The New York Cannabis Growers and Processors Association is asking New York state to limit licensing requirements and taxes if New York state legalizes marijuana this year.
Sen. George Borrello, R-Sunset Bay, created a light moment during the joint legislative budget hearing on economic development when he summed up the cannabis growers’ request.
“So, if I’m hearing you correctly, you’re very concerned that New York state might overregulate and overtax your industry,” Borrello said. “Welcome to New York state. … As a business owner, welcome to the club.”
In written testimony, Allan Gandleman, New York Cannabis Growers And Processors Association president, referenced the Cannabis Regulation and Taxation Act included by Gov. Andrew Cuomo in the governor’s 2019-20 budget legislation. Sen. Liz Krueger, D-New York City, has authored a standalone bill, the Marijuana Regulation and Taxation Act, which has been introduced in both houses of the state Legislature as well. The governor’s legislation, Gandleman said, creates a number of license categories for companies to obtain in order to receive a state license, something Gandleman said could hurt smaller businesses trying to sell marijuana.
“We promote having as many dispensaries in as many neighborhoods as possible so people have access, which is the only way we’ll get rid of the illicit market,” Gandleman said in response to a question from Sen. Diane Savino, D-Shore Acres. “If there are s only dispensaries in the rich suburbs of the state … and they don’t even want them, but the way the laws are currently, that might be the only people who could afford to purchase from a marijuana dispensary. Everyone else will be stuck in the illicit market. That’s just what we don’t want to see.”
Gandleman also asked legislators to reduce the governor’s proposed taxes on legalized cannabis. Cultivators would pay $1 per gram of dry weight cannabis they grow, roughly three times the 35 cents per gram California cultivators pay. That pricing, Gandleman said, would also hurt small growers while possibly driving consumers to the black market.
One of the reasons to legalize marijuana in New York state is to create a new revenue stream for the state.
“I think what I’m hearing you say is your suggesting New York state only set the rates so it generates enough revenue merely to cover the cost of the administration,” Borrello said. “There should be no tax revenue for this state to go into the general fund beyond that. Is that what you’re suggesting?”
Gandleman said the state should start with lower taxes and then increase taxes once the program is established in one or two years. He pointed to studies on cannabis taxes and revenues that show a boost to local sales tax revenue from equipment dealers, good suppliers and related services as well. Gandleman’s discussion of the need to limit taxes prompted Borrello to discuss how marijuana dispensaries would market themselves in the face of competition from Native American tribes that have indicated they are likely to sell marijuana on reservations if New York state legalizes marijuana.
“We decriminalized marijuana here and I don’t know how you tell the difference between legal and illegal marijuana,” Borrello said. “All of the other states that have legalized it, the black market is booming. That’s part of the challenge we face here in New York. But also where I live in Western New York, we have several Native American territories. They’ve all indicated that if it’s legalized they’re going to sell it. So how do you propose that a legal distribution that is probably going to be 30% to 50% more than the Seneca Nation is selling, how are they going to be able to survive with that kind of economic difference?”
“Well it doesn’t have to be 30% to 50% more,” Gandleman replied. “And the only way it will be 30% to 50% more is if automatically it is taxed more.”
Savino recommended Gandleman and his association spend time educating legislators in both the Senate and Assembly, particularly rural members. She said the decision in 2019 to decriminalize marijuana rather than legalize marijuana has created a litany of problems that only lobbying of rural members can resolve by changing the law this year.
“Some of them don’t realize that people smoke marijuana in New York state right now,” Savino said. “It comes as a shock to them. They don’t realize it is as easy to get as ordering a sandwich and anything off of Amazon. There are apps, apps for the illicit market. You can have anything delivered to your house, and the illicit market looks incredibly like the legal one. I would hope that you guys see your role here as educators to members who don’t really seem to understand why it’s important we get this done right and we don’t overtax it.”
Borrello, on the other hand, said it wasn’t right to legalize marijuana, which in Borrello’s view creates a host of legal and social issues, with little or no tax revenue generated for the state’s general fund to pay for services at the local level. Gandleman said the state is already dealing with those issues even if the state doesn’t legalize marijuana, and during that debate, Krueger stepped in to end the discussion — but not words of wisdom for those on both sides of the legalization debate.
“The gentleman is right,” Krueger said. “We do not want to overtax any of these products because we want to close down the illegal market, and if you overtax it people will stay in the illegal market where you don’t know who they’re buying from or what they’re buying as opposed to a legal product that’s licensed and is literally reviewed for safety from seed to sale. So it’s a better product, or mix of products, to be selling. The gentleman is also right that over time you can grow your prices as you have established the industry as with lots of other new kinds of business. I don’t agree with him that there’s no money originally. We are looking at how each state that has legalized already has moved forward, avoiding their mistakes and hopefully coming up with what I want to call the sweet spot for pricing cannabis, so to speak. We can talk about, not today at the hearing, George, but I can give you more material than you could ever want about cannabis, its safety or lack thereof. It is not a perfect product. I don’t encourage people to use it. But it is far, far safer medically from a driving, or from any measurement, to alcohol. And we seem to enjoy having legal alcohol in this state.”