Pubdate: Wed, 08 Jul 2015
Source: Alaska Dispatch News (AK)
Copyright: 2015 Alaska Dispatch Publishing
Contact:  http://www.adn.com/
Details: http://www.mapinc.org/media/18
Note: Anchorage Daily News until July '14
Author: Laurel Andrews

THE STATE WEIGHS IN: HOW MUCH MONEY WILL MARIJUANA BRING TO ALASKA?

Alaska stands to make between $5.1 million and $19.2 million in tax 
revenue from commercial marijuana in 2016, according to a preliminary 
estimate by the Alaska Department of Revenue.

An estimate dated Jan. 2 looks at possible revenues that it calls 
"very uncertain." The tax division had to estimate both how much 
marijuana is consumed in Alaska every year and what proportion of 
consumers will switch to marijuana from the legal retail market, said 
Ken Alper, Department of Revenue tax division director.

"To a certain extent you're shooting in the dark here," Alper said.

Marijuana will be taxed at $50 an ounce, according to Alaska's 
initiative, which was voted into law in November. Leading into the 
election, how much revenue Alaska stood to gain was anybody's guess. 
Former Gov. Parnell's administration declined to publicly release a 
revenue estimate, although the state did produce a cost estimate of 
$3.7 million to $7 million to set up a regulatory and enforcement system.

Meanwhile, other entities took a stab at revenue estimates, which 
varied widely. The "Big Marijuana. Big Mistake. Vote No on 2" 
campaign against marijuana legalization estimated the state would 
collect $5.1 million in tax revenue, while the Alaska Cannabis 
Institute, which held marijuana business seminars in Alaska, produced 
its own estimate of $20.4 million. The Marijuana Policy Group 
estimated potential tax revenue of $56 million.

The tax division's January estimate doesn't include potential sales 
to tourists or any additional sales or excise taxes that might be 
levied by local governments.

There are large uncertainties in these numbers. One difficulty, Alper 
said, is how the state estimates the number of marijuana consumers -- 
a number based on a 2009-10 National Survey on Drug Use and Health.

Polling data creates uncertainty, Alper said. Marijuana is a 
"historically illegal product, and a stranger is calling you on the 
phone and asking if you use it," Alper said. That scenario leads to a 
"certain amount of underreporting," he said.

The largest variable, though, is what percentage of marijuana 
consumers will transition to the retail market, and the large range 
reflects that uncertainty, Alper said. The state is estimating that 
30 percent to 80 percent of marijuana-consuming Alaskans will switch 
to the retail market.

The tax and regulatory structure Alaska is in the process of creating 
will be the biggest factor in determining who switches from the black 
market and personal grows to legal retail, Alper said. How difficult 
will it be to acquire a license? How stringent will zoning 
regulations be? These factors will influence that switchover rate, he said.

Alper noted tax revenues in Washington have come in higher than 
estimated, so that may bode well for Alaska's own revenue. Alper also 
noted a key difference between Colorado and Washington and Alaska: 
Alaska does not have a medical marijuana industry separate from its 
commercial industry. Thus, per capita, Alaska may see a somewhat 
higher percentage of consumers switching to a retail market, Alper said.

State's math behind the estimate

Alaska has 519,514 legally eligible marijuana consumers aged 21 and older.

The 2009-10 National Survey on Drug Use and Health estimates 37 
percent of 21- to-25-year-olds (19,258 Alaskans) used marijuana in 
the past year, and 25 percent used in the past month. Of people 26 
and older, 14 percent (65,445 Alaskans) used marijuana in the past 
year, and 10 percent in the past month, according to the survey.

Those numbers represent the low estimate. The state added 20 percent 
to those numbers to make up for possible underreporting and 
determined its upper estimate.

That means 84,703 to 101,644 Alaskans aged 21 and older are estimated 
to have used marijuana within the past year.

The state then estimated a person 21 to 25 years of age will consume 
an average of 3.4 ounces per year, and a person 26 years and older 
will consume 3.7 ounces per year.

That brings the state to an estimate of 307,624 to 369,148 ounces of 
marijuana consumed in Alaska in a given year.

The state also contends 310 to 1,240 medical marijuana users will 
switch to the legal market, producing a "small effect on overall tax 
outcomes," and adds another 1,147 to 4,588 ounces consumed every year.

Next, the state estimated changes in the quantity consumed due to 
price changes. That range has been "left significantly wide to show 
many possible outcome adjustments," the state says, and is estimated 
between 35,798 and 115,986 ounces per year.

The percentage of people who will switch to the legal retail market 
is 30 to 80 percent of marijuana users, the state estimates.

With that, the state ends up with a retail market consumption of 
101,800 ounces to 383,520 ounces per year. Multiply that by $50, 
Alaska's per-ounce taxation rate, and the state arrives at its $5.1 
million to $19.2 million tax revenue conclusion.
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MAP posted-by: Jay Bergstrom