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Voters in four states on Tuesday greenlighted measures to legalize and tax recreational marijuana for adults.
Arizona, Montana, New Jersey and South Dakota have joined the 11 states that have already legalized recreational pot.
Those other states are Alaska, California, Colorado, Illinois, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont and Washington state.
Meanwhile, Washington, D.C., permits adults age 21 and over to possess up to 2 ounces of marijuana and allows for the transfer of up to an ounce to another adult — but you can still be arrested for selling it.
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Voters also approved measures for medicinal marijuana in Mississippi and South Dakota.
“New Jersey legalized it, but so did deep-red South Dakota and Montana,” said Steve Hawkins, executive director of the Marijuana Policy Project. “It shows that regardless of political ideology or party differences, American support cannabis legalization.”
It also helps that levying legal pot could help states strengthen their coffers amid the current economic downturn. It comes down to their approach to the tax, policy experts said.
Fine-tuning taxes
How much of a boost states will get from pot sales will depend on how they structure the tax and each state’s approach toward licensing and regulation.
Often jurisdictions will tack an excise tax on sales of weed, along with a state general sales tax.
“If you set the rates too high, everyone goes to the black market,” said Ed Zollars, CPA and partner at Thomas Zollars & Lynch in Phoenix and an instructor at Kaplan Financial Education.
Similarly, a tax that’s based on the price of marijuana products — versus a tax that’s based on consumption or weight — might result in volatile revenues, especially as pot becomes more widely available and prices decline, said Ulrik Boesen, senior policy analyst at the Tax Foundation.
“This is why we always say with excise taxes, if you tax by quantity, you’re likely to have more stable revenue,” he said. “Even if price developments are unpredictable, we can predict how many people are buying in terms of weight.”
See below for a list of the recreational pot initiatives that voters pushed forward yesterday.
Arizona
The Grand Canyon North Rim in Arizona.
Nico De Pasquale Photography | Stone | Getty Images
Voters approved Proposition 207, which tacks a 16% tax onto the retail price of pot, along with the state sales tax of 5.6%.
The measure allows adults to possess an ounce of marijuana, and permits an adult to have up to six plants in their home.
It is expected to generate about $166 million in annual revenue.
Those funds would go toward community college districts, municipal police, sheriff and fire departments, and more.
Montana
Glacier National Park in Montana.
Jordan Siemens | Getty Images
Montanans greenlighted I-190, which would slap a 20% tax onto the retail price of recreational marijuana.
Proceeds from the taxes will go to the state’s general fund, as well as to special revenue accounts for conservation, veterans’ services and substance abuse treatment, among other purposes.
The initiative would also legalize possession and use of 1 ounce or less of marijuana. Adults would be permitted to grow up to four marijuana plants and four seedlings for personal use in their home.
New Jersey
Jersey City, New Jersey.
Dong Wenjie | Moment | Getty Images
Voters in the Garden State were largely in favor of Question 1.
The initiative would amend the state constitution and allow the recreational use of marijuana, making New Jersey the first in the mid-Atlantic region to do so.
Sales of recreational pot would be subject to the state’s sales tax of 6.625%. Local governments are permitted to tack on an additional levy.
South Dakota
Downtown Rapid City, South Dakota.
Blaine Harrington III | The Image Bank | Getty Images
South Dakotans voted for Amendment A, which would apply a 15% excise tax on the retail price of marijuana.
It would also permit adults to possess up to 1 ounce of marijuana.
People who reside in a jurisdiction with no licensed stores may cultivate up to three plants in their home within a locked space; they may keep no more than six plants in one residence at a time.
Revenue from the excise tax will go toward South Dakota’s general fund and public schools.
