Proponents of legalizing marijuana have long pointed to a prospective windfall they say state and local governments could enjoy by taxing products that now circulate on the black market.
But the sponsors of a bill to legalize marijuana in New Mexico have an unlikely goal.
They don’t want to tax it too much. And there’s a reason why.
“Our goal was to stay under 20 percent,” said Rep. Javier Martinez, a Democrat from Albuquerque who is co-sponsoring House Bill 356, known as the Cannabis Regulation Act.
The law would set a relatively moderate excise tax of 9 percent on marijuana. Local governments could add up to 3 percent. State as well as local gross receipts taxes would apply, too.
While other states have charged more, the idea is to ensure that marijuana sold on the legal market can compete with the black market.
Colorado has a 15 percent excise tax as well as a 15 percent sales tax, according to data compiled by the Tax Foundation. Nevada has a 15 percent excise tax, too, as well as a 10 percent sales tax. Oregon’s sales tax on marijuana is 17 percent. Washington charges 37 percent.
Too high a rate can put a damper on the legal market, the Tax Foundation has said. When rates are higher, legal products may not be competitive enough with products on the black market, keeping illicit trade alive.
Proponents of New Mexico’s law have tried to avoid promising too much when it comes to the funds that legalizing marijuana could raise, in part because of that balance.
Instead, they have focused on the idea’s popularity, the issue of equity and righting the wrongs of the war on drugs, as well as the economic opportunities that could come with launching a new industry.
A newly published analysis