Legislature(2023 - 2024)ANCH LIO DENALI Rm
09/14/2023 03:00 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB119 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 119 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
Anchorage, Alaska
September 14, 2023
2:52 p.m.
MEMBERS PRESENT
Representative Jesse Sumner, Chair
Representative Justin Ruffridge, Vice Chair
Representative Mike Prax
Representative Dan Saddler
Representative Ashley Carrick
MEMBERS ABSENT
Representative Stanley Wright
Representative Zack Fields
COMMITTEE CALENDAR
HOUSE BILL NO. 119
"An Act relating to marijuana taxes; and providing for an
effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 119
SHORT TITLE: MARIJUANA TAX
SPONSOR(s): RULES BY REQUEST
03/17/23 (H) READ THE FIRST TIME - REFERRALS
03/17/23 (H) L&C, FIN
03/24/23 (H) L&C AT 3:15 PM BARNES 124
03/24/23 (H) <Bill Hearing Canceled>
03/31/23 (H) L&C AT 3:15 PM BARNES 124
03/31/23 (H) Heard & Held
03/31/23 (H) MINUTE(L&C)
04/24/23 (H) L&C AT 3:15 PM BARNES 124
04/24/23 (H) <Bill Hearing Rescheduled to 04/26/23>
04/26/23 (H) L&C AT 3:15 PM BARNES 124
04/26/23 (H) Heard & Held
04/26/23 (H) MINUTE(L&C)
08/17/23 (H) L&C AT 3:00 PM ANCH LIO DENALI Rm
08/17/23 (H) -- Rescheduled to 09/14/23 --
09/14/23 (H) L&C AT 3:00 PM ANCH LIO DENALI Rm
WITNESS REGISTER
CODY RICE, House Majority Staff
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: On behalf of the bill sponsor, House Rules
by request, gave a PowerPoint presentation, titled "HB 119
Marijuana Tax."
BRANDON EMMETT, Co-Chair
Governor's Advisory Task Force on Recreational Marijuana
Fairbanks, Alaska
POSITION STATEMENT: Answered questions on CSHB 119, Version B.
CHRISTY LAWTON, Deputy Director
Division of Public Health
Department of Health
Anchorage, Alaska
POSITION STATEMENT: Answered questions on CSHB 119, Version B.
ELIZA MUSE, Health Specialist
Division of Public Health
Department of Health
Anchorage, Alaska
POSITION STATEMENT: Answered questions on CSHB 119, Version B.
LACY WILCOX, Legislative Liaison
Alaska Marijuana Industry Association
Juneau, Alaska
POSITION STATEMENT: Answered questions on CSHB 119, Version B.
ACTION NARRATIVE
3:01:16 PM
CHAIR JESSE SUMNER called the House Labor and Commerce Standing
Committee meeting to order at 2:52 p.m. Representatives
Ruffridge, Prax, Carrick, and Sumner were present at the call to
order. Representative Saddler arrived as the meeting was in
progress.
HB 119-MARIJUANA TAX
3:01:52 PM
CHAIR SUMNER announced that the only order of business would be
HOUSE BILL NO. 119, "An Act relating to marijuana taxes; and
providing for an effective date." [Before the committee,
adopted as a working document on 4/26/23, was the proposed
committee substitute (CS) for HB 119, Version 33-LS0636\B,
Radford, 4/18/23, ("Version B").]
3:02:54 PM
CODY RICE, House Majority Staff, Alaska State Legislature, on
behalf of the bill sponsor, House Rules by request, gave a
PowerPoint presentation, titled "HB 119 Marijuana Tax" [hard
copy included in the committee packet]. He stated that there
are a variety of views on this policy, and he said he would
"stick to the facts." He said that a number of states have
price-based marijuana taxes; however, Alaska has an excise tax
on each category of the cannabis plant. He explained that CSHB
119, Version B, if passed, would first change this tax to a
single tax across all categories, and then a move to a retail
sales tax would be made after 18 months.
3:04:18 PM
MR. RICE moved to slide 2, which showed that Alaska is ranked in
the middle among states in terms of cannabis tax revenue. He
moved to slide 3, which shows the comparisons of these taxes
across the legal jurisdictions in the country. He explained
that because of the differences in the taxing systems, making a
comparison is a complicated process. Notwithstanding that, the
comparison suggests that the tax on marijuana in Alaska is
higher than that in other jurisdictions [with legalized
marijuana] in the country.
