By Todd Etshman, originally published in Rochester Business Journal on August 7, 2020.
Legalization of recreational cannabis likely coming down the pike for NY
The state of New York will pass a bill legalizing recreational marijuana use in: A. 2020, B. 2021, C. in the near future, or D. none of the above.
In the summer of 2020, none of those answers can be ruled out.
Another question floating around is which legalization of recreational cannabis bill will the legislature vote on: the one Governor Andrew Cuomo proposed in 2019, which didn’t include where the revenue from sales would go exactly, or the one proposed by Assembly Majority Leader Crystal Peoples-Stokes of Buffalo that did.
There could also be a hybrid version of the two bills that attempts to deal with issues the parties disagree on, such as taxation and revenue allocation.
Proponents of legalization such as RocNorml prefer a more comprehensive Peoples-Stokes bill to the Governor’s proposed Cannabis Regulation and Taxation Act. Advocates say it creates an industry that is diverse and fair for the many stakeholders that are working to develop and maintain the cannabis industry in New York.
“It (the Stokes-People’s Marijuana Regulation and Tax Act) covers most all of the bases. It starts with establishing a regulatory framework and implementing a tax structure,” says Phillips Lytle LLP attorney Tristan Hujer, whose practice includes assisting clients with the business of cannabis.
It could have been a done deal today. The most common reason given for the fact that it isn’t is lawmakers had to suddenly deal with the emergency issues COVID-19 presented to the areas they represent.
Democratic Assemblyman Harry Bronson, co-sponsor of the Peoples-Stokes bill, wants the legislation passed as soon as possible to help deal with the gaping hole in the budget caused by COVID-19.
“The sooner we can pass this, the sooner the state, municipalities and local governments can start receiving monies through this industry,” Bronson said in a comprehensive interview regarding the legalization of recreational use of cannabis. “We really have to convince the Democratic majority in the Senate to move forward with this.”
Bronson estimates the bill will be two votes short of the 32 votes needed in the Senate to pass. Further talks with Cuomo will also be needed, even though the governor supports legalization. Those votes may be obtained simply by having the Cuomo take the lead and indicate he is ready to sign proposed legislation.
“He (Cuomo) supports the concept but not the dollar amount. He wants more control of the revenue,” Bronson claims.
An important aspect of the Peoples-Stokes bill is a social justice component to compensate communities of color that have suffered the most damage as a result of the Nixon administration’s criminalization of cannabis and placing it on the controlled substance list.
“This was a racist policy that disproportionately and adversely impacted communities of color to a great degree,” Bronson says.
There is no such proposal in Cuomo’s Cannabis Regulation and Tax Act.
Nixon Peabody LLP Cannabis Practice co-leader Lori Green agrees that coming to terms with the allocation of revenue for social programs is the main issue facing legalization.
An additional hurdle is the taxation rate of recreational marijuana; the proposed tax rates in existing bills may be too high.
“California and Washington have such high tax rates on recreational cannabis that the illegal marketplace is still extremely strong. I think we’re going to have similar problems here,” Green says.
Neither bill offers affordable tax rates.
“This is unacceptable and will destroy the chance of building small, craft cannabis businesses,” says RocNorml executive director Mary Kruger on the national NORML website.
The high tax rate isn’t good for business participants who can’t deduct their business expenses because of federal laws that prohibit the sale of marijuana. Beyond that, there are issues such as federal banking restrictions regarding money gained from the sale of marijuana.
Green believes it will pass at the federal level, too, someday. For now, she suspects that Senate Majority Leader Mitch McConnell won’t let any bill legalizing recreational marijuana come to the floor. Even the current Democratic platform excludes legalization of cannabis, but that could change, Green says.
Cannabis legalization is the pink elephant in the room, says Hujer, and always will be until it’s excluded the controlled substances list.
Meanwhile, the state of New York is behind 11 other states and the District of Columbia in taking advantage of the jobs, new businesses, revenue and economic impact of cannabis legalization.
New Jersey is set to vote on a measure in November, making it another nearby state in addition to Massachusetts and Vermont to offer recreational marijuana. Those states will be ahead of New York in knowing how to operate with the federal government, if the federal government legalizes cannabis before New York does.
“When we look back at some of the key things we’ve learned from the states that have legalized before us it’s that over regulation and over taxation is what has been most damaging to this budding industry,” says Kruger.
The opportunity for upstate New York to gain from the new and expanding industry is significant, Green says.
“We have a huge food and beverage and agricultural industry in this area, and cannabis is a natural extension of that,” says Green. “We have cheap land, water and energy in comparison to downstate … Cannabis could be a very important contributor to our economic development.”