Five years ago in October, Alaska recorded its first commercial marijuana sales, and a new industry was officially underway — with licenses, regulations and taxes. Half a decade later, marijuana in Alaska looks like many nascent industries: some success stories, some rude awakenings, some growing pains for operators. It’s a good time for our state to take stock of what’s working well and what isn’t when it comes to Alaska’s marijuana laws.
First, the good: The horror scenarios envisioned by legalization opponents haven’t come to pass — far from it. There has been no raft of marijuana-related crime, no significant impacts on underage Alaskans, no blight on neighborhoods where commercial dispensaries and grow operations are located. In part this is because those fears were overblown during the hype around a contentious legalization campaign; part of the credit is also due to legislators and the Alaska Marijuana Control Board in crafting commonsense regulations related to the industry. Alaska now has a full suite of laws governing marijuana operations, regulating everything from advertising to shop locations to tests for potency and health standards. For the most part, these laws have worked well, and policy tweaks have been applied as needed — relating to the potential for on-site consumption, for instance.
Ironically, revenue from marijuana taxes has given the state one of its only new revenue streams in recent memory. And although the $24.2 million that marijuana taxes contributed to state coffers last year certainly won’t fix Alaska’s budget issues, it doesn’t hurt to have a new industry paying its way. Perhaps the best indicator of how legalization is going is what’s happening elsewhere: Since Alaska and Oregon joined Washington and Colorado in 2014 as the first four states to fully legalize recreational use of marijuana, more than a dozen other states have followed our lead. Introducing this new industry has bred a whole generation of new entrepreneurs, willing to risk time and capital to build their own businesses. Encouraging folks to make something from nothing is good for our economy at large and well in line with the spirit of life in the Last Frontier.
However, that doesn’t mean it’s been a completely smooth road for entrepreneurs in the industry. Alaska is well familiar with the gold-rush mentality, and a flood of new businesses into the field has led to heavy competition, slimmer margins and exposure of some of the issues peculiar to the way our state decided to regulate marijuana businesses. In response, industry players are talking up the need to change some of our marijuana laws to help level the playing field — or, less charitably, to protect their own fiscal interests.
Some of the changes that commercial marijuana license holders are requesting make more sense than others. The introduction of a cap on licenses, for instance, has no place here: As we’ve seen in the bar industry, introducing artificial limits on licenses stifles innovation, rewards existing players and establishes high barriers to entry that allow only the well-heeled to participate in the industry. Our current license system can get messy, as it doesn’t have the safety net of the license being a valuable asset that a business owner can sell to recoup revenue. But that’s what the free market is supposed to do: reward those who fill needs and adapt best to changing circumstances, and give a wake-up call to those who are ill-equipped as entrepreneurs.
When it comes to taxes, on the other hand, the complaints of marijuana businesses have some merit. Alaska has a simple, even simplistic tax structure for marijuana ($800 per pound for cannabis buds, $240 per pound for “trim” — leaves and other parts of the plant used for edibles) that doesn’t take into account potency. As potency is the single most important determinant in marijuana’s price and consumer demand, the flat-tax structure gives growers a perverse incentive to waste mid-strength buds by destroying them rather than paying the tax. It also creates an “arms race” wherein growers are rewarded for cultivating strains at ever-higher potency, which in turn makes marijuana users’ tolerance increase. It doesn’t serve anyone well — not growers, not customers and not the state.
When the Legislature gavels into session in January, members will have their hands full with issues such as the budget and a long-term fiscal solution to Alaska’s revenue problems. But legislators should also carve out some time for tweaks to our marijuana laws — by and large, the system is working well, but five years’ experience with a legal marketplace has shown we can make a few improvements.