WA House RSG - Committee Meeting
(February 6, 2023)

Here are some observations from the Monday February 6th Washington State House Regulated Substances and Gaming Committee (WA House RSG) Committee Meeting.

My top 3 takeaways:

• Staff briefed on HB 1595, “Modifying the cannabis excise tax,” which had similarities to another bill committee members heard days earlier to base cannabis taxation on product tetrahydrocannabinol (THC) concentration (audio - 2m, video).
  • A detailed report on products with heavy concentrations of tetrahydrocannabinol (THC) by Washington State Health Care Authority (WA HCA) and University of Washington Addictions, Drug, and Alcohol Institute (UW ADAI) officials in 2023 included numerous policy recommendations, including using the cannabis excise tax to make the items more expensive.
    • In December 2022, Beatriz Carlini, a UW ADAI Research Scientist and head of the ADAI Cannabis Education and Research Program (CERP), spoke with legislators about the research and recommendations for basing product taxation on THC levels.
    • Another bill during the session, HB 1641, "Addressing public health challenges of high-potency cannabis products," featured a restructuring of the “37 percent cannabis excise tax to a tax of 37 percent, 50 percent, or 65 percent of the selling price, based on product type and…concentration” and was heard by the committee on February 2nd.
    • At time of publication, Washington cannabis consumers paid the most in cannabis taxes of any state with a licensed market.
  • Committee Counsel Matt Sterling took members through the bill analysis and fiscal note which stated:
    • Changes the cannabis excise tax from thirty-seven percent on all retail sales to different varying percentages based on the tetrahydrocannabinol (THC) concentration of the cannabis or cannabis product.
    • Requires the Liquor and Cannabis Board to collect certain data related to sales of cannabis products.
    • Costs for regulators related to implementing the bill was estimated to be $90,519 for fiscal years (FY) 2024-25, and $84,414, in each following biennium relating to ongoing fiscal analysis of cannabis sales data.

• Speakers touted the benefits of lower taxes on some cannabis items, while raising taxes  on items with higher concentrations of THC.
  • Three individuals registered their support for the bill (testifying, not testifying).
  • Ranking Minority Member Kelly Chambers, the legislation prime sponsor, talked about the hearing on HB 1641 and how taxation based on cannabis concentration had been offered among recommendations by the WA HCA/UW ADAI report that included stakeholders she said were interested in “keeping…high-potency products out of the hands, and use, of young people.” Creating a tiered system for cannabis taxation instead of the existing “flat rate,” was something she believed had merit in diverting “younger people from purchasing" the items legally. Chambers acknowledged the relationship between taxation and consumer behavior was “probably not as simple as that" and looked forward to input on the bill (audio - 2m, video).
    • Co-Chair Shelley Kloba was appreciative of the “creative thinking” behind the bill, asking for a run down of the tax tiers. Chambers replied that rather than a single 37% excise tax, there would be 25%, 35%, and 40% tiers, with the lower levels covering “usable flower,” as well as an “edible or liquid form,” while cannabis concentrates would be taxed at 40%. With state taxes already so high, she was attempting to strike a balance with “deterring people” from high concentration items without pushing them into buying from unlicensed markets. Moreover, she felt that incentivizing the “lower potency more than you have other issues with…fillers and lower quality products.” Kloba then inquired if there was an effort to have the changes be “revenue neutral.” Chambers relayed that neutrality had been a ”hope,” but she hadn’t seen analysis indicating whether the tiering system would be revenue neutral. She said HB 1595 incorporated “more data tracking" to know "how much is spent in each category" (audio - 2m, video).
  • Shawn DeNae Wagenseller, Washington Bud Company Co-Owner, The Cannabis Alliance and Washington Sun and Craft Growers Association (WSCA) Board Member, appreciated “if we’re going to change up the taxes, it needs to be based on THC levels.” As her company produced cannabis flower with THC percentages into the “high 20s,” she requested the tax tier covering cannabis flower be raised up to include plants with “say, 29%” THC (audio - 1m, video).
    • Chambers was curious whether Wagenseller perceived “bright lines” where tax tiering should be set. Wagenseller speculated that looking at the testing analysis on cannabis flower and concentrates sold in Washington might help identify ranges on which to base tax levels (audio - 1m, video).

• There was no testimony against HB 1595 despite more than 20 people signing in opposed; most testimony on the bill came from people with a position of ‘other’ explaining data and testing challenges resulted in their more neutral stance.
  • 21 individuals registered their opposition to the bill; five individuals registered a position of ‘other’ on the bill (testifying, not testifying).
  • Burl Bryson, The Cannabis Alliance Executive Director, signed in as ‘pro’ but clarified his position was ‘other’ due to wanting more “conversation and education” on the topic of high concentration products, since “we do believe that education is the key piece in preventing youth access" (audio - 1m, video).
  • Micah Sherman, Raven Co-Owner and WSCA Board Member, remarked he "appreciate[d] the bill and some of the issues that it's trying to get at” and had sent written comments with “specific numbers” on what WSCA members thought the tax tiering would do. He recommended clear product categories, rather than basing it on THC percentage alone, which could incentivize licensees or labs to “target” the highest permissible level. Sherman also insisted processes to improve cannabis testing had to be put in place as the same product could sometimes get "wildly different numbers” from different laboratories. He also advised that a THC “milligram” tax could prove more effective in targeting low priced, highly concentrated products (audio - 3m, video).
  • Vicki Christophersen, Washington CannaBusiness Association (WACA) Executive Director and Lobbyist, supported more conversation on the “really complicated issue,” but didn’t feel confident officials had “good sales data by type of product" and therefore couldn’t determine “revenue neutral” tiers. She encouraged continued discussion between lawmakers and industry leaders (audio - 2m, video).
  • Adán Espino, Craft Cannabis Coalition (CCC) Executive Director, was sympathetic to the aim of the bill, but shared “mild concerns” over the quality of sales data from the Cannabis Central Reporting System (CCRS). Additionally, as a tiering system was less “streamlined” than a flat tax, he expected the bill would add complications for retailers. Espino further speculated that any higher taxes on cannabis would lead to “feeding the existing illicit market” (audio - 2m, video).
  • The only person signed up to testify against the measure, Asheley Krutsinger, wasn’t available when called upon to testify.