Cannabis legalization talks break down as lawmakers clash over taxes, fees

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A bill legalizing, taxing and regulating adult-use marijuana was pulled from a Thursday vote as different sides began to lock horns on how to tax sales and how to spend the money, said several people involved with the process.

Senate Bill 21 and Assembly Bill 21 passed on Monday, and lawmakers were hoping to pass it out of both the Assembly and Senate next Monday.

But the measure required the passage in the Assembly Appropriations, and the Senate Budget and Appropriations Committee, which both met on Thursday.

“There were so many amendments that came out of the hearing on Monday,” the bill’s sponsor, Senator Nicholas Scutari, D-22nd District, said in a phone interview. “We’re making an analysis and quite frankly, wanted more time to review a 200-page bill.”

Senate Budget Chair Paul Sarlo, D-36th District, said he was skeptical the bill would receive Monday’s vote, after talks broke down over how to tax the cannabis industry.

“If it won’t go through my committee, it can’t go Monday. I can’t see it happening.”

S21 legalizes recreational marijuana for anyone over 21 years of age, taxes cannabis transactions at the 6.625% state sales tax, and allows municipalities to levy a 2% excise tax. Those tenants mirror a ballot question voters overwhelmingly approved by a two to one margin to legalize marijuana.

A five-member Cannabis Regulatory Commission would oversee the new recreational market, and the existing medicinal marijuana market, which services close to 100,000 patients.

The bill outlines a process by which an unlimited number of licenses are granted for retail, distribution, wholesale, delivery, and cultivation.

“I was in the statehouse yesterday all night, all afternoon” looking over amendments, Scutari said.

Assembly Speaker Craig Coughlin, D-19th District, said he wants the enabling legislation to include an additional “user fee” on top of the sales tax and local excise tax, “that will help to reduce the financial burden on New Jersey’s taxpayers and specifically on its urban communities.”

“They don’t have an agreement,” said one person with direct knowledge of the discussion, who requested anonymity to speak freely on the matter. “The Assembly was talking about some obscure user fee, now they settled around the concept of a cultivation tax. How much is still up in the air.”

The disagreements, this person added, center over “where and when to tax it,” as well as “any new money, what’s generated and how to spend that money.”

Scutari panned higher taxes, saying on Monday that “If we overprice the product before it’s sold, no one will buy it legally. Some will, but many people will continue to buy it from their local drug dealer.”

“Everybody wants to slice it up and create more,” he added on Thursday. “The constitutional amendment calls for a certain tax rate and for us to add an additional one is maybe constitutionally impermissible.”

Senate President Stephen Sweeney, D-3rd District, the other sponsor, agreed in a Monday statement. He, Scutari and Sen. Teresa Ruiz, D-29th District, who sponsored the decriminalization bill, and contended that a higher tax rate would only serve to hamper any racial equity.

Scutari and Sarlo both said they agreed to protections for both employees and businesses.

Those would “tell employees what they can and cannot do regarding marijuana usage, under no circumstances are employees allowed to utilize it on any job. The question becomes when they can use it and when they can use it on their off time,” Scutari added.