Gov. Andrew Cuomo announced his proposal to legalize cannabis for adult recreational use as well as a plan for the creation of the regulatory Office of Cannabis Management during his annual State of the State address.
The new department will have the responsibility of overseeing New York’s adult-use recreational program as well as the existing medicinal marijuana and cannabinoid hemp programs.
State officials expect to generate $300 million in tax revenue from this decision, money that’s expected to be used to help stimulate the state economy after being hit hard by COVID-19. Legalization efforts will also include licensing opportunities and assistance to people in communities of color who have most been negatively affected by the war on drugs.
“Not only will legalizing and regulating the adult-use cannabis market provide the opportunity to generate much-needed revenue, but it also allows us to directly support the individuals and communities that have been most harmed by decades of cannabis prohibition,” Cuomo said.
The 2022 Executive Budget includes the Cannabis Regulation and Taxation Act and the New York State Cannabis Revenue Fund to regulate and control the production, distribution, transportation, and sale of cannabis, cannabis related products, and medical cannabis within the state for the purposes of “fostering and promoting temperance in their consumption, to properly protect the public health, safety, and welfare, and to promote social equality.”
According to the governor’s Budget Briefing Book, there would be three taxes imposed on the adult-use of cannabis:
A wholesale THC-based tax at various rates according to the potency level or THC content of different product categories in an effort to more accurately capture both the true market value and the potential public health risks associated with the final cannabis product.
For example, cannabis flower/pre-roll/shake products will be taxed at a rate of 0.7 cent per milligram of THC content. Cannabis concentrates/oil products are taxed at a rate of 1 cent per milligram of THC content, while cannabis infused/edible products are taxed at a rate of 4 cents per milligram of THC content.
Adult-use cannabis products sold by a retail dispensary will also be subject to a surcharge at a rate of 10.25 percent of the final retail sale price.
Finally, all state and local sales taxes will be imposed in addition to the special THC taxes listed above.
From those THC taxes, retail surcharge, and licensing fees, the first $10 million in fiscal year 2023, the first $20 million in fiscal year 2024, the first $30 million in fiscal year 2025, the first $40 million in fiscal year 2026, and $50 million annually thereafter, will be directed to the new social equity fund, with the remainder of revenues directed to the newly established New York State Cannabis Revenue Fund.
The path to legalization has been a long and divisive issue across the nation over the past decade, with some states such as Washington and Colorado having fully legalized adult-use recreational cannabis while others like Florida still have hash fines and prison time attached to possession of minor quantities of the drug.
New York’s first major steps towards the former of these states came in 2018 when Cuomo ordered a study to be done by the Department of Health to study the potential effects of legalization.
The Department of Health concluded that there would be a net positive effect from the decision and that the criminalization of the drug has only led to disproportionate imprisonment of people of color as well as having not any real impact on public safety or health goals.
In 2019, Cuomo signed legislation that decriminalized the possession of small amounts of marijuana and expunged records for certain marijuana convictions.
Cuomo also convened a multi-state summit to discuss paths towards legalization of adult-use cannabis and coordinate programs regionally to minimize the cross-border movement of cannabis products.