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Greener pastures

Posted on 02/13/24 by Bailey Williams (he/him) in Revenue & Budget

Cannabis tax revenue can help communities. Legislators have other ideas.

The end of recreational marijuana prohibition in Ohio has state legislators seeing green. Not so much for cannabis plants themselves, but for the expected hundreds of millions of dollars in tax revenue coming from legal marijuana sales each year. Last November, Ohioans voted in favor of Issue 2, which legalized adult recreational marijuana possession and use in the state. Since then, the Ohio General Assembly has considered changes to the initiated statute, but these efforts stalled at the end of last year. While the language of Issue 2 became law on December 7th, Ohio lawmakers are still considering changes to the statute.

Those lawmakers should keep the will of Ohio’s voters in mind. Over two million Ohioans voted to legalize marijuana sales and use tax revenue from those sales to benefit communities where dispensaries are located (called “host communities”), fund substance-abuse research, and create restorative justice programs to remediate some of the harm done by the war on drugs. Changes by the legislature should focus on regulating the market to ensure product safety or improving the collection and use of tax revenue to redress racial disparities created by the discriminatory enforcement of recreational marijuana prohibition. Any other changes to the statute risk subverting the will of the voters.

Ohio lawmakers have floated two such changes, both of which should be rejected: Tax revenues from legal marijuana sales should not be used to fund broad rate cuts to the state income tax, nor should they be earmarked for policing. Either change would divert funding that should be used to help those harmed by the failed war on drugs, and clear the criminal records of Ohioans being punished for actions that are no longer crimes.

Ohio’s current cannabis laws

In November of 2023, Ohio voters supported a citizen ballot initiative to legalize recreational marijuana use, growth and sale for adults. By passing Issue 2, Ohio voters approved the possession of marijuana for adults over the age of 21 and the allowance of up to six plants per person or 12 plants per household. Issue 2 also placed a 10% tax on all legal marijuana sales.[1] The now-enacted law specified how the tax revenue from these sales was to be allocated:[2]

• 36% for the Cannabis Social Equity and Job Fund.[3]
• 36% to municipalities that host dispensaries.
• 25% to the Department of Mental Health and Addiction Services for substance abuse research.
• 3% for administrative costs for the Division of Cannabis Control and Department of Taxation.[4]

Two studies conducted before passage of Issue 2 estimated tax revenue raised in the first year to be around $200 million.[5] The anticipated influx has generated a plethora of policy suggestions from Ohio lawmakers, all of which would require the legislature to change the tax revenue allocation approved by voters. This is fully within the legislature’s power: Issue 2 was passed as an initiated statute,[6] giving it the same legal status as any law passed by the legislature. As such, it can be changed with approval from both legislative houses and the governor’s signature.

Legislative debate and policy recommendations

The Ohio Senate has already passed changes to state marijuana laws. These changes include raising the tax levied in addition to the state sales tax on legal sales from 10% to 15%; diverting hundreds of millions of dollars away from restorative justice programs and communities that host dispensaries and into policing and jails; tighter restrictions on home growth of marijuana; and piecemeal funding for expungement efforts for marijuana-related offenses that are no longer illegal.[7]

The Ohio House has not yet proposed its version of the changes, but representatives have expressed some priorities. At least one has proposed using a portion of the tax revenue raised from marijuana sales to finance broad income tax rate cuts.[8] This policy choice should be rejected now and in the future. Broad cuts to income tax rates typically result in the wealthiest taxpayers receiving most of the value of the cut. The rate cuts included in the state’s most recent budget bill, House Bill 33, saw the elimination of half of Ohio’s income tax brackets and a further reduction in the top rate. Roughly 85% of the over $900 million in tax cuts went to the highest-income 20% of Ohio households. It is clear further income tax cuts remain a priority among certain legislators, as new legislation to eliminate the income tax was recently introduced in both the Ohio House and Senate.[9]

Similarly ill-conceived is the idea — recommended by members of both chambers and included in the Senate bill — of earmarking marijuana tax revenue specifically for policing. The Senate would divert over $200 million a year in tax revenue from marijuana sales into investigative unit and drug task force operations, police officer training, and the construction of new jails. This ignores the fact that Issue 2 already takes into consideration any increase in policing needs that may arise from the end of recreational marijuana prohibition. Localities that host marijuana dispensaries will receive tax revenue from that business; this revenue can be spent on policing if need be. It also could be used on other public goods, such as parks and public transit. Communities should be able to decide for themselves how that funding is used.

To fund this $200-million expenditure, the Senate eliminated both the Cannabis Social Equity and Job Program and the host community fund for localities with dispensaries. Ohioans see the need for — and through the ballot told our representatives to fund — these crucial elements of Issue 2, to atone for past injustices and fund public services. Ohio lawmakers should respect the will of the voters instead of pouring more of our shared resources into failed drug-war policies.

Rather than continuing down this road, revenue should be used instead for meeting Ohioans’ real needs recognized by the voters in passing Issue 2. One of these serious needs is the issue of expungement.

Clearing criminal records for what is now legal marijuana possession is an important step toward restorative justice. Issue 2 required and funded research on expungement and record sealing but did nothing to simplify the often cumbersome process. Ohioans seeking to expunge or seal their marijuana convictions face a waiting period and possible prosecutorial objections, and may be required to pay expensive legal fees and court costs.[10] They must also prove they are rehabilitated before they can have their records officially expunged.[11] These Ohioans are often subject to collateral sanctions, which limit an individual’s earning potential and increase the likelihood of recidivism.[12]

It is unconscionable that Ohioans continue to be punished by the state — both with imprisonment and after with collateral sanctions — for what is now legal activity, even as they work to get their lives back on track. The legislature should work with the Cannabis Social Equity and Job Program and pass legislation to allow Ohioans to fully participate in and contribute to their communities.

When Ohioans overwhelmingly passed Issue 2, we sent a clear message to our representatives in Columbus: Legalize the sale of recreational cannabis, and use the revenue it generates to help the people and communities harmed by the failed war on drugs. Some representatives appear poised to disregard those explicit instructions — as they have done with increasing frequency. There are better options available; our representatives should listen to the voters.

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