New Arizona marijuana law goes into effect Nov. 30; schools won’t see tax infusion until 2022

Effective Nov. 30 — when the vote tally is formally announced and the law takes effect — all Arizona adults will be able to possess up to an ounce of marijuana without facing criminal charges.

By Howard Fischer Capitol Media Services

PHOENIX — Arizonans have decided they want to be able to smoke marijuana and apparently are just fine with taxing the richest state residents to help add funds for K-12 education.

They will be able to do the first by the end of the month.

But it could take more than a year for new revenues from the income-tax surcharge to reach the classroom.

The marijuana initiative, Proposition 207, is the next step following voter approval in 2010 of allowing people with certain medical conditions to obtain up to 2½ ounces of marijuana every two weeks. The most recent report from the Arizona Department of Health Services shows that nearly 280,000 people have state-issued medical marijuana cards.

On one hand, getting a card may not be difficult, as the law allows doctors to recommend marijuana for conditions ranging from glaucoma and AIDS to severe and chronic pain. But it does require a trip to the doctor — whatever that costs — as well as paying a $150 annual fee to the state.

With the measure being approved on a 3–2 margin, all that changes.

Effective Nov. 30 — when the vote tally is formally announced and the law takes effect — all adults will be able to possess up to an ounce of the drug without facing criminal charges. Ditto being able to grow up to six plants — double that for households with more than one adult.

Getting it legally, however, is a different question.

The initiative requires the Department of Health Services to come up with the rules for the new recreational marijuana outlets. And that is unlikely to happen before March, leaving no legal place for those without a medical marijuana card to purchase the drug.

It may actually be later. Sam Richards of the Arizona Dispensaries Association suggested that the operators of the planned recreational outlets are aiming for an April 20 ceremonial start-up date, playing off the fact that 4/20 is considered an unofficial “marijuana day.”

Tuesday’s voter approval drew a stinging rebuke by Lisa James, spokeswoman for the anti-207 campaign, saying the ballot measure was marked by “deceit and self-interest.”

“This unelected group of wealthy marijuana insiders wrote the rules for their new industry and almost single-handedly financed the proposition with one goal in mind: they get rich while Arizonans pay the price,” she said in a prepared statement.

Supporters do not particularly dispute that.

Virtually all of the $5 million spent came from the owners of the existing medical marijuana dispensaries.

The measure they crafted pretty much guarantees that each of them will get a state-issued license for one of the new recreational marijuana retail outlets. More to the point, it is set up in a way to limit how many places can legally sell marijuana.

But Steve White, CEO of Harvest Health and Recreation, which kicked in nearly $2 million to the campaign, balked at the idea this was creating a cartel that with a limited number of outlets where adults can legally buy marijuana — about 160 for the whole state — could stifle price competition.

“That’s like saying you have that pricing control for Taco Bell where there are about that many in the state of Arizona,” he said. And White was not deterred by the fact that someone who wants a taco could find other restaurants.

Anyway, he said, the limits are justified, saying Arizonans do not want the unlimited number of outlets that now exist in California and Colorado.

The measure has other provisions including a 16% tax — similar to what is assessed on alcohol — that proponents say will generate $300 million a year in new revenues to fund community colleges, public safety, health programs and for the construction and repair of roads.

James countered that the experience in Colorado shows there is far more being spent on marijuana-related expenses than what the tax there brings in. She also said the measure has other shortcomings, including the lack of a specific standard to determine exactly what concentration of marijuana’s psychoactive chemical is proof that someone is driving while impaired.

Approval also is good news for some who have previously been convicted of illegal possession of up to 2½ ounces of marijuana, allowing them to petition to have their convictions erased.

While James has conceded defeat, not so for Garrick Taylor, spokesman for the Arizona Chamber of Commerce and Industry, which was behind the effort to kill Prop. 208. He said Wednesday that the 5-point edge the initiative had is not yet enough to convince him that voters actually want to raise taxes on the rich.

Right now, individuals earning at least $250,000 pay state income taxes 4.5% for any earnings above that figure. The same cutoff exists for couples making more than $500,000 a year.

The initiative includes a 3.5% surcharge on top of that, bringing the effective tax rate on those top earnings to 8%.

Supporters, however, point out that the levy affects only those earnings above the threshold. So a couple with taxable income of $550,000 a year would pay that extra 3.5% only on $50,000, or an additional $1,750 a year. And anyone earning less will see no change in tax liability.

Taylor, undeterred, said it still would create one of the highest marginal tax rates in the nation. And just that fact, he said, will become a barrier to businesses locating here and chill what has generally been a healthy economy.

But Taylor was less interested in other state-to-state comparisons, including that the average class size in Arizona is higher than the national average and that teacher pay here, even after the 20% average increases of the past four years, still ranks near the bottom among all states.

“If you want to move to San Diego County, there’s a chance that a teacher would make more,” he said. “But their ability to enter the middle class is more difficult.”

And if nothing else, Taylor questioned how much of the $940 million the levy will raise actually will end up in teachers’ paychecks. He pointed out the 50% earmarked for salaries covers not just teachers, but also classroom support personnel such as nurses and counselors.

Joe Thomas, president of the Arizona Education Association, acknowledged that school districts, who will get a share of the cash based on a weighted per-pupil formula, may decide to hire more teachers to reduce class size rather than providing raises.

It will, however, take some time for the dollars to start flowing.

The higher tax rates are effective with income earned in 2021. And even with some high-wage earners making estimated payments to the state during the year, the big infusion won’t come until the spring of 2022.

Creosote Partners is an Arizona firm focused on legislative advocacy, coalition building, and strategic communications.

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