Rhode Island Senate leaders suggest legalizing recreational cannabis with 20 percent tax rate

Rhode Island Senate leaders suggest legalizing recreational cannabis with 20 percent tax rate

Bethan Rose Jenkins, Cannabis News Writer/Editorial

On Thursday, March 11, the governor of Rhode Island revealed his budget proposal for the 2022 fiscal year. Contained in his proposal was an in-depth plan for cannabis legalization in the state — RI H5555 the “Adult Use Of Cannabis Act”.

Governor Dan McKee is following in the footsteps of his predecessor, Gov. Gina Raimondo, who regularly advocated for recreational cannabis legalization. Raimondo has since resigned from her role as governor to become President Joe Biden’s commerce secretary.

Rhode Island’s cannabis legalization plan has emerged just after Senate Health & Human Services Committee Chairman Josh Miller and Majority Leader Michael McCaffrey introduced their version of a bill to legalize recreational cannabis in Rhode Island for adults aged 21 and older. 

Regardless of which plan is approved, adults aged 21 and above would be able to buy and possess one once of the plant. On the other hand, only the lawmakers’ version of the bill offers a home cultivation option. According to the governor’s bill, home cultivation could land someone a hefty fine.

What does the governor’s version of the bill include?

Lieutenant Gov. Dan McKee’s (D) proposal aims to develop a “strictly regulated legal market for adult-use [cannabis]” that is “anchored in principles of equity and public health and safety.” Should the governor’s measure be approved, sales would kick-off in April 2022. 

“Prohibiting the possession, cultivation, and sale of cannabis to adults has proven to be an ineffective policy for the State of Rhode Island,” reads an excerpt from the legislative text. 

For the program’s initial three years of implementation, 25 retailers are expected to be licensed on an annual basis. Moreover, licenses for Rhode island’s perspective market would be distributed on a lottery basis, with the first five designated for minority-owned businesses.

“In the absence of a legal, tightly regulated market, an illicit cannabis industry has thrived, undermining the public health, safety and welfare of Rhode Islanders. Regional and national shifts in cannabis policy have increased access to legal cannabis and [cannabis] products for Rhode Islanders in other states, the sale of which benefits the residents of the providing state while providing no funds to the State of Rhode Island to address the public health, safety and welfare externalities that come with increased access to cannabis, including [cannabis],” reads the legislation.

A tax of 17 percent – inclusive of a 10 percent excise tax and seven percent sales tax – would be imposed on Rhode Island’s recreational cannabis sales. Additionally, sales could be slapped with a wholesale tax of approximately three percent and a “weight-based excise tax on [cannabis] cultivation,” as proposed by the governor.

The state general fund would receive 60 percent of tax revenue, while an additional 25 percent would be used to fund administrative costs and “public health and public safety costs associated with adult-use [cannabis].” Local governments stand to receive the remaining 15 percent following the first year of implementation, at which point 70 percent of revenue would support the administrative and regulatory costs.

Based on a fiscal analysis of the governor’s plan, the state could easily generate $1.7 million in cannabis tax revenue for the 2022 fiscal year. By 2023, the figure is expected to reach $16.9 million.

Competing Senate Bill to legalize adult-use cannabis in Rhode Island

Senators Miller and McCaffrey drafted Rhode Island’s recreational cannabis bill specifically for Senate President Dominick Ruggerio, who has never, until now, openly announced his desires to legalize cannabis for non-medical use across the state.

“Cannabis legalization is a monumental shift in public policy that effectively creates a new economy. We want to ensure as many Rhode Islanders as possible have the opportunity to participate in this new economy,” Miller, D-Cranston, said in an official statement. He went on to say that a legal cannabis market will ensure the industry isas entrepreneurial as possible.”

Under the Senate proposal, a new Cannabis Control Commission (CCC) would be established. The CCC would be in charge of controlling and overseeing Rhode Island’s cannabis policy, as opposed to the Department of Business Regulation. In addition to this, the five member-strong CCC would approve retail store, cultivation and production licenses.

A summary of the bill states that cities and towns could opt-out of cannabis stores via voter referendum. However, they may not want to go down this route, since the three percent local tax structure can greatly benefit local municipalities where cannabis is sold

Individuals would be forbidden from consuming cannabis in public spaces, as well as storing unsealed containers of cannabis in the passenger area of a vehicle. Furthermore, retail stores are to be capped at 25 and licenses could be applied for by the state’s three existing medical cannabis dispensaries. Cannabis expungement is also a main facet of the measure.

Consumers will be required to pay a three percent municipal tax and the current seven percent sales tax, as well as a newly-imposed 10 percent tax — resulting in 20 percent total taxes on all adult-use cannabis products in Rhode Island.

Although the state’s General Fund will be strengthened by the taxes collected on adult-use cannabis sales in Rhode Island, licensing fees would be unloaded into a “cannabis equity fund” that would “provide technical assistance and grants to applicants from disproportionately impacted areas.”

The Senate bill specifies that retail store owners must pay an annual licensing fee of $20,000, whereas cultivators who grow their own plants would need to afford fees in the range of $100 to $20,000; the price would be dependent on the size of a cultivation greenhouse. 

Finally, a $5,000 fee would be asked of manufacturing and product testing license applicants.

The bill must now be considered further, but a hearing date has not yet been confirmed by the Senate Judiciary Committee.