law.

"I was told that is in the bill," said one source.

Such a change would almost certainly bring pushback from the activists behind the successful Yes on 4 campaign who believe voters should be able to make that opt-out decision, while municipal leaders have asked for more flexibility to make decisions about pot.

Cusack, a Braintree Democrat, did not return a call or message left for him Tuesday seeking comment.

Those same people familiar with the drafting of the bill said the House plans to leave oversight of the new marijuana industry within the Treasury, but plan to propose a restructuring of the Cannabis Control Commission that would expand its membership from three to five members and spread the appointments among the governor, treasurer and attorney general.

The ballot law currently in place would give Treasurer Deborah Goldberg the authority to appoint three members to the CCC. Goldberg has urged the committee to leave the authority for marijuana oversight within the Treasury, while other have suggested giving oversight to an independent authority akin to the Massachusetts Gaming Commission.

The direction the House appears to be moving in would be a hybrid of the two.

Last year after several provisions of the ballot law took effect - including possession of up to an ounce of marijuana and home growing - the Legislature voted to delay other aspects of the law by six months with the goal of licensing retail pot shops for operation by July 2018.

The new committee formed to look at the law and consider marijuana-related legislation set a deadline of the end of the fiscal year to recommend changes to the law in order to be able to meet the timeframe for legal pot sales.

Sources told the News Service that Senate leadership does necessarily agree with the direction the House is moving on all key elements of the bill, and may be likely to rewrite portions before it emerges for a vote in that branch.

--Matt Murphy, State House News Service