Challenges Facing the Legalization of Marijuana
The legalization of marijuana in this state was triggered by the passage of two bills. These bills legalize the possession, cultivation and sale of marijuana and create an incentive for marijuana businesses to locate in states where legalized marijuana is readily available. The legalization of marijuana also has many benefits for the public, including increased tax revenue. However, there are several challenges associated with regulating marijuana businesses. The biggest challenge is ensuring that marijuana businesses are operated in an ethical manner.
Legislation to legalize marijuana
Legislation to legalize marijuana is still under consideration in Congress. While it has passed the House and cleared a sponsor’s panel in September, it has not yet passed the Senate. That’s because it requires 60 votes to pass. However, some Democrats are supporting the bill. Vice President Joe Biden has publicly backed marijuana decriminalization, but he has also signaled his support for federal prohibition.
The state’s Cannabis Control Division will oversee the legalization of marijuana. The new law will allow adults 21 and older to possess marijuana and purchase it from a licensed retailer. The new law eliminates penalties for public possession of three ounces of marijuana and up to 24 grams of concentrated marijuana. Applicants will have to pay a 12 percent excise tax. The taxes will rise by 1 percent each year until 2030.
This new law will also provide opportunities to low-income communities of color, which have long been slashed by the drug wars. Under the new law, a portion of the tax from the sale of cannabis will go toward investing in these communities, through the Restore, Reinvest and Renew Program. Moreover, under the new law, arrest records of people who possess small amounts of marijuana will be automatically expunged. Moreover, a list of minor possession offenses will be provided to the board that makes clemency recommendations to the governor.
In the past two years, some states have pushed for legalization of cannabis. For instance, in New Jersey, marijuana was made legal for adult use in 2016. And in Connecticut, a bill that would legalize marijuana for adults in 2021 will become law there. Those states that are currently legalizing marijuana for adult use are:
There are still a few key pieces of legislation in the works. Several bills have already passed the House. One of the most important is the SAFE Banking Act, which would allow cannabis businesses to obtain bank accounts. Currently, marijuana businesses are barred from bank accounts under federal law, leaving them vulnerable to robbery. However, the bill has repeatedly stalled in the Senate. Hopefully, it will pass by the Senate soon.
Tax revenue generated by legalized marijuana sales
As marijuana legalization proceeds, state governments are beginning to reap the financial benefits. According to a report released by the New York state comptroller’s office, tax revenue from marijuana sales could hit nearly $3 billion in 2021, an increase of 33 percent over a year earlier. In fact, cannabis excise tax revenues are outpacing those of alcohol and other “sin taxes” by a significant margin.
In Washington and Oregon, states have departments dedicated to cannabis sales. In Massachusetts, the Cannabis Control Commission does not collect tax payments, but the state Department of Revenue will. It will be difficult to estimate tax revenue from marijuana sales in Massachusetts without knowing how much cannabis is being sold in a state. Regardless, the cannabis tax revenue will be a vital part of the state’s revenue stream. Ultimately, the question remains, how will marijuana businesses do well in Massachusetts?
The Illinois Department of Revenue reports that cannabis tax revenue has surpassed liquor sales taxes in the state. Between July and November 2016, adult-use cannabis generated more than $193 million in tax revenue. The state’s liquor tax revenue is made up of taxes on beer, wine, and spirits. This money will be distributed to local communities to improve their quality of life. The money will also go to public schools and the transportation fund.
While marijuana is currently taxed for medicinal purposes, the income generated from cannabis sales is not always transparent. There are a number of factors that go into determining the amount of tax revenue that marijuana generates. The marijuana industry has a large market, and taxes for it will be high. For instance, the amount of THC in marijuana products depends on the product’s potency. The government must account for the THC content of the product, which will be used to determine taxes.
