Senate leaders propose recreational cannabis with 20% tax rate

Politics - Government

PROVIDENCE, R.I. (WPRI) — Rhode Island Senate leaders have introduced a bill that would create a system to tax and regulate recreational marijuana, with potentially dozens of private retail stores across the state.

The bill, introduced by Senate Health & Human Services Committee Chairman Josh Miller and Majority Leader Michael McCaffrey, would make it legal for adults ages 21 and older to possess up to one ounce of marijuana in Rhode Island. It would also allow people to grow the plant at home.

“Cannabis legalization is a monumental shift in public policy that effectively creates a new economy,” Miller, D-Cranston, said in a statement. “We want to ensure as many Rhode Islanders as possible have the opportunity to participate in this new economy.”

During a briefing with reporters, Miller said the legislation was designed with the goal of making the legal marijuana market “as entrepreneurial as possible.”

The legislative session marks the first time Senate President Dominick Ruggerio has expressed openness to legalizing cannabis for non-medical use in Rhode Island. The two senators crafted the bill at his direction.

Newly inaugurated Gov. Dan McKee is expected to propose his own version of a recreational marijuana market in his budget bill, which is due to the General Assembly on Thursday.

On the House side, spokesperson Larry Berman said Speaker Joe Shekarchi “has not taken a position, pro or con” regarding marijuana legalization.

“He is open to listening to all stakeholders and the public at House committee hearings,” Berman said. “He will wait to formulate his opinion based on the public testimony and the viewpoint of his members. The potential marijuana legalization will go through the same process as any other bill and he will not take a position out of respect to his members.”

A major facet of the Senate proposal is a new Cannabis Control Commission, similar to the one in Massachusetts. The commission would eventually control and oversee marijuana policy rather than the Department of Business Regulation, which currently regulates the state’s cannabis programs.

The commission would — among other things — approve licenses for private businesses that apply to open retail stores, grow marijuana or manufacture products. It would have five members, who would serve full-time for five-year terms. The governor, House speaker and Senate president would set their salaries. They would also hire an executive director.

The bill sets no cap on how many retailers will be licensed to sell cannabis statewide, leaving it up to the yet-to-be-formed commission. But it does set a minimum number, requiring the commission to license at least three applicants in each municipality. Each community would be eligible to have at least three retail licenses, with a cap beyond that of one license per 10,000 residents per city or town.

Cities and towns would be able to ban marijuana stores via voter referendum, though many may not want to for financial reasons: the tax structure proposed by the Senate includes a 3% local tax paid by the customer that would go to the municipality where the marijuana was sold.

“We know from experiences in other states that less parochialism and lower fees leads to greater transparency and a more competitive market,” McCaffrey said. “If a community wants to opt out and forgo tax revenue that is one thing, but we also need to make sure the process is open and transparent.”

And while communities can block marijuana stores as a whole through a referendum or zoning regulations, individual stores won’t have to get a “letter of non-opposition” from the city’s leader about their specific business, a facet of the Massachusetts program that led former Fall River Mayor Jasiel Correia to allegedly extort prospective businesses for bribes in exchange for the letter.

“We saw what happened in Massachusetts with respect to what happened in Fall River,” McCaffrey said. “We’re not going to let the cities and towns like in Massachusetts issue a letter saying ‘yes, we want this.'”

Consumers will have to pay the 3% municipal tax and the existing 7% sales tax, plus a new 10% tax, for a total of 20% in taxes on a marijuana product. McCaffrey said an estimate is still being put together for how much revenue the bill would generate.

While the taxes collected would go into the state’s General Fund, licensing fees would be deposited into a “cannabis equity fund” that would “provide technical assistance and grants to applicants from disproportionately impacted areas,” according to a summary of the bill.

Much of the criticism of Rhode Island’s existing medical program has been about the high licensing fees for dispensaries — currently $500,000 annually — that create a barrier to entry for many entrepreneurs seeking to get into the business.

Under the Senate bill, the annual licensing fee for a retail store would be $20,000, while cultivators who grow cannabis would pay a fee ranging from $100 to $20,000, depending on the size of the facility. Applicants for licenses to manufacture or test products would pay a $5,000 fee.

Any business entity would be allowed to hold only one license, though McCaffrey said two entities could have the same owners.

The three existing medical dispensaries — plus six more expected to be licensed later this year — would be allowed to apply for retail licenses, and could potentially be the first to begin recreational sales since they already have the infrastructure in place to do so.

The legislation is markedly different from the most recent proposal from former Gov. Gina Raimondo, who last year proposed opening state-ran cannabis shops with tight controls. McKee has already indicated he supports a private business model, which is what the Senate is proposing.

While McKee’s office has not commented on the details of his upcoming proposal, 12 News has learned his plan would cap the number of retail stores at 25 in the first year, with a lottery system similar to how the state plans to select six new medical dispensaries this spring.

McKee’s plan would allow stores to open around April 2022. The details of his plan were first reported by The Providence Journal.

In addition to setting up the legal cannabis framework, the Senate bill also sets up a process for people with past marijuana offenses to apply for expungement.

“Prohibition clearly didn’t work, and is next to impossible with the availability of legal cannabis just over the state border,” Miller said.

Individuals would not be allowed to consume cannabis while in public places or have unsealed containers of the drug in a car’s passenger areas.

The Senate Judiciary Committee has not yet scheduled a hearing to consider the bill.

Steph Machado (smachado@wpri.com) covers Providence, politics and more for WPRI 12. Connect with her on Twitter and on Facebook

Ted Nesi contributed to this report.

Copyright 2021 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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