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With no official forecast planned, revenue from Alaska marijuana taxes is anyone's guess

  • Author: Suzanna Caldwell
  • Updated: September 28, 2016
  • Published September 11, 2014

Want to know how much tax revenue the state of Alaska stands to make if Ballot Measure 2, the initiative to legalize recreational marijuana, passes in November?

Take a calculator and guess how many ounces of marijuana Alaskans will purchase in a year, then multiply that by $50.

Done? Then you're as close as anyone else to guessing how much tax revenue Alaska stands to gain.

Alaska Department of Revenue spokeswoman Lacy Wilcox said the agency is not planning to conduct a revenue forecast to estimate how much money the state would make if marijuana was legalized. The issue? The agency, which oversees the state treasury and matters of taxation, has no data on how much marijuana would be sold and therefore cannot estimate how much would be taxed.

Beyond a formal forecast, the state cannot even consider possible implications, according to a directive from the Gov. Sean Parnell's office prohibiting the use of state resources to look at the possible economic effects of marijuana legalization.

A request by Alaska Dispatch News for the state to analyze a formula used by the "Big Marijuana. Big Mistake. Vote No on 2" campaign to calculate potential marijuana tax revenue was denied. Wilcox said that would require the state to expend resources on the subject, which they are currently prohibited from doing.

That's not to say that there is nothing known at the state level about costs. In January, the Alaska Department of Commerce, Community and Economic Development did a minimum cost estimate, which is required of all ballot initiatives per state statute. That estimate of between $3 to $7 million in the first year simply looks at costs state agencies expect to incur should voters decide to legalize marijuana. It does not factor in current costs, nor does it include revenue estimates.

While much has been made of comparing Alaska to Washington and Colorado -- where recreational marijuana is legal -- Alaska differs when it comes to revenue forecasts. Washington and Colorado both had state economists conduct revenue forecasts ahead of a popular vote. Oregon, which may legalize marijuana this fall, also did a forecast, as required by state statute.

But Alaska isn't budging.

In an interview Tuesday, Parnell said he would not draft regulations related to marijuana use ahead of the initiative passing, but that he was not aware of any directive to not expend resources on a revenue forecast. In a follow-up, his spokeswoman, Sharon Leighow wrote "(the governor) does not think it is prudent to spend state resources on an analysis at this time, when there are still so many unknowns such as the number of growers, sellers, customers and regulations.

"Simply put -- there is not enough data to have realistic projections," she wrote.

Here's what the state does know: The initiative states that marijuana would be taxed $50 per ounce at the wholesale level. But Wilcox said that there's hardly any data to support how much would be sold if it were to pass.

Still, the department is carefully watching other states that have legalized recreational marijuana for guidance.

"We are attentive to the returns coming out of other states where similar situations exist and will continue to observe those statistics so that we can be as prepared as possible should the initiative pass," Wilcox wrote in an email.

Alaska may be the third state to legalize marijuana with Ballot Measure 2, an initiative that would make the drug legal to those age 21 and older. According to the language of the initiative, sales would be taxed at $50 per ounce at the sale or transfer from a marijuana cultivation facility to a retail store. Supporters of the initiative say the language of the law is based closely on the language used by the Colorado initiative, which passed in 2012.

Legal sales of recreational marijuana began in Colorado this year. So far, Colorado has collected almost $12 million in taxes. Most of that money will go toward drug treatment, schools and prevention programs -- but it's far below the $33 million Colorado estimated would be made in the first year.

Campaigns chime in

The Campaign to Regulate Marijuana Like Alcohol in Alaska has been hesitant to release an exact number. Campaign spokesman Taylor Bickford declined to provide Alaska Dispatch News with any estimates on how much money the state could receive in taxes, only that it would be in the "millions."

Bickford said it would be "wildly irresponsible" to make such an estimate until more is known on what the market would look like.

"It's not something we're interested in doing because it's a disservice to the voters," he said. "But it's possible between now and November we will have a more official projection."

Not only will there be an excise tax on marijuana (similar to alcohol and tobacco) but there will also be corporate income taxation applied to all new businesses as well as sales tax in communities where that is already in place, Bickford said. He also noted that local communities could opt to add additional taxes to the drug.

Bickford said that there will also be licensing fees at the state and local level, and that the revenue generated by those fees "should be expected to pay for a significant portion of any enforcement costs." In June, the Alaska Association of Police Chiefs calculated it could cost local law enforcement up to $6 million in additional costs.

Officials with Big Marijuana. Big Mistake. Vote No on 2 campaign said they expect the state to make about $5.1 million in tax revenue annually. They calculated the figure by looking at tax revenue collected by Colorado in February and then dividing it by the number of Colorado adults over the age of 21 -- arriving at 89 cents for each. They then multiplied that number by every Alaskan over the age of 21 to come up with a monthly estimate, multiplying that by 12 to get an annual estimate of $5.1 million.

Campaign spokesman Charles Fedullo stood by the numbers Monday, saying the campaign believed it was a reasonable analysis. He said campaign volunteers calculated it in April.

"The difficulty is that there isn't a lot of options to use to develop a fair analysis," Fedullo said. "We figured this was as good as any to at least have some number that we could use as reference."

But even that logic allows for "pick your figure" style of selection. Using that same formula, but using Colorado tax data from July, which showed a dramatic increase of $6.02 million in tax revenue alone, Alaskans could stand to gain as much as $10.3 million annually in tax revenue. Pick a month with lower revenue, or an average of all the months, and the total annual figure is significantly lower.

Dr. Troy Payne, an assistant professor at the University of Alaska Anchorage Justice Center, noted that research on marijuana is lacking across the board. Payne studies criminal justice and said finding economic calculations is as difficult as finding crime statistics for marijuana in Alaska.

He compared the debate over Ballot Measure 2 to that of Ballot Measure 1, the recently rejected measure on Alaska oil taxes. Lots of rhetoric, but light on facts -- a disconcerting idea if you're trying to decide public policy.

Payne added that the data and demographics on legal recreational marijuana use from other states are so new that it makes it hard to draw accurate comparisons.

"It really exposes a weakness in criminal justice, health and economics research," Payne said. "There's just an awful lot we don't know."

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