Revenue from the fee is slated for social equity projects and reinvesting in communities impacted by the war on drugs. Some want it to rise from $1.24 to $30 an ounce. (Photo by Michael M. Santiago/Getty Images)
Cannabis advocates are debating whether New Jersey’s cannabis regulators should vote this week to increase a fee intended to steer some revenue from recreational marijuana sales to social equity projects and to communities impacted by the war on drugs.
The Cannabis Regulatory Commission is slated to meet Wednesday to determine the social equity excise fee that will go into effect on Jan. 1. The fee currently stands at $1.24 an ounce and brought in an estimated $2.6 million in fiscal year 2024.
Four years after New Jersey voters legalized adult-use marijuana, progressive activists say now is the time to raise that fee to $30 an ounce. Marleina Ubel, senior policy analyst at progressive think tank New Jersey Policy Perspective, noted that New Jersey has among the lowest cannabis taxes in the country, and said $30 an ounce would be a “reasonable” amount that businesses can manage.
“This money goes back to communities that have been most harmed by the war on drugs. If you need after-school programming, this money could potentially provide that,” Ubel said. “It’s a really important pot of money, and we have just kept it extraordinarily low.”
New Jersey’s legalization law mandates the social equity fee, which is collected from cannabis cultivators based on the quantity of cannabis produced. The law lays out a maximum amount for the fee as the market matures and allows for the Cannabis Regulatory Commission to raise or lower the fee annually.
The fee was first set at $1.10 in 2022 and peaked at $1.52 per ounce in 2023.
While the commission sets the fee and makes recommendations to the Legislature and governor on how to spend the funds, the panel has no say in how they are allocated. A percentage of the revenue generated from the fee is required to go toward funding programs aimed at diverting youth from cannabis-related activities.
In the past three years, the commission has held multiple public hearings to consider what the money should be spent on. Previous recommendations have included social support services, expungement and legal aid programs, and community reinvestment.
So far, none of the social equity fee funds have been spent.
Some cannabis activists say the law won’t live up to its goals until the fee is increased. Ami Kachalia of the American Civil Liberties Union of New Jersey is also urging the commission to increase the fee to its maximum of $30 an ounce in pursuit of social justice targets.
“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, and set a precedent that New Jersey’s commitment to repair is optional. It’s imperative that those most harmed by prohibition have an opportunity to benefit from New Jersey’s legal cannabis market,” she said.
But others argue that increasing the fee will hurt the market. Todd Johnson, head of the New Jersey Cannabis Trade Association, said that while the association supports social equity initiatives, raising the fee so dramatically would “send a shockwave through the entire supply chain.”
“Cultivators will be forced to raise their wholesale prices to offset the increased cost. Manufacturers and retailers will then raise prices of cannabis products sold to consumers,” he told the commission earlier this month.
He predicted that raising the fee to $30 an ounce would cause average prices to increase a minimum of 15% and push more people to buy cannabis from the unregulated market, he said. At New Jersey cannabis dispensaries, an eighth of an ounce of weed goes for about $40 to $60, depending on the quality of the cannabis.
Longtime cannabis advocate Leo Bridgewater also opposes any change to the fee. The impact on small businesses that are just getting off the ground would be detrimental, he said.
“It’s tone deaf,” said Bridgewater. “For businesses, even the ones that are operating, access to capital is still a problem, especially for people of color.”
Bridgewater noted that the fee would bring in more revenue if more towns allowed cannabis sales locally. Fewer than a third of New Jersey’s municipalities allow the cultivation or sale of recreational marijuana.
Ubel argued that potentially higher cannabis prices would be worth the risk to increase the social equity fund and contribute to “some really transformative community reinvestment.”
“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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