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Cities, counties gear up for fight over marijuana taxes

Ballot measure, which takes effect July 1, is limited to state tax; legislative panel created.


SALEM — The marijuana industry and lobbyists for cities and counties are preparing for a fight in Salem over whether to allow local sales taxes on legal marijuana.

Under Measure 91, recreational marijuana will become legal on July 1. That is also the effective date of a provision that will give the state exclusive authority to tax marijuana in Oregon.

As cities adopted pot taxes ahead of the Nov. 4 election, government lawyers often warned they could face lawsuits from the marijuana industry. That remains a possibility, but it is increasingly clear that state lawmakers will also delve into whether cities and counties should be allowed to adopt local cannabis taxes.

“The taxation issue will be a major component of our work,” Sen. Ginny Burdick, D-Portland, said. Burdick is co-chair of the joint legislative committee named this month that will oversee implementation of Measure 91.

Under the measure, 40 percent of sales tax revenue will go to the Common School Fund and 20 percent will be used to provide mental health, alcoholism and drug services, much of which are provided by counties. The Oregon State Police will receive 15 percent, city police will receive 10 percent and county law enforcement will receive 10 percent.

The remaining 5 percent is set aside for the Oregon Health Authority to provide drug addiction treatment and prevention services.

More than 70 cities and three counties adopted local pot taxes, according to the League of Oregon Cities.

Scott Winkels, a lobbyist for the League of Oregon Cities, said the group wants to avoid a repeat of the situation cities currently face with distribution of sales tax revenue from alcohol. According to Winkels, the state receives most of the revenue but cities bear most of the costs, for example when police respond to reports of drunk drivers and disturbances at bars and parties.

Cities want lawmakers to eliminate the prohibition against local taxes in Measure 91.

“These are decisions that should be left to the city council to decide,” Winkels said.

Measure 91’s supporters remain adamant that lawmakers should refrain from any major changes to the language approved by voters.

Anthony Johnson, chief petitioner and co-author of Measure 91, said limiting who can tax marijuana is important to keep prices low enough to compete with the black market.

“We haven’t seen any bills but at first glance, we would be opposed to any local taxation that would be against the voters and hurt the regulated system, which I think is the priority of the state and the federal government, that we bring people out of the unregulated system into a regulated system,” Johnson said.

Hilary Bricken, a Seattle-based lawyer who represents recreational and medical marijuana clients in several states including Oregon, said local tax revenue remains a key political issue in Washington.

The initiative that voters approved to legalize pot in Washington did not include any tax revenue for cities and counties. Bricken said local governments responded by holding up legislation sought by the recreational pot industry and banning cannabis stores in some cities.

“This is not about whether local taxes are good or bad,” Bricken said. “This is really more about politics.”

Johnson said that Measure 91 differs from the Washington initiative, since the Oregon measure sets aside portions of tax revenue for cities and counties.

“I don’t see a similar situation playing out (in Oregon),” Johnson said.

Rob Bovett, legal counsel for the Association of Oregon Counties, said voters in at least one county have demonstrated they want the option to approve local taxes. In Josephine County, 76 percent voted in favor of an advisory measure that asked if the county should tax marijuana sales. “Marijuana is a major cash crop in Josephine County right now,” Bovett said, and voters recognized the county is short on money to provide services.

Burdick said it is natural for lawmakers to consider tweaking Measure 91.

“The ballot measure is a really good first draft of a regulatory system,” Burdick said. “But I’m looking at it as a first draft. We need to look at the whole issue with everybody at the table, and come out with a solution that is good for all Oregonians.”

hborrud@eomediagroup.com

(503) 364-4431

twitter.com/hborrud

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