The Department of Revenue Administration in New Hampshire has revised its estimates of cannabis revenue upwards to $58 million annually if the products are taxed at 15%. These estimates come at a time when a committee is discussing a proposals to legalize recreational marijuana next year.
Why would the state be interested in how much it will earn from cannabis sales? Legislators want to know whether the taxes generated from the marijuana industry would, at a bare minimum, meet the high cost of regulating the industry.
The figures released by the Department of Revenue Administration suggest that the taxes collected from cannabis sales would more than meet the cost of regulation. The $58 annual revenue projection was arrived at after using the modeling information provided by a study which was done in New York.
That information provided more pricing and usage pattern data to rely on than was available when the Department of Revenue Administration in New Hampshire released its earlier projection of $41.6 million a year in December last year.
However, there are a number of variables that could swing the actual revenues significantly in either direction. For example, the model used to project how much can be earned could not determine with a high degree of certainty how many people would consume cannabis once it is decriminalized.
The existence of a marijuana black market can’t be ignored as well. How many people will prefer to get their marijuana from the black market instead of through the regulated supplies? The outcome of that decision will impact the state’s earnings from cannabis sales.
Similarly, some people may opt to purchase their cannabis from sources outside the state. Many reasons, ranging from price differences and perceived or actual product quality issues, can drive some people to purchase marijuana from elsewhere. The magnitude of people who take that option will also have an impact on the revenues generated for the state.
The revenue projections were sent to a special commission which was set up to plan how marijuana will be regulated, taxed and legalized. The commission is expected to have their report ready in November.
The report to be released is likely to be comprehensive since the commission was drawn from a broad cross-section of the state including law enforcement, legislators, anti-marijuana advocates and members of the medical profession. Any agreement reached by such a diverse group is likely to carry the day when the proposal is finally voted on by legislators.
The Flowr Corporation (TSX.V: FLWR) and The Green Organic Dutchman (TSX: TGOD) (OTCQX: TGODF) must be wondering why the U.S. feds don’t take charge of marijuana decriminalization instead of standing by as each state passes its own legalization laws that will eventually force the federal government to toe the same line.
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