Minnesota Governor Explains Why He Wants Double The Marijuana Tax Rate Compared To The Legislature’s Reform Bill

Key Minnesota lawmakers and the governor agree that marijuana should be legalized in the state. But one area where they aren’t exactly aligned is the tax rate for cannabis products.

The bill that’s been advancing in House and Senate committees in recent weeks calls for an eight percent marijuana excise tax. Gov. Tim Walz (D) thinks that should be almost doubled, proposing a 15 percent tax as part of his biennial budget request.

The legalization legislation has moved through six House committees and four Senate panels, with the tax rate so far unchanged.

Rep. Zack Stephenson (D), sponsor of the House version, says the priority should be ensuring that the tax is low enough to effectively transition people away from the illicit market while still covering administrative costs and key programs, including those meant to promote social equity.

In an interview with Fox 9 that aired late last week, the governor said that he understood that need—but “the evidence doesn’t show” that his higher tax proposal would help the illicit market thrive. At the same time, he feels there’s a need to generate more tax revenue to support substance misuse treatment, in part to appeal to legalization opponents.

“I certainly am not trying to encourage people to use [cannabis]. I’m just simply making the case of prohibition didn’t work, get it off the streets,” Walz said. “If we’re going to do this, let’s use that revenue to go back into programs. And I think for many people, especially those opposed to the idea of using general funds to make this work, is not very palatable to them.”

Stephenson, for his part, has insisted that the “point of this is not to raise revenue for the state of Minnesota.”

“We should not legalize cannabis to raise revenue for the state of Minnesota. There are many reasons to do this. That is not one of them,” he said.

Walz also previously expressed a different opinion about the timeline for enacting legalization, predicting that the legislature could accomplish it “by May.” House Speaker Melissa Hortman (D), in contrast, said it “will take a long time,” possibly extending over a two-year period.

There is still quite a bit of legislative work to be done before the legalization legislation makes it to the floor of either chamber and then possibly to the governor’s desk. There are more than a dozen committees left to consider the proposal between the House and Senate.

That means there will be plenty of time left for lawmakers to weigh the pros and cons of different tax rates.

In any case, with majorities in both the House and Senate and control over the governorship this session, Democratic-Farmer-Labor party officials are confident that legalization will be enacted in short order.

The legislation that’s being actively considered is an iteration of the 2021 House-passed bill from former Majority Leader Ryan Winkler (D), who now serves as campaign chairman of the advocacy coalition MN is Ready. That group announced in December that it would be lobbying for the measure while leading a grassroots effort to build support for reform.

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The governor has called on supporters to join lawmakers and the administration in their push legalize marijuana this session, and he circulated an email blast last month that encourages people to sign a petition backing the reform.

Much of the revised bills that are advancing through committee are consistent with Winkler’s legislation, though there are a few key changes, in addition to the newly adopted amendments. For example, it adds a new license category for businesses that sell “lower-potency edible products” under Minnesota’s unique THC law that the governor signed last year.

There would also be reduced regulatory requirements for those licensees, and they’d be able to permit on-site consumption if they have a liquor license, which is meant to ensure that shops currently selling low-THC beverages and edibles don’t face disruption.

Here are the main components of the revised marijuana legalization bills, HF 100 and SF 73:

Adults 21 and older could purchase up to two ounces of cannabis and cultivate up to eight plants, four of which could be mature.

They could possess up to two ounces in a public place and up to five pounds in a private dwelling.

Gifting up to two ounces of marijuana without remuneration between adults would be permitted.

It would promote social equity, in part by ensuring that diverse licensing by scoring equity applicants higher.

Prior marijuana records would also be automatically expunged. The Bureau of Criminal Apprehension would be responsible for identifying people who are eligible for relief and process the expungements.

In addition to creating a system of licensed cannabis businesses, municipalities and counties could own and operate government dispensaries.

On-site consumption permits could be approved for events, and cannabis delivery services would be permitted under the bill.

Unlike in many legal states, local municipalities would be banned from prohibiting marijuana businesses from operating in their areas, though they could set “reasonable” regulations on the time of operation and location of those businesses.

Retail cannabis sales would be taxed at eight percent. Part of that revenue would fund substance misuse treatment programs, as well as grants to support farmers.

A new Office of Cannabis Management would be established, and it would be responsible for regulating the market and issuing cannabis business licenses. There would be a designated Division of Social Equity.

People living in low-income neighborhoods and military veterans who lost honorable status due to a cannabis-related offense would be considered social equity applicants eligible for priority licensing.

The legislation as revised fixes an issue in current statute that prohibits liquor stores from selling THC products.

It also contains language banning synthetic cannabinoids, which is consistent with Board of Pharmacy rules put into place last year.

Two polls released in September found that the majority of Minnesota residents support adult-use marijuana legalization—and one survey showed that even more Minnesotans approve of the state’s move to legalize THC-infused edibles that was enacted earlier this year.

A survey conducted by officials with the House at the annual State Fair that was released in September also found majority support for legalization. That legislature-run poll found that 61 percent of Minnesotans back legalizing cannabis for adult use.

Support was up this year from 58 percent when the House Public Information Services polled fair goers on the issue in 2021. In 2019, the House poll found 56 percent support for legalization.

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