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Forum Editorial: North Dakota voters will be shown a skewed fiscal picture of pot legalization

The brief statement for the ballot measure proposing to legalize pot in North Dakota fails to even try to calculate the financial impact.

Editorial FSA
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The November ballot measure in which North Dakota voters will decide whether to legalize recreational marijuana use for adults should come with an advisory: voters beware.

Unfortunately, the one-sentence description of the fiscal implications for the measure makes no mention of the fact that state officials didn’t even try to calculate the revenues taxing legal recreational marijuana would generate.

This is the one-sided summary that voters will find on their ballots: “The estimated fiscal impact of the measure beginning in 2023 through the 2025-2027 Biennium is Revenue of $3,145,000 and Expenses of $4,985,000.”

The simple math implies a net-negative cost of $1.8 million during the five-year period. In fact, any earnest attempt to estimate revenues from legal pot sales would show the state would come out ahead by millions of dollars.

The ballot statement given to voters fails to disclose, however, that state officials didn’t even try in any meaningful way to estimate the revenues, as reported by Forum News Service reporter Jeremy Turley . Voters will therefore be unaware that they’re being shown a skewed fiscal picture.

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Brian Kroshus, state tax commissioner, blames the failure to even try to calculate the revenues on unknown variables, such as the cost of cannabis products or the level of sales. Yet state officials routinely must estimate costs and revenues for new proposed policies.

And there’s this: A three-page summary of the fiscal analysis by Kroshus’ office allowed that “additional revenue is anticipated to be collected on the sale of cannabis products” — an important qualification missing from the ballot description.

Secretary of State Al Jaeger said he didn’t have any discretion over the contents of the brief fiscal note and had to include it on the ballot.

Most of the $3.1 million in projected revenue from the measure, as noted in the ballot description, would come from application and registration fees paid by marijuana manufacturers and dispensaries.

To put it mildly, that results in a gross underestimate of potential revenues.

Voters aren’t even told in the ballot description that legal marijuana sales would be subject to a state sales tax of 5% and local sales tax of up to 3%. If the measure passes, legislators could very well decide to tack on an excise tax that could generate considerably more revenue.

How much revenue could we be talking about?

One estimate comes from Raymond March, an economics professor at North Dakota State University, who estimated the state could generate annual tax revenues of $6 million, a figure based on a comparison with Montana and Nevada, which allow recreational pot.

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Another estimate comes from Dustin Gawrylow, who heads the conservative North Dakota Watchdog Network, and believes the recreational pot tax could raise from $8 million to $10 million a year. To arrive at that estimate, Gawrylow took figures from Montana and adjusted them for North Dakota’s smaller population.

Omitting a realistic revenue projection in the ballot description in effect loads the dice by making legalization of pot seem like it will become a burden to taxpayers, something that legislators can ensure won’t happen.

This budgetary “reefer madness” is part of a history that is impossible to ignore of North Dakota officials presenting fiscal notes that paint a distorted picture of the financial impacts of marijuana legalization measures.

North Dakota voters deserve better from their elected officials.

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