Marijuana taxes could bring in $64M in the first year

Earlier this March, officials from the Department of Revenue testified in front of the Legislature’s Joint Committee on Marijuana Policy, providing the first public estimate of the expected tax revenue from adult use marijuana sales. The numbers are significant. Massachusetts could expect between $45 million and $83 million in tax revenue during the first 12 months of the program. In the second year, tax revenues could rise to between $93 million and $172 million on sales ranging from $707 million to $1.312 billion.

Revenue officials based their estimates on tax rates under the current law, which include a 6.25% sales tax, a 3.75% excise tax, and a potential 2% “local option” tax. The Legislature is widely expected to raise these rates, a move legalization proponents argue will drive more customers to the black market.

While both House Speaker Robert A. DeLeo and Senate President Stanley C. Rosenberg are open to raising the marijuana tax rate, Governor Charlie Baker is more circumspect. Baker ran for office in 2014 pledging not to raise taxes or fees. When asked about marijuana, a spokesperson said the governor believes the tax rate should reflect the cost of implementing the new law as well as any “secondary costs” associated with increased marijuana use.

The current tax rate likely more than covers the cost of implementation. Treasurer Deborah B. Goldberg projects regulatory startup costs will be about $10 million, a figure which includes many one-time expenses. However, depending on how one defines “secondary costs”, they could add up to anywhere from thousands to millions of dollars, making Baker’s position on raising rates more opaque. Do emergency room visits count? Extra police officers? Until the governor provides more information, there’s no way to know where he stands raising rates.

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