MR. RICE moved to slide 4 concerning Colorado's market. He
explained that marijuana is a commodity, and the graph on the
slide shows that once legal, the price of marijuana has moved in
a downward trend. He pointed out that this is especially
important if cannabis is federally legalized, as this would
create more competition for the market in Alaska.
3:06:46 PM
MR. RICE moved to slide 5, displaying the Department of
Revenue's (DOR's) historical data on the ounces of cannabis sold
by the categories of bud, immature, and trim product in Alaska.
He stated that the highest selling category in 2021 had been
bud. After this year, he pointed out the change in the product
mix on the graph. He expressed the opinion that this has been a
response to the tax policy. He explained that it is objectively
difficult to measure, test, and determine the difference between
the categories of bud, trim, and immature product [which creates
the product mix]. He stated that this is defined in regulation
but difficult to enforce. He suggested that this gives growers
incentive to find fault in their own product. He disclosed that
this is not an opinion on policy, rather these are the effects
of the current policy. In result of this product mix, he
pointed out that the tax revenues from marijuana are decreasing.
MR. RICE moved to slide 7 and stated that the graph shows the
weighted average tax, which reinforces that tax revenues are
decreasing. He moved to slide 8 to show the estimated marijuana
tax revenues under the current law and slide 9 to further
explain these forecasted revenues compared with forecasts from
Version B. He addressed the model he had presented to the
committee in a previous meeting and described the four different
scenarios. He pointed out that in every scenario the revenues
would exceed the expectation when using a tax of $12.50 per
ounce for 18 months, and then moving to a 10 percent sales tax.
3:10:59 PM
MR. RICE, referencing questions from the previous committee
meeting, expressed the understanding that under the proposed
legislation it appears the tax rate would decrease from $50 per
ounce to $12.50; however, he explained that this is not a fair
comparison because the $50 per ounce tax is for the top category
only. He continued that [for all categories], the current
weighted average tax would be around $28 per ounce, and he
suggested that it would be lower for the upcoming year. He
advised that comparing this to a sales tax is difficult, and he
estimated that a sales tax would be around $12 per ounce, which
would be about a 2 percent reduction.
MR. RICE summarized the presentation, stating that the facts
reveal that legal marijuana prices tend to drop over time,
Alaska has higher than average marijuana taxes, and the changing
product mix is resulting in lower revenue. He estimated that if
nothing changes these revenues would be $9 million less in three
years. He reiterated that the models he made of the proposed
legislation all show higher revenue.
3:13:36 PM
REPRESENTATIVE CARRICK, regarding slide 4, questioned Alaska's
marijuana tax burden in comparison to other states, if Version B
were to pass.
MR. RICE, per the proposed legislation, explained that there is
a higher forecasted reduction in revenue in the near term;
however, in the long term it would be a 1 percent to 2 percent
reduction.
3:14:52 PM
CHAIR SUMNER questioned the percentage of retail sales tax
needed to move Alaska to the middle of the chart on slide 4.
MR. RICE expressed uncertainty but stated that the average in
other states with a retail sales tax is about 7 percent to 12
percent.
3:15:54 PM
REPRESENTATIVE PRAX pointed out that the fiscal note from DOR
comes to a different conclusion regarding a marijuana tax
reduction. He questioned the difference between this conclusion
and DOR's.
MR. RICE expressed the opinion that DOR's conclusion is not
accurate. He explained that, in reference to the status quo,
DOR assumed that revenue would stay in place or go up. He
expressed confidence that revenue would go down without the
proposed changes.
3:18:19 PM
REPRESENTATIVE CARRICK referred to the comment that revenue has
been reduced because of a product mix. She questioned whether
the loss of cultivation in the state is also influencing the
reduction of revenue.
MR. RICE responded in the affirmative. He deferred to the
industry representatives to speak to this.
3:19:46 PM
BRANDON EMMETT, Co-Chair, Governor's Advisory Task Force on
Recreational Marijuana, pointed out he is only speaking to the
analysis of the task force and not speaking for the industry.
He pointed out that recommendations made by the task force are
similar to the proposed legislation, with the difference being
the task force recommends a percentage of tax change. Given the
industry's burden of producing, along with the evidence of the
black market and attrition rate, he suggested that it would be
prudent that the committee recommends a dramatic reduction in
taxes.
3:21:59 PM
REPRESENTATIVE CARRICK questioned the task force's opinion
concerning the tax of 10 percent verses a lower rate.
MR. EMMETT expressed the belief that changing to a 10 percent
tax would not provide much relief. He stated that Alaska has
the highest effective tax in the nation, as well as the highest
cost to produce marijuana, and this is combined with a very
healthy black market. He expressed the belief that without any
other changes, a 10 percent tax would not provide relief for
long-term sustainability.
