The Marijuana Money: Impacts of legal cannabis and Ohio’s sales tax plans

CLEVELAND — A big factor Ohio voters will have to consider when deciding legalization of recreational cannabis this year is the potential economic impact legal weed would have. In this “Marijuana in Ohio” report, we traveled to Michigan to see what’s happening with the tax revenue there. Plus, we show Ohio’s plans and those who oppose the idea altogether.

“It creates jobs, gets money moving through for the state as well,” said Dylan Steiner. He’s a regular cannabis user in Michigan who’s happy to see that legal recreational marijuana in the state keeps expanding. “Especially the products that come in are crazy…you would never expect them,” said Steiner.

NEW BUILDS, USING OLD SPACE

Wally Manju sells those products at his dispensary Nature’s Remedy in Ferndale, MI. “The investment is there,” said Manju. “We redeveloped the entire site for new construction because we wanted to make sure that we build from ground up so people see something different…an improvement to the real estate.”

Other cannabis operations have taken over industrial and commercial buildings that haven’t been used in a long time.

“And that’s a problem in Michigan and Ohio. You know, the term Rust Belt is not a term for no reason, right?” said Michigan attorney Brett Gelbord, who specializes in the cannabis industry and employment law. “Over 33,000 people are employed in the cannabis industry statewide right now, and those are good jobs. They’re good-paying jobs.”

In Michigan, tens of millions in tax money collected from marijuana are going to cities and counties. Tens of millions are going to school districts. Tens of millions are helping Michigan roads.

MI MAYOR AND MANAGER WEIGH IN

“Every city and every municipality and even counties are having struggles with paying their bills, especially with the rate of inflation,” said Hazel Park, MI Mayor Mike Webb. He said its marijuana money goes to police, fire, and other city employees. “It’s helped us…pay our pension programs…shore up our pension obligations to our former employees that have retired here.”

In Ferndale, MI, City Manager Joseph Gacioch said its cannabis tax money goes into the general fund. During COVID, the city’s business-related taxes were in flux, and it was good to have that marijuana money.

“It ended up being a very helpful backfill to offset some of those disruptions, those economic disruptions,” said Gacioch.

Last year, Michigan saw $1.8 billion in overall cannabis sales. This year, it’s projected to be $3 billion. So with a 10% sales tax, that means $300 million in revenue.

There are dispensaries near the border of Michigan and Ohio that see quite a flow of people from the Buckeye State.

“50% to 60% of our customer base is from the Ohio region,” said Kevin Brojek, who helps run King of Budz in Ferndale. The company has a store in Monroe, too.

IS OHIO MISSING OUT?

“Regulating the sale of marijuana for adults has been successful in just about every state,” said Tom Haren. He’s the spokesperson for the Coalition to Regulate Marijuana Like Alcohol. He told us 25% of Ohio cannabis sales tax money would go to drug prevention, 36% to municipalities allowing marijuana sales, and 36% to something called the Social Equity and Jobs Fund. People with a social or economic disadvantage can apply for special considerations. “There are 50 dispensary licenses and 40 new cultivator licenses that will be issued with a preference to social equity applicants,” said Haren.

However, not everyone agrees Issue 2 is a good idea.

“It’s a super bad deal for Ohioans,” said State Senator Mark Romanchuck. He’s from Northeast Ohio, and he’s on the Senate Finance Committee.

IS 10% SALES TAX ENOUGH?

He and some other legislators have said Issue 2 only benefits“a few greedy investors,” and that a 10% sales tax is too low, “pitiful,” because the money raised won’t counteract the social costs that legal pot would level.

He told us the Social Equity and Jobs Fund goes right back into the cannabis industry itself and not to Ohio.

“When you have the industry writing the laws and the rules, they’re going to do it in a way that benefits them,” he said.

The Social Equity and Jobs Fund will also encourage diversity hiring and studying criminal justice and bail reform.

“White folks and people of color use marijuana at the same rates, but we know that enforcement falls disproportionately,” said Haren.

“If we wanted to help people, I think putting some of that money into education, or food insecurity, or housing would be a much better way to spend it,” said Senator Romanchuck.

An Ohio State University study projects Ohio’s tax revenues from marijuana sales could be anywhere from $276 million to $403 million in year five after legalization.

We will have much more from our series “Marijuana in Ohio” coming up next week so you have the info you need before you head to the polls to vote on Issue 2.