Critics contend that a higher fee would be passed onto consumers
The Cannabis Regulatory Commission last week punted on whether to hike a fee tacked onto cannabis after already canceling a scheduled vote on the fee earlier this month.
The commission was expected to vote during a special meeting on whether to raise what’s known as the social equity excise fee from $1.24 an ounce to as much as $30 for 2025.
The fee, mandated by state law, goes toward a fund that dedicates some revenue from recreational cannabis to social equity projects and reinvesting in communities that were harmed by marijuana criminalization. A percentage of the fee also goes to funding programs aimed at diverting young people from cannabis.
But following a two-and-a-half-hour meeting behind closed doors, the five-member panel voted 3-2 to delay the Nov. 1 deadline to approve any changes to the fee. Commissioner Charles Barker said delaying the decision would give the commission “more time to gather information, to speak to more stakeholders and organizations who represent the businesses and the people who will be directly impacted by this decision.”
The fee was expected to be discussed at the commission’s Oct. 17 meeting, but it was pulled from the agenda. The panel did not say when they would reconvene to vote on the fee that goes into effect on Jan. 1, 2025. Their last meeting this year is scheduled for Dec. 12.
The fee brought in an estimated $2.6 million in fiscal year 2024. The funds from the fee are allocated by the Legislature and governor, though no money has been spent so far. In the past three years, the commission has held several public hearings to consider what the money should be spent on.
Cannabis cultivators pay the social equity fee based on the quantity of usable cannabis produced. But critics claim a higher fee would lead to businesses passing the cost onto consumers.
Commissioner Sam Delgado proposed raising the fee to $5 per ounce of usable cannabis, and Commissioner Maria Del Cid-Kosso proposed setting the fee to $10 per ounce. Neither proposal advanced to a vote last Wednesday.
Barker said he doesn’t want to limit revenue raised from the fee nor raise the fee to the maximum of $30 if the funds are used for their specific purpose.
“We need to be sure that we’re going to be able to generate more tax revenue for great social equity programming that gets to communities and the people most impacted by the federal war on drugs, while at the same time not having a colossal effect on the industry where the social equity businesses that we’ve newly onboarded can’t make it and don’t succeed,” he said.
According to the state’s recreational marijuana legalization law, the social equity excise fee can run up to $30 per ounce when the average per-ounce price of legal cannabis is between $250 and $350. The average retail price is $330.68 an ounce, according to the commission’s acting executive director, Christopher Riggs.
Progressive activists had urged the commission to hike the fee to the maximum, saying the law won’t live up to its social equity goals without more revenue. American Civil Liberties Union of New Jersey campaign strategist Ami Kachalia said with a $30 fee, the state would have millions more dollars to reinvest in communities targeted by decades of marijuana criminalization.
“It’s imperative that going forward, commissioners deliver on the law’s promise and invest in repairing the harms from the failed drug war – and that means leveraging every opportunity to ensure communities who bore the brunt of past enforcement benefit from New Jersey’s legal cannabis market,” she said.
Samuel Reichbart is a cannabis patient advocate. He told the commission that while small businesses need protections, larger corporate cannabis companies can afford a higher fee. Those companies should have to “pay every single dollar that you guys are allowed to charge them by law,” he said.
In addition to raising the fee, Austin Edwards of nonprofit Salvation and Social Justice called on the commission to create a website to track the funding set aside for community reinvestment. There should also be an annual report on the way those dollars are spent on community programs, he added.
“We’re just hoping to create and establish an equitable and legal cannabis industry. We know it’s not easy, but we know that you have the power to create that equity back into our community,” he told the commission.
Industry players and business owners who warned a higher fee would lead to skyrocketing prices and problems for small cannabis shops celebrated the decision. Scott Rudder, president of the New Jersey CannaBusiness Association and owner of a dispensary in Riverside, said rising prices would be a problem for everybody struggling with affordability.
Rudder said he’d be open to a maximum of $5 per ounce until more operators, cultivators, and retailers get their licenses. In a few years, when there’s greater competition and prices are lower, raising the fee higher would be less of a jolt for consumers, he said.
“By hitting them over the head with higher prices right now when we’re just getting started, when consumers are coming off the legacy market, coming on to the legal and tested market — now is the time to strengthen that encouragement, not to discourage,” he said.
Cannabis attorney Bill Caruso stressed to the commission that they can’t “kill this golden goose” that is the emerging cannabis market in New Jersey.
“Racial and social equity reinvestment is absolutely important, but not on the backs of this commission, and not on the backs of this industry,” Caruso told commissioners.
This article was republished from the New Jersey Monitor under Creative Commons license CC BY-NC-ND 4.0. You can read the original version here.
