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The Referendum and the Compromise

Last November, Massachusetts voters approved a measure that legalized recreational cannabis use, specified certain aspects of regulating the resulting industry, and set a timeline for rolling out legal sales.

This is all pretty standard fare, but as the deadline fast approaches, the state’s legislature has been divided on certain aspects of the plan, that many lawmakers see as too lax.

The first bone of contention is the maximum tax rate, which the referendum caps at 12 percent, including the state’s 6.25 percent sales tax. That’s pretty low compared to other states’ recreational taxes. The House proposed raising that maximum to 28 percent, and Governor Charlie Baker supports an increase, citing concerns about covering the cost of regulating the industry.
That concern rings hollow, given the windfalls to state and local governments that have consistently followed legal recreational sales. Although costs may rise in the years to come, for now, recreational tax revenue has been a flood, not a trickle.

Recently, however, the House and Senate have reached a compromise, which will not be quite so burdensome on the nascent market. Namely, they’re splitting the difference and capping the maximum tax at 20 percent. The compromise also specified an initial excise tax on consumer sales of 10.75 percent.

As a result, depending on whether cities and towns elect to impose their own taxes, of up to three percent, consumers could pay between 17 and 20 percent tax on every purchase.
The compromise also addressed the ability for local governments to ban cannabis dispensaries in their area, a power which the November referendum only granted to local voters. Any attempt at instituting a local ban would require a local referendum.

The House’s proposal shifted that power into the hands of elected officials, and again, the compromise seemed to split the difference. Now, those communities that approved the original referendum will leave the power in the hands of the voters. But in those communities where the majority of voters were against legalization, elected officials will be able to ban dispensaries on their own.

Around 72 percent of the population voted for the referendum, leaving some 92 communities with elected officials getting the power to ban. However, some legal experts have raised concerns that the split is unconstitutional. “Think about the larger issue,” said attorney Thomas O. Bean. “The legislature passes a law that has one provision for one set of cities and towns, and a different provision for another set of cities and towns, based on a vote that no one took.”

Finally, who will regulate the cannabis industry will be differing from that specified in the referendum. In November, voters specified that a Cannabis Control Commission would take on the task, consisting of a three-member board, appointed by the state treasurer. Instead, the compromise bill changes the commission to a five-person board, with the governor and attorney general getting a say in who sits on the board in addition to the treasurer.

Politics is the art of the possible, and voter referendums tend not to be written by lawmakers, but by industry lobbyists. It’s small wonder that the state government wants to make some changes to bring the regulatory structure more in line with other agencies.

Nevertheless, whenever lawmakers interpret a referendum as anything less than the gospel truth of the voters’ desires, it raises the question, are they really representing the will of the people? Legalization advocates don’t seem to have their hackles up about the new changes, so although they are likely to increase burdens on the industry, at least they don’t come as a shock.

“The law passed by voters was well-crafted and required no alteration,” said Matthew Schweich, director of state campaigns for the Marijuana Policy Project. “However, we respect the need for compromise, and while we don’t approve of every provision of this bill, we are satisfied that the outcome will serve the interests of Massachusetts residents and allow the Commonwealth to displace the unregulated marijuana market with a system of taxation and regulation.”

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