Nevada Legislature

How Will the Nevada Legislature “Fill the Pothole”? Digging into the Weeds of the Marijuana Tax Bills

Who knew the State of Nevada would come to this? Just as recently as 2012, Nevada had no legal mechanism for most medical marijuana users to obtain their medicine. In 2017, the state budget depends upon successful implementation of legal recreational marijuana. How’s that coming along? We dig into the weeds as Nevada figures out how to tax legal pot.

Since voters passed Question 2 last fall, the State of Nevada has been moving quickly to take advantage of marijuana legalization.

At his State of the State Address in January, Governor Brian Sandoval (R) unveiled his proposed recreational marijuana excise tax to raise additional funds for education. The Governor’s Office stood by that claim when presenting Sandoval’s SB 508. If this becomes law, Sandoval’s budget chief Jim Wells expects the state to collect $90 million in revenue in the next two years, with $69 million of that going into the Distributed Schools Account (or DSA, the main funding vehicle for K-12 public education). SB 508 sets a 10% cultivation tax rate and a 15% retail tax rate on recreational marijuana.

Photo by Andrew Davey

So where will the rest of that money go? Senator Julia Ratti (D-Sparks) aimed to address this and the overall matter of developing the state’s marijuana tax policy with her own SB 487. Ratti described as “critical” the state’s mission to pass a marijuana taxation system that’s “well vetted, clean, and efficient”. Yet since Sandoval unveiled his own SB 508, Ratti has since released a conceptual amendment that moves her bill closer to his while also addressing local governments’ concern about revenue they can keep.

Why are these marijuana tax bills so important? Again, the state’s depending on that revenue.

During last week’s Senate Revenue and Economic Development Committee hearing, Ratti explained how her amended SB 487 will work if it becomes law. It sets a 15% cultivation tax rate for both medical and recreational marijuana. It also sets a 5% retail tax rate on medical marijuana, and a 15% retail rate on recreational marijuana.

Cultivation tax revenue for both is split between various state budget accounts and local governments in SB 487. All of the retail medical marijuana tax revenue goes to substance abuse aid programs. One-third of retail recreational marijuana tax revenue goes to local governments, while the remaining two-thirds goes into the DSA for K-12 public schools.

“It’s really the intent to simplify the universe, and bring it all into one structure.” – Senator Julia Ratti

Marijuana business lobbyists testified in favor of both bills, as the overall tax rate stays under what marijuana advocate William Adler called the 35% “cliff”. Adler also stated he doesn’t mind the bulk of the revenue going to public education, as he touted this while campaigning for Question 2 last year. “We consider it promises made, promises kept.”

However, not everyone was sanguine about Nevada’s budding pot industry. Nevada Taxpayers’ Association’s Cheryl Blomstrom addressed the proverbial elephant in the room last week. “We have concerns about earmarking, especially when it comes to a program that’s federally nebulous.”

Even though #NVLeg Democratic leaders have stood with Governor Brian Sandoval in defending marijuana legalization, some #NVLeg Republicans have voiced more skepticism.

Before the hearing, Senator Ben Kieckhefer (R-Reno) and Assembly Minority Leader Paul Anderson (R-Las Vegas) sent a letter to U.S. Attorney General Jeff Sessions requesting “guidance” on President Donald Trump’s threats to crack down on states that have legalized recreational marijuana. Sessions is directing U.S. Justice Department lawyers to send recommendations on possible changes to enforcement of federal drug laws, while U.S. Senators Catherine Cortez Masto (D) and Dean Heller (R) have asked Sessions not to follow through on Trump’s threats. Are Kieckhefer and Anderson just curious on what the fed’s might do, or are they hesitant to back the key component Sandoval is using to balance his budget?

Photo by Andrew Davey

There’s so much riding high on Question 2 implementation. Without that marijuana excise tax revenue, Sandoval and Legislative leaders will either have to make cuts or raise taxes somewhere else. The Legislature only has another 59 days to cut through the weeds and make it happen. Keep a close eye on SB 487 and SB 508 as “the end game” quickly approaches.

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3 comments

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