News Analysis: Taxing Medical Marijuana

Few issues have proven hotter controversies than the proposal by Rhode Island Governor Gina Raimondo to impose per-plant taxes and other restrictions on individual growers of medical marijuana. As a journalist, I’ve been asking fundamental questions about the proposal, and I’m not getting a lot of answers.

Spokesmen for the state have pushed back against even describing the new fees as a “tax,” but the proposal comes as part of the annual budget process that necessarily focuses on money to the exclusion of everything else and to a great extent defines and constrains the nature of the debate. For one thing, the governor projects additional revenue of $8.4 million in the first year, and the legislature cannot just ignore this by discarding the proposal to throw the budget out of balance. On the other hand, I’ve been unable to obtain any data or study from the state justifying that estimate, which seems to be somewhere between a wild guess and outright fantastical wishful thinking. I’m willing to review and fairly consider any evidence if I could get it, but I can’t get it.

It seems implausible on its face that medical marijuana patients and caregivers would be in a position to each pay up-front annual fees ranging from $900 (6 tags x $150 for patients) to $2,100 (6 tags x $350 for caregivers) even before they can begin to grow anything legally. People who obtain certification from a medical professional to use marijuana are by definition pretty sick, typically undergoing cancer chemotherapy, treatment for HIV/AIDS, experiencing chronic pain, or afflicted by one of the similar conditions specified by statute for eligibility in Rhode Island. In short, they generally cannot work and either are applying to be or are already approved as disabled. Insurance does not cover medical marijuana as it does for prescription medications, so patients have to pay out of their own pockets. It would be the rare medical patient who has this kind of cash available.

The vast majority of medical marijuana growing is what the average person would employ if they were growing tomatoes or any other ordinary plant, except that marijuana for legal and security reasons must be grown indoors hydroponically, greatly increasing both difficulty and cost. Yields are low and crop failures are frequent. Many growers struggle to control spider mites and other pests that destroy a crop to make it useless. Yet tax tags would be required for failed crops as much as for successful ones.

Why is there a difference in tag fees between patients growing for themselves ($150 per plant) and caregivers growing for a patient ($350 per plant)? Why is the number of plants per patient cut in half? Why are seedlings that in the past have been exempted from plant-count limits made subject to them, which in combination with the direct 50% reduction in plant count turns it into an effective 75% reduction? Why is a patient to be allowed only one caregiver, reduced from two? I haven’t been able to get answers to any of these questions.

Despite protests to the contrary and claims by the state that the goal is improved access for patients, from what I can see of the proposal – and I am open to the possibility that the state may be able to produce evidence to convince me otherwise – the real goal has nothing to do with revenue but instead is to pressure medical marijuana patients to obtain their medicine from compassion centers, squeezing out individual growers. Consider the evidence.

The original statute adopted by the General Assembly was drafted with evident skepticism that the executive departments responsible, particularly the Department of Health, would carry it out. To prevent bureaucratic obstructionism, the law commanded the creation of exactly three compassion centers to supply those patients who were unable to grow their own plants or to find a caregiver to grow plants for them. The law even provided that if a compassion center closed, another would have to be opened. Without rehashing the entire history of this, even with explicit commands from the legislature the process did not go smoothly within the Department of Health, but eventually the mandated three facilities were opened and are now operating.

However, compassion centers are an expensive way to obtain medical marijuana. They are corporate entities, albeit non-profit, that must pay rent and wages, and they necessarily incur all of the added expenses of their corporate infrastructure. This is not a criticism of compassion centers, but simply a recognition of what they are. It doesn’t require a sophisticated understanding of economics to know that you can grow your own tomatoes with your own labor more cheaply than you can buy them from the supermarket.

Part of the new proposal would allow the Department of Health to decide how many compassion centers would exist, and as I read the proposed statutory changes they could allow zero or hundreds depending upon whatever criteria they choose. New classes of licenses would be created, including “licensed cultivators” who grow for compassion centers with no association to any particular patient and “authorized purchasers” who can buy from compassion centers on behalf of a patient who is too sick to go in person. Bluntly, what is proposed is an entire system in support of the compassion center model intended, it appears, to replace the private growing model.

And, of course, there is the coup de grâce: Compassion centers and those growing for them, unlike individual patients and their caregivers, will not have to pay for tax tags.

If the proposal is adopted, what seems likely to happen is a set of results that will do enormous harm to the public interest: Patients who can afford compassion center prices will abandon private growing, while patients who cannot afford compassion center prices will go back to growing illegally as they did before the original medical marijuana law was adopted in 2006. Almost no one will buy the new tax tags because the economic assumptions behind them seem absurd.

I’m not suggesting that there is any grand conspiracy motivating the proposal, but rather that it seems a cobbling together of concerns from numerous disparate parties. Police have never liked the medical marijuana law — not because they oppose marijuana as medicine, but because they believe much of the medical growing activity is a subterfuge that feeds the illegal market. Many doctors still see marijuana as a substance abuse problem and prefer prescribing traditional drugs — not because they are being paid off, but because they genuinely trust the pharmaceutical industry more than homegrown plants. Is it possible that the governor was convinced by a confluence of such interests to believe that she can really get $8.4 million from people who are not as sick as they claim to be?

If there is one thing I am virtually certain about from covering her, it is that Governor Raimondo is not an idiot. Does she really expect $8.4 million from medical marijuana tax tags?

If the real goal of this proposal is to get rid of individual growers, that should be openly stated and considered in a transparent legislative hearing process, not slipped through the back door by an article buried in the annual budget.