Recently, state Rep. Ryan Yamane stated in several press statements that the potential revenue generated from legalizing the sale of cannabis to adults 21 in Hawaii wouldn’t be enough to cover compliance and regulatory costs. His statements are based on revenue estimates offered by the Hawaii Department of Taxation in its Oct. 31 presentation to the Dual Use Cannabis Taskforce. A closer look at the numbers and the cost of regulation in other states tells a different story.
It’s important to note that the tax department’s revenue estimate is very conservative. Mostly notably, it doesn’t account for millions of visitors who come to Hawaii annually. According to the Hawaii Tourism Authority, in 2021 more than 4 million visitors traveled to Hawaii from the “U.S. West” where Nevada, Arizona, and every state along the western seaboard have approved the sale of cannabis to adults 21 and over.
The tax department’s revenue estimate also doesn’t consider application and licensing fees — it only accounts for anticipated tax revenue. Data from states with operational cannabis programs continually show that license fees and tax revenues are more than enough to cover compliance and regulatory costs of state cannabis programs. In many states, the licensing fees alone cover regulatory costs, leaving the entirety of tax revenue for other needs.
For example, during fiscal year 2019, Alaska collected $2 million in cannabis licensing fees, while it allocated $1.9 million was to pay for staff and services to regulate the cannabis industry. During that same year, Alaska generated over $19 million in cannabis tax revenue. In Nevada during fiscal year 2020, officials spent $5.4 million on personnel, travel and operating costs for their cannabis compliance program while the program brought in $5.2 million in licensing and registration fees. During that same year, Nevada reported over $105 million in cannabis excise tax revenue.
In Hawaii, during fiscal year 2021, lawmakers budgeted just over $2 million for personnel and costs associated with the oversight and regulation of Hawaii’s medical cannabis program, which includes eight licensees. According to the tax department’s presentation to the cannabis taskforce on Oct. 31, Hawaii’s medical cannabis industry generated over $2 million in tax revenue the same fiscal year. That figure is only general excise tax and does not include license fees paid to the Department of Health from the state’s approximate 30,000 registered medical patients. These numbers also dispel Rep. Yamane’s belief and show that in Hawaii’s emerging medical cannabis program, revenue and license fees largely cover the cost of regulatory compliance.
Hypothetically, even if Hawaii decided to heavily regulate the adult use cannabis industry, $50 million in anticipated revenue would still be more than enough to cover regulatory costs AND return money to the state coffers for other budget priorities. Colorado, a state with 5.9 million residents that welcomed 36.3 million overnight visitors in 2021, budgeted $25.7 million for the Marijuana Enforcement Division that same year. Last year, the Department of Taxation in Hawaii operated on a $30.1 million budget and employed 330 people. Even if Hawaii built regulatory agencies of these sizes there would still be tens of millions in revenue to dedicate toward other issues like homelessness or climate change.
Last year, Hawaii was ranked No. 46 by U.S. News & World Report in economy and fiscal stability, respectively. In the upcoming legislative session, Hawaii has an opportunity to diversify and strengthen its economy using adult use cannabis as a tool to change that trajectory. As the discussion ramps up, we want to encourage lawmakers to focus on the facts and data of legalization to make the best decision for Hawaii’s future.
DeVaughn Ward is senior legislative counsel for the Marijuana Policy Project.
