The Alaskan House of Representatives Makes Bold Move to Reform Cannabis Taxes
The Alaskan House of Representatives has taken a major step towards much needed tax reform in the cannabis industry. In a resounding 36-3 vote on May 10, House Bill 119 was approved, paving the way for significant changes in the state’s tax structure.
The bill, which was recommended by an Advisory Task Force on Recreational Marijuana, would replace the current $50 per ounce tax on cannabis with a much lower 7% tax. If passed in the Senate and signed by Gov. Mike Dunleavy, the new tax system would go into effect on July 1, 2024.
According to a report from Alaska Beacon in September 2023, many cannabis business owners have been pleading for relief from the current tax situation. Lacy Wilcox, legislative liaison for the Alaska Marijuana Industry Association, described the situation as “desperate” during a hearing with the House Labor and Commerce Committee last year.
The $50 per ounce tax has been in place since the legalization of adult-use cannabis in 2014, making Alaska one of the states with the highest cannabis taxes. A report from the Tax Policy Center released in September 2022 stated that “Alaska’s $50-per-ounce tax exceeds all other weight-based tax rates and the remainder was a local percentage-of-price excise tax (Anchorage).”
As a result of these high taxes, many cannabis businesses have been forced to close. “We are all in survival mode, and we are coming together to share our pain with you,” Wilcox added.
One of the members of the task force, Brandom Emmett, spoke at the committee meeting in September and highlighted the difficulties legal businesses face in competing with the black market due to the high taxes. “I can tell you with a high degree of certainty that [marijuana] is still much cheaper on the black market. Alaska’s taxes and the burden on businesses from the Marijuana Control Board is causing prices to stay high and businesses to be uncompetitive,” said Emmett.
The current $50 per ounce tax only applies to cannabis flower, while lower taxes of $25 per ounce and $15 per ounce apply to “immature/seed/failed” flower and trim, respectively, according to a fiscal analysis from the House Finance Committee published in April 2024. The report also projected that the legal cannabis industry in Alaska has matured and will only see a 1% growth in total volumes per year going forward.
The Alaska Advisory Task Force on Recreational Marijuana was created by Gov. Dunleavy in September 2022 with the goal of reviewing the current tax and fee structures, regulations, and public safety measures in the cannabis industry. The task force, consisting of 13 members, met six times between December 2022 and January 2023 to discuss these matters and provide recommendations for improvements to the Office of the Governor.
Their recommendations were published in a final report, which served as the basis for House Bill 119 and the recent vote in the House of Representatives. With the bill now moving to the Senate, the future of cannabis taxes in Alaska hangs in the balance. Will the state finally see much needed reform, or will the high taxes continue to cripple the legal cannabis industry? Only time will tell.
