New Jersey set to become biggest East Coast state to legalize pot

October 29, 2020, 6:21 PM UTC

New Jersey is poised to become the biggest state on the East Coast to legalize recreational marijuana.

After struggling to enact legislation to join the growing number of states that have fully lifted prohibition of the drug, lawmakers placed it directly on the Nov. 3 ballot. And it has widespread support: a recent poll found that two-thirds of likely voters are in favor of it.

The step would be a major boost to the marijuana business by making New Jersey the fourth most-populous state to legalize recreational use. It would also promise more than $100 million of new tax revenue to New Jersey, which was hit hard by the coronavirus pandemic and is planning to borrow billions to cover the shortfalls left in the government’s budget.

“It will be an economic engine for New Jersey when it gets going,” said state Senator Nicholas Scutari, a Democrat, who plans to file enabling legislation as soon as next week, if voters approve the measure. “The greater impact on society is going to be the job opportunities, people getting employed and paying their employment tax, people not getting arrested. It’ll be a whole new industry just like we have liquor stores, and we have breweries and we have beverage warehousing.”

New Jersey would join 11 states that have already fully legalized cannabis, including Maine and Massachusetts. Similar referendums are on Nov. 3 ballots in Arizona, Montana and South Dakota while Mississippi voters will decide whether to allow medical marijuana use.

If legalized, it is expected to generate $1.9 billion of sales in New Jersey, possibly generating some $126 million of sales-tax revenue, according to the state’s Office of Legislative Services. Medical marijuana has been legal in New Jersey since 2010.

The new revenue would help a state that plans to issue as much as $4.5 billion of debt in the current budget year to cover budget shortfalls as the coronavirus outbreak weakens revenue collections. New Jersey has a lower bond rating than any other state except Illinois and is at risk of being downgraded to triple-B levels, the lowest range of investment grades.

“If we didn’t need the money before, we certainly need it post-pandemic with all the austerity measures that are being talked about at the state level due to certain budget issues because of the pandemic,” said Michael McQueeny, a lawyer who specializes in the cannabis industry at FoleyHoag LLP.

If New Jersey’s pot referendum passes, enabling legislation could be enacted as soon as late November, according to Scutari, the lawmaker. The legislation would impose the state’s 6.6% sales tax on cannabis sales and allow local governments to implement an added levy of up to 2%, he said.

The enabling legislation will also aim to foster small-business growth in the industry by offering micro-licenses for entrepreneurs and focusing on affected communities that may already have black-market industries, Scutari said.

To help bring marijuana sales out from the underground market and make legal pot sales competitive, the state should avoid high taxes on the product, said Scott Rudder, a former state legislator and president of the New Jersey CannaBusiness Association.

“People are selling it on the street at a much lower rate,” Rudder said. “We want to make sure that we’re getting to the point where our prices are much more attractive to people who want to go to a legal market, who want to buy something that they know they can trust.”

State Senator Ron Rice, a Democrat from Newark, has criticized the state’s drive to legalize while it’s not moved so fast on a decriminalization bill he sponsored. In a Sept. 1 letter to Senate President Steve Sweeney, a fellow Democrat, Rice requested that the bill have a hearing in the Senate Judiciary Committee, where it has sat since June. The bill as of Thursday had no action scheduled.

The state’s Republican senators and assembly members largely oppose legalization, and the party’s county chairpersons in September passed a resolution to oppose the ballot question.

Since Governor Phil Murphy took office in 2018, he and other state lawmakers have tried, and failed, to legalize recreational use through the legislature. Governor Andrew Cuomo has faced similar difficulty in neighboring New York.

A Stockton University poll of likely New Jersey voters conducted from Oct. 7 through Oct. 13 showed that 66% supported the referendum while 23% oppose and another 10% were not sure or undecided.

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