Weighing enforcement and black market, city introduces marijuana tax

The Anchorage Assembly is introducing a measure to tax marijuana when sales become legal in the year ahead. The proposal hinges, however, on voter approval in April.

Though it’s still several steps away, Assembly members are proposing to eventually tax marijuana retail sales at five percent.

Ernie Hall chairs the committee that’s been looking at how to tax cannabis products within the municipality, and said the figure is a preliminary estimate of what the city will need to collect in order to pay for the licensing and enforcement costs that come along with opening new businesses.

“This is drafted where if we start at five and we find out we’re not covering the expense of this industry we can adjust it two percent at a time over a number of years,” Hall explained after the committee meeting adjourned Thursday evening. The Assembly would only be able to change the percentage taxed every two years.

If the Assembly can vet the measure and gather public testimony on it before the end of January then the proposition will make the deadline for going before voters on the April 5th ballot.

As it’s written now, the ordinance also puts limits on the maximum and minimum taxes that can be levied: it can drop no lower than two percent, but climb no higher than 12 without going back before voters. The reason for not trying to capture more revenue at the outset with a higher taxed percentage, according to Hall, is that the Assembly doesn’t want to place too large a financial burden on legal sales.

“We don’t want to make the cost of marijuana so high that the black market continues,” Hall said. As part of the developing lisencing model, the State will levy a tax on new businesses before local governments figure out how to pay for their own permitting and enforcement costs. “Before you know, the price so high that the black market can continue to thrive–and we absolutely don’t want to do that.”

The Assembly’s Finance Committee will look at the measure later this month, which will determine whether five percent is enough of a tax to cover municipal regulatory costs.

The marijuana sales tax has nothing to do with another tax measure voters could see in April: South Anchorage Assembly Member Bill Evans is introducing a flat sales tax, which he hopes will lessen the burden currently placed on property-owners.