3:23:47 PM
REPRESENTATIVE PRAX questioned the estimated amount of marijuana
on the black market. He questioned whether legalization had
changed this.
MR. EMMETT responded that when marijuana became legal, there had
been several surveys on individuals and the amount of marijuana
they consumed. Using this data, he expressed the opinion that
now 40 to 50 percent of marijuana sold in the state is on the
black market. He stressed that anyone in the state can find
marijuana that costs 50 percent less on the black market than in
a retail store.
REPRESENTATIVE PRAX said the task force made several other
recommendations, such as removing the product transfer
restriction and amending the annual registration. He asked if
the committee should consider these recommendations.
MR. EMMETT said that many of the recommendations were made
through the scope of whether public safety would be affected.
He suggested that the task force's recommendations were made in
the consideration of public safety while allowing the industry
the best chance for survival.
3:28:59 PM
REPRESENTATIVE PRAX referenced statistics from the Department of
Health (DOH) and a nationwide study. He suggested that in these
statistics the assumption is that any use of marijuana presents
a health concern; however, the nationwide study suggested that
many people are self-medicating in regard to a health problem,
such as depression or insomnia. He questioned whether there is
any data on the benefits of marijuana.
3:30:57 PM
ELIZA MUSE, Health Specialist, Division of Public Health,
Department of Health, explained that there are conditions where
marijuana use could be seen as advantageous. She said that
prior to Alaska's legalization, DOH had a medical marijuana
registry; however, because of legalization the need for medical
marijuana cards has decreased. She said, "There is certainly a
time and place for medical marijuana." She added that there is
a list of debilitating conditions in which medical marijuana has
been beneficial. She stated that the survey Representative Prax
referred to is the International Cannabis Policy Study. She
stated that it is a comprehensive study that looks at use and
trends over time, and it discusses where Alaskans have purchased
products, legally and illegally.
3:32:52 PM
CHRISTY LAWTON, Deputy Director, Division of Public Health,
Department of Health, explained that CSHB 119, Version B, would
address the fiscal challenges the marijuana industry is facing.
She said that Version B would also supply funding for prevention
education and treatment. She stated that implementation would
be long term through DOH, with after school programs for grades
5 through grades 8. She stated that Version B would result in a
temporary reduction in these funds until the sales tax is fully
enacted. She further detailed the funding provision for
recidivism, education, and treatment. She continued that the
proposed legislation would reduce, stall, or end some of these
public health programs for the first 18 months, while in the
long run, programs for youth would grow.
3:35:28 PM
REPRESENTATIVE CARRICK asked if there are any current programs
funded independently from sources other than marijuana revenue.
MS. LAWTON said that the division has 10 grantees that provide
after school programs with activities and services. Of these
programs, three are exclusively funded by grant programs. In
response to a follow-up question, she stated that, per the
proposed legislation, the temporary pause on programs would last
18 months.
3:37:47 PM
REPRESENTATIVE PRAX shared that in high school he had been
involved in a service organization which discouraged drug use.
He expressed the understanding that now such work may have been
counterproductive. He questioned whether there is any data
showing the success rate of DOH's prevention efforts.
MS. MUSE responded that in the last several decades more has
been learned on the topic, and programs like D.A.R.E. may have
been counterproductive in the effort to reduce substance misuse.
She said that success rates are created now by using safe spaces
for youth where they can interact with their peers and ask
questions of trusted adults. These programs use fact-based
arguments rather than "fear mongering." She said that the
programs are not based on prevention, rather they are based on
creating safe spaces, as the goal is to have structured quality
programs with trained individuals. She stated that the grants
are targeted for youth in grade 5 to grade 8, as this is the
time that experimenting with marijuana happens. She added that
earlier use will more often lead to addiction issues in
adulthood. She said success rates are not determined by asking
youth about their marijuana use, but rather by implementing
metrics, such as expanding programs with quality training for
staff.
REPRESENTATIVE PRAX pointed out that reports have put forth that
marijuana use among high schoolers is elevated. He opined that
the usage did not seem to change much even after legalization.
He asked if there is any data addressing whether this usage has
gone up or down.
