CONCORD — The latest bipartisan bill to legalize the adult possession of marijuana creates a 15% tax on companies that cultivate cannabis.
The proposal, the subject of much discussion at a hearing Monday, shifts taxation from retail sales to wholesale.
House Majority Leader Jason Osborne, R-Auburn, said that under the proposal, the state would tax marijuana the same way it taxes the sale of beer.
“No matter what we do, we are going to be extracting new revenue from the industry because it does not exist today,” Osborne told the House Ways and Means Committee during a second hearing on the bill Monday.
Osborne said the state already taxes illegal marijuana sales in a fashion.
“I would look at it as not creating a new tax but replacing one,” Osborne said. “Whether you like it or not, there is a tax on cannabis today, and it’s an enforcement tax because it exists in the black market. The cost is baked into the price of the good of having to deal with avoiding law enforcement.
“It is simple supply and demand analysis,” he said.
A broad coalition of groups, from the fiscally conservative Americans for Prosperity to the liberal American Civil Liberties Union of New Hampshire, had embraced the original bill, which would tax marijuana retail sales under the state’s 8.5% tax on restaurant meals and hotel rooms.
Ross Connolly, AFP’s deputy state director, said at 8.5%, New Hampshire would “likely” have the lowest tax rate on cannabis of any state in the country.
“We think the 15% might be a little bit high,” Connolly said, noting the state taxes retail sales of vaping products at 8%.
All the coalition partners, including AFP, support the tax change (HB 639).
Last month the House voted 234-127 in support of the bill in a division vote, which does not reveal how individual members voted.
Some of Osborne’s Republican colleagues likely did not vote for it because they signed a campaign pledge to oppose new taxes.
House Commerce Committee Chairman John Hunt, R-Rindge, said his panel did not want to “re-create the wheel,” so it chose to have cultivators collect the tax at the wholesale level.
For decades, beer distributors have collected the state tax on beer — 30 cents a gallon.
This method also should maximize revenue for the state, Hunt said.
“If you tax it at the cultivator level, you get it before shrinkage, before it leaves the door. We’ll have gotten the tax up front,” Hunt said.
Under the bill, the State Liquor Commission will oversee the sale of marijuana at retail stores in a similar way to how it polices the retail sale of tobacco, he said.
Nathaniel Gurien, executive director of the New Hampshire Cannabis Party, praised the new proposal.
“This creates one tollbooth for an entire industry,” Gurien said.
Cultivators out in cold
Rep. Susan Almy, D-Lebanon, said she hasn’t spoken to one farmer willing to cultivate marijuana and pay a 15% tax while competing with national firms that could come in and try to monopolize the market.
Riley Kirk, a cannabis research scientist from Massachusetts, also was skeptical.
“I agree with Rep. Almy that the current proposal of a 15% tax on cultivation only would not incentivize cultivators and nobody would want to participate,” Kirk wrote in an email to the House panel.
HB 639 requires that at least one principal in the marijuana cultivation or retail business be a New Hampshire resident.
Rep. David Rochefort, R-Littleton, a member of the Ways and Means panel, said allowing these companies to make tax-free marijuana could generate more net income.
“Why tax at all? These businesses are going to pay business profits taxes. Couldn’t we conceivably make an argument that the businesses selling this are going to be wildly profitable and we are going to get our money a different way?” Rochefort said.
Osborne said his primary goal is to create a bill that can survive the political process.
“I like how you think, Representative,” Osborne said. “I happen to agree, and if you could find me another 201 (House) votes, 13 (Senate) votes and a governor, I would love to go along with that.”
On more than half a dozen occasions, the House has passed a marijuana legalization bill only to have it die in the Senate.
Senate President Jeb Bradley, R-Wolfeboro, said he remains opposed to it.
Gov. Chris Sununu said this is not a good time to be legalizing any drugs, as the state experiences a spike in opioid overdose deaths.
The New Hampshire Association of Chiefs of Police and New Futures, a public health advocacy group, both also oppose the measure.
To improve its chances, Osborne said he agreed to jettison two other provisions from the original bill that would have made it legal for adults to grow marijuana at home and would have annulled misdemeanor convictions for marijuana possession.
Committee Chairman Laurie Sanborn, R-Bedford, scheduled an executive session for Wednesday, when the panel could make a recommendation on the bill.
