Cannabis

New Jersey Legalized Marijuana!: What can we learn from the latest legal state?

More than three years after Governor Phil Murphy ran on a campaign promise to legalize marijuana, cannabis legalization for adult use is finally the law of the land in New Jersey. Voters overwhelmingly approved legalization through a ballot measure back in November, but months of disagreements among lawmakers and the governor’s administration held up final approval until the last possible moment – literally. The legislature had previously passed two bills to legalize and decriminalize cannabis in December, but negotiations around how to handle possession for minors came to an impasse early this year. It took a third “clean up” bill that passed with broad bipartisan support last week, for Governor Murphy to finally sign all three bills into law just ten minutes before the deadline.

Despite being the 15th state in the US to pass adult use cannabis legalization, the path to legalization in New Jersey has been fraught with arguments about the best ways to handle the various aspects of regulating cannabis. This is not entirely surprising, and not only because of the challenges of legalizing through the legislative process (as opposed to by ballot measure alone) – although we have seen many iterations of state regulations that attempt to “get it right”, I think we can all agree that no state has come up with the perfect policy yet. Still, there is much to be gleaned from each new attempt, and as many of us believe Rhode Island is poised to become one of the next states to legalize through the state legislature, I think there are a few important lessons we can learn from what happened in New Jersey.

What Does the Law Do?

Altogether, the three bills will legalize and decriminalize use and possession of up to 6 oz of marijuana for adults. Like most other legal states, it will also create a fully regulated legal retail market (the first between Boston and Washington DC), although that is unlikely to open doors for several months – or a year or more, realistically. That’s because a Cannabis Regulatory Commission needs to first be established, and tasked with creating specific regulations for the cannabis industry, including cultivation and retail licensing. Once the rules are set, the CRC can start accepting applications, but who knows how long the process will take from start to finish? Remember: It took two full years for dispensary doors to open in Massachusetts after citizens voted to legalize in 2016.

The other component of the legalization debate, which held up the process and necessitated the “clean-up bill,” is how the state will handle underage marijuana possession under the new laws. Before now, New Jersey laws were not doing much to keep young people out of the criminal justice system, with underage drinking punishable by a fine of up to $1,000 and six months in jail. Of course, we know that these types of laws are almost always disproportionately enforced in communities of color, which is the main reason for the legislative impasse earlier this month. Governor Murphy was concerned that the language of the first two legalization/decriminalization bills would leave the door open for de facto legalization for kids, which was no one’s intention. On the other hand, the NJ Legislative Black Caucus and proponents of criminal justice reform were concerned that overly punitive policies around possession by minors would likely result in young people of color bearing the brunt of enforcement, as usual.

Legislators came to a compromise in the clean-up bill, which would make underage possession of alcohol and marijuana subject to written warnings, that can later escalate to include parental notification and a referral to community services upon subsequent violations. The bill also set forth new guidelines for policing underage possession – officers can no longer use the odor of marijuana to justify a search, and body cameras must be used when engaging in these situations involving minors. While the powerful Policemen’s Benevolent Association called the law “anti-police,” many see it as a huge step forward for the civil liberties of the citizens of New Jersey, intended to prevent the irreparable damage that is caused by the criminalization of young people of color. I for one, will take “anti-police” if it means “pro-people” any day of the week.

How Will Taxes Work?

As the most populous legal state on the east coast, New Jersey cannabis sales are expected to generate $126 million in annual tax revenue, and I am sure lawmakers and state leaders are chomping at the bit to fill some of their budget deficit with marijuana money (sound familiar, Rhode Island?). The tax structure they have come up with is somewhat unique, and even visionary in its effort to mitigate the long-term effects of falling prices on cannabis tax revenues, and the programs they are expected to fund. This was another topic that was hotly contested in the legislature, resulting in two state taxes and an optional municipal tax. Here’s a quick breakdown of the taxes and what the revenue will be used for:

  • Enhanced State Sales Tax (7%)
    • 15% –  underage deterrence and prevention (community groups)
    • 59.5% – “impact zones” (cities with large Black and Latinx communities and high unemployment rates, where cannabis prohibition was most strictly enforced)
    • 25.5% –  “general fund” 
  • Social Justice Excise Tax 
    • $10-$60 per oz, depending on average market price of cannabis
    • 100% of revenue will go directly to “impact zones”
  • Optional 2% Municipal Tax – can be levied on any marijuana business within municipality

I doubt I’ve ever said before that tax rates are interesting, but there are a few notable components that make this tax structure worth mentioning. I like that there are multiple avenues for directing cannabis tax revenue to community reinvestment via the “impact zones” designation, and I am curious to see how the fluctuating tax based on the average price of 1 oz of cannabis will play out in reality. The idea is that even as the value of the product decreases over time, sales tax rates will remain steady, while the excise fee will increase, ensuring that revenue still flows into communities where it is most needed. The optional municipal tax will also help to ensure that towns and cities that don’t allow cannabis businesses within their borders will not be able to benefit from the resulting revenues in the same way as municipalities that do.

What’s Missing?

Overall, I am impressed with the efforts of New Jersey legislators to create comprehensive, meaningful laws around cannabis legalization for adult use. There will always be different opinions on the best way to legislate, tax and regulate, but if the contentious arguments, delays and resulting compromises are indicative of a resolution that was thoroughly debated, well-thought-out, and inclusive of as many voices as possible, that is still ultimately a win for democracy.

For me, there are a few glaring omissions in New Jersey’s new laws. I guess it shouldn’t be surprising that growing cannabis at home will remain prohibited in New Jersey, because they don’t even allow their medical patients to cultivate cannabis, but it bothers me just the same. If we agree that cannabis should be regulated similarly to alcohol, why can’t we allow responsible adults to grow it themselves, much as many people enjoy brewing their own beer at home? Even more infuriating is the lack of guaranteed or automatic expungement for those who have been punished under cannabis prohibition, which is something that simply must be included in any new legalization framework in my opinion. Similarly, lawmakers didn’t lay out their plans for creating an inclusive and equitable cannabis industry in New Jersey — namely low barriers to entry, social equity licensing and technical / financial assistance programs for prospective businesses who may lack the capital and entrepreneurial experience typical of the rich white men who already dominate the cannabis industry.

At the end of the day, I have to echo what New Jersey Senator Nicholas Scutari said of the process and resulting legislation: “No one is happy, and nothing is perfect. And let’s not let the pursuit of the perfect be the enemy of the good.” We shall see how New Jersey continues to refine its new cannabis laws in the coming years, but one thing is for sure: The pressure is on more than ever for other east coast states like New York, Pennsylvania, and Rhode Island to legalize soon, if they don’t want to lose even more tax revenue to neighboring states. Let’s learn from the missteps, successes and outside-the-box thinking that allowed New Jersey lawmakers to eventually get past their differences, so as to create a better future for their citizens.

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