The Cannabis Regulation & Tax Act (CRTA) was first proposed in Governor Cuomo’s FY 2020 budget proposal and set the groundwork for legal adult-use cannabis in New York. Despite endorsements from Governor Cuomo and upstate lawmakers, the CRTA ultimately failed due to a lack of support from moderate districts in Westchester and Long Island, as well as a drop off in support from the state assembly who touted their own bill, the Marijuana Regulation and Tax Act (MRTA).
The high tax rates proposed by the CRTA proved to be one of the most divisive issues regarding cannabis legalization, and policymakers and activists have gone back and forth debating how to most effectively tax cannabis. The state assembly released the MRTA-C in March of 2020, which addressed these concerns by proposing a significant reduction of the taxes.
In this analysis we break down the tax structure of the CRTA and took a look at how it may adversely affect the market for adult-use cannabis in New York. Also, we examine the tax structures of other legal states and assess their cannabis industries to determine the various impacts different tax regimes have on adult-use markets. Finally, we put forth some alternative tax plans that are designed to lower prices for consumers and increase tax revenues for the state, in order to create a robust and sustainable cannabis industry in New York.
We conclude that removing the weight-based taxes levied on cultivators and increasing the taxes on retailers will both decrease final retail prices for consumers while collecting more revenue for the state. Our research shows that consolidating the tax structure to a 25% tax on retailers would save consumers $6.33 per gram and would earn the state government an additional $0.11 per gram.
When the time comes to vote on the CRTA, legislators will need to keep in mind how the tax rates on cannabis will shape the market. A decreased effective tax rate, along with a shifting of the tax burden away from cultivators, will create a far more efficient cannabis marketplace – allowing towns, cities, and counties to reap the full economic benefits adult-use cannabis has to offer.