Cannabis advocates in New Jersey are in a lively debate over whether the state's cannabis regulators should raise the social equity fee—an excise fee on recreational marijuana meant to fund social equity initiatives and support communities impacted by the war on drugs.
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The Cannabis Regulatory Commission is set to meet soon to decide on the fee for 2024, which currently stands at $1.24 per ounce and brought in roughly $2.6 million in revenue last fiscal year.
Four years after New Jersey voters legalized adult-use marijuana, progressive voices, like Marleina Ubel from New Jersey Policy Perspective, believe it’s time to raise the fee to $30 per ounce. Ubel notes that New Jersey has some of the lowest cannabis taxes nationwide, arguing that $30 per ounce would be a “reasonable” amount that businesses could absorb. “This money goes back to communities that have been most harmed by the war on drugs,” Ubel said. “It’s a really important pot of money, and we have just kept it extraordinarily low.”
New Jersey’s legalization law mandates a social equity fee, collected from cannabis cultivators based on production, with a set maximum and an annual review by the commission to adjust the fee as the market evolves. Initially, the fee was set at $1.10 in 2022 and has peaked at $1.52 per ounce in 2023. While the commission is tasked with setting the fee and recommending spending to the legislature and governor, it doesn’t control how the funds are allocated. Some funds are meant to support youth diversion programs, while other proposed uses have included expungement programs, legal aid, and community reinvestment.
In the past three years, the commission has held public hearings to gather input on how the funds should be used, but none of the collected funds have been spent yet. Advocates like Ami Kachalia from the ACLU of New Jersey are pushing for a maximum $30-per-ounce fee to meet social justice objectives, saying, “To do otherwise would leave millions of dollars on the table that should be invested back into Black and Latinx communities, which have borne the brunt of the drug war.”
However, the proposal is controversial. Todd Johnson, who leads the New Jersey Cannabis Trade Association, warns that increasing the fee to $30 would “send a shockwave through the entire supply chain.” He explained that cultivators would likely have to increase wholesale prices, which would then lead to higher prices for consumers. Johnson estimated a 15% price hike on average if the fee rises to $30, which could push more consumers to the illicit market. Currently, cannabis at New Jersey dispensaries costs around $40 to $60 for an eighth of an ounce, depending on quality.
Leo Bridgewater, a long-standing cannabis advocate, also opposes the fee hike, particularly because it could hurt small cannabis businesses that are still struggling to access capital, especially those owned by people of color. “It’s tone deaf,” Bridgewater remarked, highlighting that access to local markets is still limited, with fewer than one-third of New Jersey municipalities allowing recreational cannabis sales.
Ubel, however, believes the potential for community reinvestment justifies the risk of slightly higher cannabis prices. “As a consumer, if I’m told that the price has gone up but that the money I’m spending is going to go towards funding all of these wonderful things in my community, I personally would be happy to pay it,” she said.
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