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New Mexico’s Marijuana Legalization Work Group Issues Report on Adult-Use Legalization

October 30, 2019

New Mexico Governor Michelle Lujan Grisham decided to proactively research the benefits of legalizing adult-use cannabis in June after the state legislature failed to pass cannabis legalization legislation. She created the Marijuana Legalization Work Group to conduct an independent study on the potential pros and cons of legalizing recreational marijuana.

Marijuana Legalization Work Group

The Marijuana Legalization Work Group recently wrapped up their research and issued a comprehensive report on their findings. They also included their recommendations when establishing a framework for the legal cannabis market. One of their most pertinent suggestions was to offer expungement for low-level cannabis convictions.

Expunging low level cannabis crimes will address some of the damage done by the war on drugs especially in communities who were disproportionately targeted by law enforcement. It would be an incremental step in criminal justice reform and encourage cannabis convicts to take part in social equity programs for the emerging cannabis industry. The state could establish grant programs, in addition too low licensing fees, and free training programs.

The Marijuana Legalization Work Group is comprised of attorneys, law enforcement, lawmakers, industry members, physicians, citizens, and environment and public health officials. All parties were to adhere to certain guidelines: “maintain and expand our robust medical cannabis program, install public safety protections to protect minors and identify and prosecute those who misuse legal cannabis, create strong testing and labeling, and provide equity and economic opportunity for every community, including those disproportionately impacted by prohibition drug policies.”

Eliminating Black Market & Protecting Medical Marijuana

Governor Grisham is determined to get it right when it comes to New Mexico adult-use cannabis industry. Members of the legalization task force were able to learn valuable lessons from the shortcomings of other states to nail down what really works. In an effort to extinguish black market sales, the Marijuana Legalization Work Group also recommended that the state take away the option for local cities to ban cannabis businesses.

Banning recreational or medical marijuana dispensaries in any area will leave a gap in the market that illegal operations are likely to fill. By allowing licensed businesses to meet the demand, black market producers will have little ground to stand on. Additionally, the task force suggested that regulations should make home grows illegal to decrease the chances of illegal sales. 

They also recommended that the state expand the state’s medical marijuana program, including a $3.9 million subsidy program for low-income medical marijuana patients. This program would receive more funds annually so that in five years the subsidy will be up to $7 million. The report aims to protect medical marijuana even as adult-use flourishes so that patients have access to affordable cannabis products.

Cannabis Tax Revenue

The Marijuana Legalization Work Group report also details the economic benefits of legalizing adult-use cannabis. They estimate that legalization would generate $63 million in new state and local taxes in the first year, and grow to more than $94 million by year five. These numbers are based on sales estimates which are expected to be about $318 million for year one. The group thinks this will increase to $620 million 5 years in with a market consisting of around 468,000 consumers.

With such lucrative market potential the report also recommends that the state impose a 17% average tax rate. This breaks down to a 5% state excise tax on sales with a 5.125% gross receipts tax on businesses, another 5% local excise tax, and an additional 2% local gross receipts tax. 

The Marijuana Legalization Work Group report reads, “Combined, a joint medical/adult use program is anticipated to include more than 13,000 jobs at all skill and income levels and mature to generate at least $850,000,000 in annual sales which would generate almost $100,000,000 in new revenue for state and local governments annually.”