Regardless of the reasons for the revenue generated from marijuana sales, the legalization of cannabis in the United States has benefited many communities in several states. The tax revenue from marijuana sales is projected to increase to more than $3 billion in 2021 in states where recreational use is legal. This is an increase of 34% from what state governments made from marijuana in 2020. Legalization has also had positive effects on tourism. According to a study from Penn State University, legalization increased Denver hotel revenue by $130 million a year.
Challenges in regulating cannabis businesses
A major challenge facing the legalization of cannabis is access to capital. Federal prohibition prevents small cannabis businesses from accessing bank loans. As such, they will operate on cash-only basis. Banking services will only be available to large market actors. Moreover, cannabis business owners from disadvantaged communities are particularly vulnerable to investor predation. In order to raise capital, these entrepreneurs must rely on their own savings or borrow from banks, which are not easily accessible to small businesses.
The vast majority of commercial cannabis activity takes place inside tightly regulated businesses. The security of cannabis facilities is also important, and operators must adhere to public health and security regulations. Further, cannabis businesses must follow extensive regulations aimed at protecting minors, including restrictions on advertising, checking customer age, and restricting advertising. Despite these challenges, state governments can still create a friendly regulatory environment if they take the right steps.
Many policymakers must consider the illegal market when developing cannabis policies. The majority of cannabis consumers began using cannabis before the legalization of the drug. As a result, many of them have developed accustomed buying habits and relationships with illegal suppliers. Recent research shows that marijuana consumers prefer to purchase legal cannabis over illegal, but will revert to illegal cannabis after paying a certain price. The lack of institutional knowledge and inconsistent state and federal laws are just some of the challenges that regulators must address.
Many early legalizing states have passed reforms to make the cannabis industry more attractive to minority business owners. In addition, a social equity program aimed at promoting minority cannabis businesses has been established in many states. These reforms have the potential to address a wide variety of social and economic disparities. Additionally, these reforms will increase community investment opportunities. The benefits of legal cannabis will outweigh any challenges associated with regulating the cannabis industry.
Regulation of cannabis businesses is also an issue for local governments. Local governments must be sensitive to the public safety and the environment. Many states use their police authority to protect public safety. Many jurisdictions require cannabis businesses to register with the city and adhere to certain security measures. This may include outdoor lighting, signage, and storage safes. Others limit operating hours and restrict seating and drive-throughs. Nonetheless, local governments must exercise caution and balance local interests against public safety and equity.
Impact on minority-owned businesses
The legalization of marijuana has a number of implications for minority-owned businesses. In California, for example, there are two cannabis equity programs in place. The first is the state’s M/WBE program, which requires companies to be certified by the government. This process can be expensive for smaller companies and is not necessary. The second program aims to support small and minority-owned businesses.
The second survey shows that the cannabis industry is not representative of minority business owners. According to the Survey of Entrepreneurs, only 29% of minority-owned businesses have paid employees. The industry is still in its early days, with many firms in the startup stage without any employees. However, this gap is beginning to narrow, as more firms are entering the marijuana industry. Minority-owned businesses will be more likely to thrive in this industry.
New York and other states have introduced racial quotas for marijuana licenses. The state requires that 15% of medical marijuana licenses go to economically disadvantaged minority groups. However, a state judge has ruled that the use of race in the marijuana licensing process is unconstitutional. Oakland, Calif., also approved an equity permit program, requiring half of marijuana business licenses to be awarded to people with prior convictions.
The COVID-19 pandemic and the George Floyd murder have led to a long-overdue awakening in the Black community. Systemic racism has a negative impact on the health of the Black community. Between February and June 2020, the percentage of minority-owned businesses in New York fell by seventy percent. Similarly, the state-sponsored destruction of New York’s marijuana entrepreneurs cannot further compound the disparate outcomes of the Black population.
Despite the legalization of marijuana, small businesses still face challenges. Among them is the high cost of starting a marijuana business. In some cases, the costs are prohibitively high, limiting their success. Minority-owned businesses need to have an excellent business plan and a good location in order to get started. The high costs make this industry unaffordable for many people.
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