Alaska stands to make between $5.1 million and $19.2 million in tax revenue from commercial marijuana in 2016, according to a preliminary estimate by the Alaska Department of Revenue.
An estimate dated Jan. 2 looks at possible revenues that it calls "very uncertain." The tax division had to estimate both how much marijuana is consumed in Alaska every year and what proportion of consumers will switch to marijuana from the legal retail market, said Ken Alper, Department of Revenue tax division director.
"To a certain extent you're shooting in the dark here," Alper said.
Marijuana will be taxed at $50 an ounce, according to Alaska's initiative, which was voted into law in November. Leading into the election, how much revenue Alaska stood to gain was anybody's guess. Former Gov. Parnell's administration declined to publicly release a revenue estimate, although the state did produce a cost estimate of $3.7 million to $7 million to set up a regulatory and enforcement system.
Meanwhile, other entities took a stab at revenue estimates, which varied widely. The "Big Marijuana. Big Mistake. Vote No on 2" campaign against marijuana legalization estimated the state would collect $5.1 million in tax revenue, while the Alaska Cannabis Institute, which held marijuana business seminars in Alaska, produced its own estimate of $20.4 million. The Marijuana Policy Group estimated potential tax revenue of $56 million.
The tax division's January estimate doesn't include potential sales to tourists or any additional sales or excise taxes that might be levied by local governments.
There are large uncertainties in these numbers. One difficulty, Alper said, is how the state estimates the number of marijuana consumers -- a number based on a 2009-10 National Survey on Drug Use and Health.
Polling data creates uncertainty, Alper said. Marijuana is a "historically illegal product, and a stranger is calling you on the phone and asking if you use it," Alper said. That scenario leads to a "certain amount of underreporting," he said.
The largest variable, though, is what percentage of marijuana consumers will transition to the retail market, and the large range reflects that uncertainty, Alper said. The state is estimating that 30 percent to 80 percent of marijuana-consuming Alaskans will switch to the retail market.
The tax and regulatory structure Alaska is in the process of creating will be the biggest factor in determining who switches from the black market and personal grows to legal retail, Alper said. How difficult will it be to acquire a license? How stringent will zoning regulations be? These factors will influence that switchover rate, he said.
Alper noted tax revenues in Washington have come in higher than estimated, so that may bode well for Alaska's own revenue. Alper also noted a key difference between Colorado and Washington and Alaska: Alaska does not have a medical marijuana industry separate from its commercial industry. Thus, per capita, Alaska may see a somewhat higher percentage of consumers switching to a retail market, Alper said.
State's math behind the estimate
Alaska has 519,514 legally eligible marijuana consumers aged 21 and older.
The 2009-10 National Survey on Drug Use and Health estimates 37 percent of 21- to-25-year-olds (19,258 Alaskans) used marijuana in the past year, and 25 percent used in the past month. Of people 26 and older, 14 percent (65,445 Alaskans) used marijuana in the past year, and 10 percent in the past month, according to the survey.
Those numbers represent the low estimate. The state added 20 percent to those numbers to make up for possible underreporting and determined its upper estimate.
That means 84,703 to 101,644 Alaskans aged 21 and older are estimated to have used marijuana within the past year.
The state then estimated a person 21 to 25 years of age will consume an average of 3.4 ounces per year, and a person 26 years and older will consume 3.7 ounces per year.
That brings the state to an estimate of 307,624 to 369,148 ounces of marijuana consumed in Alaska in a given year.
The state also contends 310 to 1,240 medical marijuana users will switch to the legal market, producing a "small effect on overall tax outcomes," and adds another 1,147 to 4,588 ounces consumed every year.
Next, the state estimated changes in the quantity consumed due to price changes. That range has been "left significantly wide to show many possible outcome adjustments," the state says, and is estimated between 35,798 and 115,986 ounces per year.
The percentage of people who will switch to the legal retail market is 30 to 80 percent of marijuana users, the state estimates.
With that, the state ends up with a retail market consumption of 101,800 ounces to 383,520 ounces per year. Multiply that by $50, Alaska's per-ounce taxation rate, and the state arrives at its $5.1 million to $19.2 million tax revenue conclusion.