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Hawaii Lawmaker Says Tax Revenue Won’t Cover Costs of Legal Adult-Use Cannabis

According to the Hawaii State Tax Department, legalizing adult-use cannabis would result in about $50 million annually in tax revenue. This is far more than the $2.5million in medical marijuana taxes that were collected in fiscal 2011. A state legislator believes that the tax revenue collected won’t cover the cost of legalizing recreational marijuana.

At a meeting of Hawaii’s Dual Use of Cannabis Task Force on Monday, state Tax Director Isaac Choy reported tax revenue of $2.557 million on medical cannabis sales, corporate income tax and employee withholdings from July 1, 2021, through June 30, 2022. According to the agency, tax revenue from legalization of recreational cannabis would amount to approximately $50 million.

State Representative Ryan Yamane, chair of the House Health, Human Serv­ices Committee, said on a livestreamed news program that the projected tax revenue would likely not be enough to pay for the regulatory costs associated with legalizing adult-use cannabis.

“There’s not much that $50 million can pay for,” Yamane said. “So there is not … this huge windfall that will be able to subsidize education or health services.”

According to the Democratic lawmaker, the sum would be too high to finance the infrastructure necessary to oversee a state-wide recreational marijuana market.

“That is difficult to use in order to establish a new program,” said Yamane. “Hire employees, do monitoring, do all the different aspects of adult recreational use, with $50 million annually.”

Cannabis Industry Disputes Projections

But representatives of Hawaii’s medical marijuana industry dispute the Tax Department’s projection that adult-use cannabis legalization would generate about $50 million in revenue for the state. Ty Cheng (chair of Hawaii Industry Cannabis Association) and President of Aloha Green Apothecary said sales of recreational cannabis and therefore tax revenue will likely exceed state projections. 

Cheng disputed the department’s projections of gross annual recreational cannabis sales of $200 million to $273 million because it is not clear how much money tourists visiting the islands will spend on adult-use cannabis. His projections for recreational cannabis sales were more than $400 million. This is roughly the same amount as Hawaii spends on alcohol each year. The tax increase would probably amount to about $80million at this rate.

Cheng says that there is a lot of room for growth for Hawaii’s cannabis industry. According to data from the Department of Health in Hawaii, there had been 33,725 valid medical marijuana card holders as of September 31st. Each business only has access to an incredibly small percentage of total patients, as there are eight marijuana dispensaries scattered across the islands.

“We’re really only catering to about 8,000, 9,000 patients,” said Cheng. “And those patient numbers have increased over the last three years, especially during the pandemic and we’ve seen revenue double from two years ago.”

Task Force on Legalization In Hawaii

The Dual Use of Cannabis Task Force was created last year by the state legislature and current Democratic Governor David Ige, who opposes recreational cannabis legalization, to explore the issues surrounding further reform of Hawaii’s marijuana policy. The state’s lawmakers legalized the medicinal use of cannabis in 2000, making Hawaii the first state to legalize medical marijuana by action of the legislature rather than through the ballot box. But, legalization of medical marijuana dispensaries was not achieved until 2015.

Cheng said that he is hopeful that following next week’s general election, the administration of a new governor will herald new progress in cannabis legalization.

“I think there’s real positive mood right now when it comes to adult use cannabis with the recent pardoning by President Biden on federal drug charges,” said Cheng.

Terilynne Gorman, a task force member from Maui, said that if the aim of legalizing marijuana is to generate revenue, the taxes collected from medical marijuana and expected from adult-use cannabis will not live up to people’s expectations. She said that the projected tax revenue does not “seem like much of a windfall for the state of Hawaii. … This could not be the tax windfall that people are anticipating.”

Gorman added that if the goal is to generate tax revenue for public coffers, a state lottery could be “much more lucrative,” then noted, “I know we’re not here to discuss that.”

Yamane has told reporters that the task force is Hawaii’s best chance to legalize cannabis after years of failed attempts. Yamane said that the task force is still collecting information and will report back to the legislature.

“There’s going to be a number of opportunities for the general public to chime in, testify for or against,” he said. “But what we wanted was to dispel some of the myths and find out what is fact.”

With voters in five states deciding on cannabis legalization in next week’s election, industry representatives in Hawaii hope that their state will not be far behind.

“We should all stay tuned, and we should be prepared for the public to provide input and comment,” said Randy Gonce, director of the Hawaii Cannabis Industry Association. “This is the closest Hawaii has ever been to legalizing cannabis in the history of our state.”