WA Senate LC - Committee Meeting
(January 22, 2024) - SB 6271 - Public Hearing

A study of changing product tax rates based on cannabinoid content divided cannabis sector interests, while a public health official supported further evaluation of the approach.

Here are some observations from the Monday January 22nd Washington State Senate Labor and Commerce Committee (WA Senate LC) Committee Meeting.

My top 4 takeaways:

• A briefing on SB 6271, “Modifying the cannabis excise tax to consider THC concentration,” was provided by Session Analyst Madeline Ralstin (audio - 1m, Video - TVW).
  • At time of publication, the state levied a 37% excise tax on cannabis, in addition to local sales and use taxes. In 2019, the Washington State Liquor and Cannabis Board (WSLCB) organized a legislatively mandated  Potency Tax Work Group whose members looked into “varying the marijuana excise tax rate based on product potency.” A feasibility study from BOTEC Analysis was followed by a final report from the work group concluding the idea was “not feasible at this time in Washington State.” The document also indicated “group members from the public health community were in favor of a tax structure that would discourage consumption of high potency cannabis, but did not have confidence that this tax would guarantee those outcomes.”
  • Ralstin described the effects from the bill analysis:
    • Requires the Liquor and Cannabis Board (LCB) to collect data on cannabis product sales and submit a report to the Legislature by November 14, 2025.
    • Requires LCB to formulate a recommended approach and implementation plan for modifying the cannabis excise tax and submit a report to the Legislature by September 18, 2026.
  • The prepared fiscal note indicated an initial cost of $63,600 in fiscal year (FY) 2025, and $7,200 in the following fiscal bienniums for “400 vendor hours to modify the agency's Cannabis Central Reporting System (CCRS),” as well as an “ongoing annual subscription for additional cloud storage.”

• Chair Karen Keiser expressed her concern over the availability of cannabis concentrates and suggested her sponsorship of the measure could lead to tax changes that “disincentivize” their use (audio - 1m, Video - TVW).
  • “I think we do have an issue to deal with,” Keiser told her colleagues, “with the high THC [tetrahydrocannabinol] products that have become available in liquid form…and dabs and so forth.” She claimed the items were “not the old cannabis" produced as a crop, “they're more of a chemical device.”
  • Keiser felt the topic had “become somewhat fraught in terms of possible health effects,” but believed there was potential to “adjust the current approach to cannabis taxation” while discouraging concentrate use “with a higher tax, and to be revenue neutral by lowering the tax on what we would call normal products, not high THC products.”
  • Keiser expected SB 6271 was “destined for Ways and Means,” the Senate committee most experienced in fiscal issues, “but I thought it would behoove us to hear a little bit.”
  • Keiser spoke about the topic, among others, with Washington CannaBusiness Association (WACA) during their legislative symposium in December 2023.

• Members of cannabis trade associations and a public health representative testified favorably about how the bill would help inform legislators’ policymaking on cannabis taxes to better protect public health.
  • Vicki Christophersen, WACA Executive Director and Lobbyist (audio - 1m, Video - TVW)
    • “We've been talking for a while about the need to have a good look at our tax system,” said Christophersen, who thought reforms could be undertaken “for a variety of reasons. Those that you outlined, we support.” She agreed the kind of product sale data requested in the legislation was “exactly the kind of data we need to even be able to do the analysis to determine what the appropriate sort of ranges of taxation should be.” She felt using tax rates to regulate sales was “a far better approach t[han] prohibition, which does not work.”
  • Caitlein Ryan, Cannabis Alliance Executive Director  (audio - 1m, Video - TVW)
    • Ryan stated her organization was “in support of the concept of this bill,” but recommended some modifications. “There was a version of the study in 2019,” and Ryan requested “rather than repeating that…theoretical inquiry we recommend that an allocation be given to the Department of Commerce for an analysis based on using detailed data to model a variety of options.”
    • She added that she’d “be remiss if I did not remind the committee that, at 37%, we are by far the most highly taxed industry in the country” for legal cannabis. Ryan said the goal should be “deterring people from buying these types of products, rather than just these types of products within the regulated market.”
  • Megan Moore, Washington State Public Health Association (WSPHA) Executive Director (audio - 1m, Video - TVW)
    • Moore agreed with the need for the legislation “as a means to reduce access to these products for youth and young adults” that had reported “higher rates of using high potency THC products, like waxes, shatters, dabs, and vapes.” She suggested the public health issues had “actually been studied well, including in Washington state.” Moore argued this research showed “in an undeveloped brain, which is under 25, the frequent use of these products can trigger outcomes like addiction, cannabis hyperemesis syndrome, anxiety, depression, and long-term…mental health diseases.”
      • While many researchers have suggested development in regions of the brain associated with decision making continue developing until approximately the age of 25, a 2022 article in Slate noted “one especially large study showed that for several brain regions, structural growth curves had not plateaued even by the age of 30,” and other studies had found “progressive volumetric changes from ages 15–90 that never ‘level off.’”
    • Moore supported policies to reduce youth access, “especially if they are revenue generating for substance use prevention work.” She promised to “work with the committee and the industry on any option that would protect public health and safety.”
    • The Washington State Joint Legislative Audit and Review Committee (JLARC) released a final staff report on Appropriations and Expenditures of the Dedicated Cannabis Account on January 4th which found between FY 2015 and FY 2023:
      • $283,667,545, or about 9% of all cannabis revenue, went to “Prevention, education, & treatment” programs.
      • $8,375,112, or 0.3% of cannabis taxes, were allocated for research.
  • In addition to three people testifying in favor, four signed in to support the bill (Testifying, Not Testifying).

• Two cannabis industry stakeholders warned against passage, unconvinced adjusting tax rates was any more feasible today than when the state last looked at the approach as a means to improve health outcomes.
  • Ezra Eickmeyer, Producers Northwest Founder (audio - 1m, Video - TVW)
    • Eickmeyer regarded the bill as a second pass at what had been studied in 2019, “and LCB basically said ‘it's not feasible to do a graduated tax system.’ But more importantly, I honestly just don't see it working.” He agreed that youth cannabis use was “still a pretty big issue…we have not tackled as a state by any stretch of the imagination.”
    • Eickmeyer favored strategies for getting “teenagers, young people to quit experimenting with drugs and alcohol in their teenage years.” But he argued there was an “illicit market out there that can make any of the products we can make, and for cheaper at times,” and going to graduated tax rates “just drives up the price for some of these products” in one of those markets.
  • Lukas Hunter, Harmony Farms Director of Compliance and Government Affairs (audio - 1m, Video - TVW)
    • Hunter remarked that the “BOTEC study that was delivered in December 2019” determined it “wouldn't be economically feasible for the State to put…the new taxation structure into place, and the public health community did not have confidence it would actually guarantee the desired outcome.”
  • Along with three people signed up to testify against the legislation, eight individuals signed in opposed to the bill. Sarah Ross-Viles, Seattle and King County Public Health Youth Health and Marijuana Program Manager, also signed in to testify as ‘other,’ but wasn’t available when called by staff (Testifying, Not Testifying).

Information Set