By: Nick Mordowanec | C&G Newspapers | Published October 9, 2018

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LANSING — A new economic analysis of the potential impact of recreational marijuana on the Michigan tax revenue market is drawing praise by proponents and ire from opposition.

On Oct. 1, VS Strategies, a national cannabis policy consulting firm based in Colorado, released its economic forecast detailing how legal recreational marijuana would generate an estimated $520 million in the first five years of implementation in Michigan.

This five-year analysis covers the period beginning in 2020 — which is customary for setting up rules, regulations and collecting and analyzing applications — and concluding in 2024. It is estimated that by 2024, the 10 percent tax on marijuana will generate more than $325 million, while bringing in another approximately $195 million due to the state’s 6 percent sales tax.

Revenue, however, is expected to reach maturity by 2023, at a tune of about $134.5 million just in terms of recreational marijuana. Adult-use recreational marijuana revenue is expected to surpass $520.7 million by 2024.

In total, the combination of tax revenue from both recreational and medical marijuana by 2023 is expected to bring in about $172.8 million. The seven-year projection of combined recreational and medical marijuana sales, between 2018 and 2024, is expected to bring in $760.2 million.

VS Strategies formulated this analysis by assessing the number and growth rate of Michigan marijuana consumers and patients, in addition to the likely number of marijuana-consuming tourists from outside Michigan. The model uses myriad data sources, including the U.S. Census, the National Survey on Drug Use and Health, Longwoods International, RAND Corporation, and the University of Michigan, as well as research commissioned by the Colorado Department of Revenue.

Estimated regulated market capture rates are based on data from other states that have already legalized marijuana, as well as the firm’s experience in analyzing marijuana markets nationwide.

Josh Hovey, communications director for pro-marijuana The Coalition to Regulate Marijuana Like Alcohol, said his group paid for the analysis, but “not with preconceived notions” and in search of an honest assessment.

The group originally estimated the firm’s analysis as being between $100 million and $200 million in additional tax revenue per year.

“I think $130 million a year, and half a billion over five years, is more money than Michigan is receiving now and helping the parts needed most. … For a lot of people, the tax revenue is just a bonus,” Hovey said. “Most people understand that this initiative is not going to fix road funding problems, it’s not going to solve our education problems. But it’s gonna help.”

Proposal 1, as the legalization initiative is officially named on the upcoming ballot, would legalize the possession and consumption of marijuana for all Michigan adults 21 and older while setting a 10 percent excise tax on (non-medical) retail sales. Additionally, all marijuana sales would be subject to the state’s 6 percent sales tax.

It would also direct the 10 percent excise tax revenues to be divided: 35 percent for roads, 35 percent for schools, and 15 percent each to counties and municipalities — essentially local governments with marijuana businesses within their jurisdictions.

Sales tax revenue primarily supports Michigan’s School Aid Fund.

Hovey said the proposal language states that the very first tax dollars collected will go toward regulation and the enforcement of legalization — adding that the costs are accounted for, similar to how the state set up a regulatory structure for the medical marijuana industry when the public approved it.

Scott Greenlee, president of the anti-legalization group Healthy and Productive Michigan, said the analysis was “interesting” due to how the coalition had reportedly touted tax revenue increases in the amount of about $200 million per year.

“They’ve been telling voters it will be $200 million per year. … They’ve essentially cut their own projection in half by doing a study,” he said.

Greenlee made the point that with the state’s budget hovering around $57 billion, these projections amount to approximately .0017 of 1 percent in revenue gains.

“This is a gross number, this isn’t a net number,” he said. “The state of Michigan is going to need a whole new department to oversee this. There’s gonna be increased law enforcement costs. There’s gonna be health costs. There will be drug test costs.”

He also mentioned how Michigan has about 120,000 miles of paved roads, with just one lane mile costing roughly $1 million for repair.

Hovey maintains that legalization is bigger than just revenue, mentioning how tens of thousands of smokers would no longer be arrested for “petty possession” charges, giving more freedom to jails, local police resources, prosecutors and courts.

He added that instead of focusing on what he deemed to be a civil liberty that people do in the privacy of their own homes, the state could spend more time battling issues like the opioid epidemic.

“When you look at tax dollars enforcing failed law that hasn’t stopped people from using, it’s a massive waste of resources. … That should be their right and they should be able to do it without fear of arrest,” he said.

Greenlee said the proposal will go “right down to the wire,” and he hopes that voters see what he calls the “facade” of the pro-recreational marijuana crowd.

“Do voters really do the research and know what it will do for the people?” he said.