New Jersey is closer to legalizing marijuana

New Jersey lawmakers advanced a recreational marijuana legalization bill this week that that moves the cash-strapped state closer to a new revenue stream.

Assembly and Senate committees in a joint meeting Monday approved legislation that would impose a 12% state excise tax on marijuana sales, with host municipalities having the option to enact an additional 2% tax. While the proposal was only narrowly approved largely along party lines, political analysts forecast that the measure will soon pass the full legislature and be signed into law by Gov. Phil Murphy. Democrats control the governor's office and both houses in the legislature.

David Paul Morris/Bloomberg

“I think it is going to pass, but there are a lot of moving parts and a lot of different objections that need to be solved,” said Seton Hall University political science professor Matt Hale. “There is a lot of desire to get it as right as possible out of the gate.”

Hale said that while some lawmakers have concerns about the tax rate being too low and marijuana making its way into the hands of children, he does not see enough resistance to prevent the legislation from passing. The bill could be scheduled for a vote on the legislature’s final scheduled day of voting this year, Dec. 17, or be taken up early next year, according to Hale.

“I think it’s a question of when, not if,” said Hale.

Bill sponsors noted that in addition to generating new revenues, the state would also benefit from saving an estimated $127 million that is spent yearly on enforcement. A 2016 report from New Jersey Policy Perspective and New Jersey United for Marijuana Reform estimated the state would receive $300 million in annual state revenue from legalizing cannabis based on graduated tax increases that ended with a final 25% rate. Murphy has previously proposed a 25% tax rate while lawmakers have sought lower marijuana taxes.

Nine other states that have legalized the recreational sale of cannabis: Colorado, California, Oregon, Washington, Nevada, Alaska, Maine, Massachusetts and Michigan. The retail excise taxes in the legalized states range from a low of 10.75% in Massachusetts to 37% in Washington, according to data from Leafly.com.

“I think it is absolutely time that we update our archaic drug laws,” said State Sen. Nicholas Scutari, D-Linden, during testimony before the Senate Budget Committee prior to Monday’s vote. “The sky has not fallen on states that have legalized marijuana and in fact they have seen a boon in their economic industries and the job creation market.”

Murphy unsuccessfully pushed marijuana legalization soon after taking office in January in hopes that new revenues could be used for the 2019 fiscal year budget that took effect July 1. Structural budget challenges and a large pension burden have contributed to New Jersey having the second-lowest bond ratings among U.S. states. New Jersey’s general obligation debt is rated A3 by Moody’s Investors Service, A-minus by S&P Global Ratings and A by Fitch Ratings and Kroll Bond Rating Agency.