Alaska House of Representatives Approves Bill to Reform Cannabis Taxes

The Alaskan House of Representatives recently voted on May 10 in a decisive 36-3 vote to approve a bill aimed at reforming the state’s cannabis tax structure.

Key Tax Reforms in House Bill 119

House Bill 119 proposes changing the current $50 per ounce tax on cannabis to a 7% tax, as recommended by the Advisory Task Force on Recreational Marijuana. If HB-119 passes the Senate and is signed by Governor Mike Dunleavy, the new tax structure would take effect on July 1, 2024.

Cannabis business owners have been vocal about their need for tax relief. The Alaska Marijuana Industry Association’s legislative liaison, Lacy Wilcox, described the situation as “desperate” during a House Labor and Commerce Committee meeting last year. The current $50 per ounce tax has been in place since Alaska legalized adult-use cannabis in 2014. According to a September 2022 report by the Tax Policy Center, Alaska’s cannabis tax is among the highest in the nation.

Challenges Faced by Legal Cannabis Businesses

Many cannabis businesses have struggled to stay afloat under the current tax regime. “We are all in survival mode,” Wilcox stated. Task force member Brandom Emmett highlighted that the high taxes make it difficult for legal businesses to compete with the black market, estimating that 40-50% of cannabis sold in Alaska comes from illegal sources.

The current tax applies only to cannabis flower, with lower taxes for “immature/seed/failed” flower at $25 per ounce and trim at $15 per ounce, as per an April 2024 fiscal analysis from the House Finance Committee. The report projected minimal growth in the legal cannabis market, with flower sales stabilizing at 15% of total ounces.

Formation and Recommendations of the Task Force

Governor Dunleavy created the Alaska Advisory Task Force on Recreational Marijuana in September 2022 to review the current tax and fee structures and make recommendations for improvements. The 13-member task force met six times between December 2022 and January 2023, discussing tax reforms and potential enhancements to public safety. Their final report was released in January 2024.

Initially, the task force recommended a 3% sales tax. However, Rep. Jesse Sumner proposed a 10% tax, which was later adjusted to 6% and finally increased to 7% in the most recent House discussion. Sumner believes the 7% tax will be more appealing to the Senate for approval.

Additional Legislative Developments

In addition to HB-119, the House also passed House Bill 228 with a 36-4 vote. If fully enacted, HB-228 would establish a task force to explore psychedelic-assisted therapies such as psilocybin and MDMA. Rep. Jenny Armstrong, the bill’s sponsor, emphasized the importance of preparing for potential federal approval of these substances. “House Bill 228 would create a task force to put forth recommendations for the next legislature,” Armstrong said on May 2.

Support and Opposition

Alaska has a high number of veterans per capita and one of the highest rates of violence in the country. Rep. Laddie Shaw, former director of Alaskan Veteran Affairs, supports HB-228, noting its potential benefits for veterans. “This task force gives us an opportunity to move forward productively on behalf of our veterans,” Shaw stated.

However, some representatives opposed the bill, calling it “premature” and suggesting that the state should wait for federal rescheduling of psychedelic substances before moving forward.

Conclusion

The approval of HB-119 and the discussion around HB-228 signify important steps toward reforming Alaska’s cannabis industry and exploring new avenues for medical treatments. The proposed tax changes aim to provide much-needed relief to cannabis businesses, fostering a more competitive and sustainable market.