MS. MUSE answered that there is data from a 2019 Alaska Youth
Risk Survey; however, the survey was not done in 2021. She said
that over time the trendline has been stable for the use of
cannabis products pre and post legalization. She continued that
there has not been a change in the trend for all high school
students, but when the data is disaggregated by gender or grade,
there has been a small uptick in female use. She expressed hope
that there will be 2023 data available. In response to a
follow-up question, she stated that there has been enough data
to establish usable trends in program evaluations. She
continued that marijuana, tobacco minus vaping, and alcohol
usage has remained stable. She pointed out that this is an area
that could use more research. In response to a follow-up
question about the conclusion that the programs are successful,
she answered that the trend across all populations nationally
where recreation use is legalized shows marijuana use has
remained stable, despite the funding of prevention programs.
She reiterated more research is needed.
3:47:49 PM
LACY WILCOX, Legislative Liaison, Alaska Marijuana Industry
Association (AMIA), stated that AMIA's concerns have been
addressed during the meeting, and AMIA supports the task force's
recommendations. She referenced the economic impact on the
industry because of attrition, tax delinquency, and burdensome
regulations. She stated that the industry is in "survival mode"
and expressed the opinion that this is not a surprise because it
has been known the industry would need help from the legislature
regarding the high and complex tax scheme. She pointed out that
data had not been available at the time [of legalization] for
forecasting. She outlined various tax percentages and said that
AMIA supports the 3 percent tax, as a 10 percent tax would grow
over time. Considering some municipal taxes, she explained that
the proposed legislation does not contain language for a cap,
and this would allow the tax burden to increase over time.
3:50:38 PM
REPRESENTATIVE CARRICK questioned the attrition on the
cultivation side of the industry and how this may be related to
the tax burden and regulatory concerns.
MS. WILCOX stated that when legalization occurred and the
framework was created, two cultivation types were created, a
limited and standard grow. The limited cultivator was created
to bring in black-market growers into the legal system. She
talked about the small home-grow operations, as taxing these has
caused attrition at about 30 percent. She suggested that
because of the overburdensome regulations, these operations are
not renewing their licenses. She pointed out that within the
last year there has been a 25 percent loss of large grow
operation cultivators as well. She added that each cultivator
grows various qualities and amounts, and this creates a varied
amount of tax to the state, which is difficult to track. She
stated that the marijuana consumption rate in the state has not
changed, but where the product is purchased has. She suggested
that when small cultivators do not renew their licenses, they do
not shut down, rather, they become part of the black market.
REPRESENTATIVE CARRICK expressed the understanding that the
industry is not seeing a drop off in demand, but the drop off is
in the [legal] supply.
MS. WILCOX responded in the affirmative. She pointed out that
product mixing, as explained by Mr. Rice, has also decreased the
amount of tax the state receives. She expressed the opinion
that this has incentivized the industry to "cheat." She
reasoned that this is because the system, as is, is not
sustainable.
REPRESENTATIVE CARRICK questioned whether there is an ideal tax
rate between 10 percent and 3 percent which would prevent black
market growth.
MS. WILCOX responded in the negative, insisting that the
percentage number should be 3; however, she continued that 3
percent still feels like a tax. She stressed that long-term
thinking is needed and said that 10 percent is punitive while 3
percent would allow the industry to grow.
3:57:29 PM
REPRESENTATIVE RUFFRIDGE questioned the current tax structures
and how this effects the "cheating model."
MS. WILCOX responded that in the beginning cultivators were
following the guidelines for fear of enforcement; however,
seeing the lack of enforcement and the price drop, cultivators
understood that they could declare the value of their product as
lower, while still being "honest enough," and this could be
declared on taxes with no repercussions. She expressed the
opinion that 90 percent of cultivators have done this.
[HB 119, Version B, was held over.]
4:00:09 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was [adjourned] at
4:00 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 119 _Tax Reform_ Position Statement REV 9.6.23 AMIA.pdf |
HL&C 9/14/2023 3:00:00 PM |
HB 119 |
| DRAFT_HB119_091423_LCv1.pptx |
HL&C 9/14/2023 3:00:00 PM |
HB 119 |
| HB 119 Infographic (1 page) AMIA.pdf |
HL&C 9/14/2023 3:00:00 PM |
HB 119 |
| Marijuana Tax Changes Analysis 0908.23v1.xlsx |
HL&C 9/14/2023 3:00:00 PM |
|
| HB 119 _Tax Reform_ Position Statement REV 9.6.23 AMIA.pdf |
HL&C 9/14/2023 3:00:00 PM |
HB 119 |
| HB 119 Infographic (1 page) AMIA.pdf |
HL&C 9/14/2023 3:00:00 PM |
HB 119 |
| DRAFT_HB119_091423_LCv1.pptx |
HL&C 9/14/2023 3:00:00 PM |
HB 119 |