New York projects $1.25 billion in pot tax revenue over six years
New York is on track to collect $1.25 billion in revenue from taxes on legal cannabis sales, according to a budget projection by Democratic Governor Kathy Hochul released Tuesday. Revenue projections are included in the state budget for next year, which includes significant investments in projects designed to continue economic and social recovery from the ongoing coronavirus pandemic.
“We have the means to respond immediately to the COVID-19 pandemic and seize this unique opportunity for the future with a historic level of funding that is both socially responsible and fiscally prudent,” Hochul said in a statement. statement from the governor’s office.
New York State’s fiscal year 2023 budget, which is detailed in an 85-page briefing book from the Governor’s Office, projects $56 million in cannabis-related revenue, including $40 million from license fees on cannabis businesses. State lawmakers legalized recreational cannabis last year, and since taking office in August, Hochul has pledged to expedite regulation of adult cannabis use blocked by Andrew Cuomo, the former governor who resigned last summer over a sexual harassment scandal.
Over the next six years, the governor’s office projects the state will collect more than $1.25 billion in revenue from recreational cannabis taxes and fees, with the annual total increasing as more and more producers, processors and retailers start their operations. Cannabis tax revenues are expected to increase to $95 million in fiscal year 2024 and reach approximately $363 million in 2028.
New York’s budget projections include revenue from cannabis ‘potency tax’
Taxes on the cannabis industry in New York include a 9% excise tax and another 4% tax for local governments. State regulations also include a separate tax on THC, with the amount of tax collected increasing as a product’s potency increases.
David C. Holland, a New York lawyer with extensive experience in cannabis policy and law, says that “the THC potency tax at first appears to be the state abusing revenue, but, in fact, some see it as an ingenious, recession-proof tax. for the state to receive predictable revenues.
Holland explained that the THC tax is levied at a rate ranging from $0.005 (half a penny) per milligram of THC to $0.01 (one cent) per milligram, depending on the form of the cannabis product (ie. i.e. dried flowers, extracts or edibles). For example, an edible containing 10 mg of THC would be taxed 10 cents, while an edible containing 100 mg would be taxed one dollar. The THC tax is levied on wholesale transactions, when products are transferred from distributors to retailers.
Holland, who is also co-founder and president of the NYC Cannabis Industry Association, noted that the THC tax provides the state government with a revenue stream that is not dependent on the ups and downs of the economy.
“What makes it recession proof is that the price per pound of cannabis, whether it’s $1,000 in times of scarcity or $200 in times of surplus, is irrelevant. – the potency tax remains a constant due to the THC concentration of the raw or processed product. , and this tax is uniform across product lines,” Holland wrote in an email to Highlights.
“As such, the tax is truly a more predictable source of revenue for the state and insulates it against the boom and bust cycles of crop cultivation and market consumer idiosyncrasies in forms of cannabis. which they choose.”
Revenue generated from the state’s 9% excise tax will be divided among several social programs, with 40% going to education, 40% to community reinvestment, and the remaining 20% to drug treatment. Revenue from the additional 4% tax will be shared by local governments, with counties receiving 25% and 75% going to cities, towns and villages.
A launch date for legal adult cannabis sales in New York has yet to be determined, but is expected to be later this year or early 2023.