Auditor General eyeing pot tax windfall

By Roger DuPuis - [email protected]
DePasquale -
Marijuana and a pipe used to smoke it are displayed in New York earlier this month. - Peter Morgan | AP file photo

While some politicians continue to oppose legalization of recreational marijuana, one of Pennsylvania’s top state-level officials continues to suggest reasons for embracing pot.

In fact, state Auditor General Eugene DePasquale now has more than a half-billion reasons.

DePasquale recently released a report suggesting that Pennsylvania could take in at least $581 million in annual revenue by regulating and taxing recreational pot.

That’s nearly triple the estimate DePasquale initially made when he first issued a public call for legalization in March 2017, becoming the first statewide official to do so.

“Imagine what that $581 million could mean for Pennsylvanians,” DePasquale said, pointing out polls suggesting an estimated 56 percent of state voters believe recreational pot should be legalized.

“Not only would it help balance the state budget, but it would also mean increases to initiatives that affect Pennsylvanians’ lives, such as greater access to opioid treatment and better health care access for veterans and children,” DePasquale added.

As the Times Leader reported in our Time to Toke special series in June, DePasquale has remained steadfast in his support — for budgetary reasons, to be sure, but he also sees other benefits: Job creation, fewer arrests and prosecutions, and an end to the stigma decriminalization has created.

So far, nine states, the District of Columbia and reservations across the U.S. have granted adults age 21 and over the right to legally use marijuana.

Twelve more states have decriminalized it, typically for small amounts — as have some cities around the country, including here in Pennsylvania: Philadelphia, Pittsburgh, Erie, Harrisburg, York, State College, Allentown and Bethlehem.

Wilkes-Barre City Council voted in 2016 to downgrade possession of drug paraphernalia from a misdemeanor to a summary offense, subject to the arresting officer’s discretion. Otherwise, the status quo remains.

By the numbers

As numbers pour in showing growing revenues in other states, DePasquale’s office revised their estimates, which in 2017 predicted Pennsylvania could rake in $200 million per year.

The AG’s report assumes the following:

• Approval would be for the use of those 21 and older, in a state with about 9.5 million adults.

• Survey data by the Substance Abuse Mental Health Services Administration show that, as of 2015-16, 8.38 percent of Pennsylvania adults admit to being regular marijuana users, meaning they used it within the past month.

• That means the market for regular marijuana users would be about 798,556 adults.

• In 2017, marijuana sales totaled $1.3 billion in Washington State and more than $1.5 billion in Colorado, meaning the average user spends about $2,080 per year in those states.

• Assuming Pennsylvania users would spend a similar amount, that translates into 798,556 adult users creating a roughly $1.66 billion industry in Pennsylvania.

• Based on a how alcohol, cigarettes and medical marijuana are taxed in Pennsylvania, as well as additional factors, such as tax rates in surrounding states, DePasquale’s office recommends a tax rate of between 35 and 37 percent. At 35 percent, that would translate into the $581 million tax revenue DePasquale cites.

Statewide benefits

DePasquale suggested the money could be used to fund such things as pre-kindergarten programs, expanding the Children’s Health Insurance Program (CHIP), more programs that help veterans access and receive mental health and drug treatment services, and more money to combat the opioid crisis.

But wait, there’s more.

The auditor general even sees opportunities for boosting tourism revenue, and he cites two reasons.

First, commercial distribution is not legal in the nearby District of Columbia. And, he said, Pennsylvania’s proximity to Southeastern states that have not legalized medical marijuana would make it an attractive destination for people from that region.

The Philadelphia area alone draws millions of tourists each year, the AG added.

In 2016 a record 42 million tourists’ spending generated $634 million in tax revenue there, where marijuana has been decriminalized.

“At this point, Pennsylvania is potentially leaving a great deal of tourism money on the table, since marijuana has been decriminalized there but it is not being regulated, sold and taxed, and legalization in Delaware is imminent,” the report stated.

Legal limbo

DePasquale’s report acknowledges that the path forward is not clear, and not without drawbacks.

For starters, the U.S. Drug Enforcement Administration still lists marijuana as a Schedule I substance, which means its use remains a federal crime.

Even though the Obama administration made pursuing pot charges a low priority, current U.S. Attorney General Jeff Sessions opposes the drug and has threatened to step up enforcement, but so far seems to have stopped short of it.

In the meanwhile, some politicians have been reticent to push ahead, and legislation calling for legalization in Pennsylvania remains stuck in committee.

That hasn’t stopped DePasquale from calling on lawmakers to push on.

“With our neighboring states all looking at legalizing marijuana, now is the time for Pennsylvania to do the same,” DePasquale said. “Legislators must act now so that we can be competitive and not lose potential revenue to other states.”


Marijuana and a pipe used to smoke it are displayed in New York earlier this month. and a pipe used to smoke it are displayed in New York earlier this month. Peter Morgan | AP file photo
Recent report predicts $581M annual revenue

By Roger DuPuis

[email protected]