New Mexico’s legislature may not be in session but House and Senate lawmakers still met recently to hear what financial experts have to say about the potential economic impact of marijuana legalization in the state.
The joint Interim Revenue Stabilization and Tax Policy Committee received forecasts from the Tax Foundation, the Legislative Finance Committee and O’Donnell Economics and Strategy in advance of the meeting, while representatives from the New Mexico Tax Research Institute and Ultra Health – a chain of 23 dispensaries operating in New Mexico’s medical marijuana program – provided further testimony.
Based on projections assuming New Mexico follows tax rates and regulations adopted in Colorado’s marijuana industry, the Tax Foundation – a think tank generally critical of tax increases – put first-year tax revenues at $25 million in its report. It expects annual excise tax revenues to rise and then stabilize at around $68 million.
O’Donnell Economics and Strategy submitted a report it published last year which anticipated cannabis sales of $660 million within five years of a legal market, alongside nearly 12,000 new jobs and “$541 million in additional income for New Mexicans.”
Duke Rodriguez, president and chief executive officer of Ultra Health, commissioned O’Donnell’s analysis but warned – if marijuana was legalized in the next legislative session – these figures would only be achieved so long as the state immediately ramped up cannabis production. He noted there are only 34 licensed growers and 29,000 plants for New Mexico’s medical marijuana program. For comparison, Colorado’s billion dollar tax revenues from its marijuana industry is the work of thousands of cultivators growing around one million plants. Rodriguez recommended three actions to ensure a healthy cannabis economy in New Mexico akin to Colorado’s: sufficient production, generous purchase limits for consumers and taxes that are not too onerous.
At the other end of the spectrum, Richard Anklam, president and executive director of the New Mexico Tax Research Institute, singled out California as a state legalization model to avoid.
“They continue in this regard to be a poster child of how not to act,” he said, highlighting in particular the lower than anticipated revenues, high taxes and complex bureaucracies which have all served to ensure California’s illegal cannabis market continues to thrive.
The joint committee chair, Rep. Javier Martinez (D), recently introduced legislation to legalize cannabis in New Mexico and stressed at the meeting the need to incorporate social equity commitments in a legal marijuana industry.
“[We] can’t legalize for the sake of legalizing without making a commitment to righting the wrongs of the past,” Martinez said.
The joint committee meeting follows the publication of a report last year by a working group formed by Gov. Michelle Lujan Grisham to study the impact of cannabis legalization. The working group estimated total tax revenues in New Mexico’s medical and recreational cannabis markets at $100 million annually once the industries mature.
The potential for marijuana legalization to help state’s recoup economic losses caused by the COVID-19 pandemic is a point that’s been frequently made, most recently by the governor of Pennsylvania. Gov. Grisham similarly believes marijuana legalization will help rebuild New Mexico’s economy and she has lamented the legislature’s inability to pass such legislation prior to the coronavirus outbreak. The New Mexico House passed a marijuana legalization bill last year but it’s still languishing in the Senate. Gov. Grisham said she is open to putting the question to New Mexico voters in the form of a ballot initiative but that won’t happen in next month’s elections.