DFL deficit: Legalize it / And I will…tax it?
“Legalize it,” Peter Tosh sang in 1976, “And don’t criticize it.” He also promised to “advertise it,” but he said nothing about taxing it. But then, he probably hadn’t been to Minnesota.
When marijuana was legalized in Minnesota in 2023, a gross receipts tax was imposed of 10% on sales at licensed businesses. Now, in one of the few reasonably firm details coming out of last week’s agreement on spending targets for the upcoming two biennia, Gov. Walz and legislative leaders in the Senate and House announced that the rate would go up to 15%. That is on top of the state sales tax rate of 6.875%, any local sales taxes, and applies to low-dose, THC edibles derived from hemp, too.
Industry advocates argue that higher taxes will mean higher prices, putting legal ganja retailers at a disadvantage compared to those in the illicit market. This is probably true.
Supporters of the measure, on the other hand, argue that the new rate would bring Minnesota more in line with other legal cannabis states. Taxes on tampee vary from state to state, with rates as low as 6% and as high as 37%, according to the Tax Foundation. Just three of the 21 states that collect a percentage for each pot sale — Connecticut, Missouri, and Maryland — have lower rates.
Another change which has been less noted is the proposal to eliminate revenue-sharing with the local governments tasked with enforcing the laws governing the weed market. At present, the state’s general fund takes 80% of the revenues from the tax and cities and counties get the rest. Senate fiscal analysts claim that this “would result in $64.6 million of revenue for the general fund.”
Those same Senate fiscal analysts calculate that increasing the Mary Jane tax would generate more than $140 million in additional revenue over the next four years. Such estimates are a bit hazy — to borrow a phrase — given the fact that there is currently no legal, taxable sinsemilla being sold in Minnesota. A lottery to allocate the capped licenses for growers and retailers is set for June 5. Businesses might actually begin operating and paying taxes later this year. In time for Christmas, Minnesotans will be able to get as high as their taxes.