Will Connecticut marijuana legalization happen soon? To answer that, perhaps a different question should be posed first.
What does the wealthiest state in the nation do when it has trouble paying its bills and it has exhausted its supply of rich people to tax? It considers other ways — including legalizing and taxing marijuana — to make up the shortfall.
A $400 million budget shortfall
After two decades of healthy fiscal growth, Connecticut predicts that its income tax revenue will drop by roughly $400 million in fiscal 2017 — its first drop since the recession. As the Wall Street Journal reports, about $200 million of the drop was connected to a drop in fortunes among the state’s top 100 earners who typically contribute a huge percentage of the state’s revenue. Many of the top earners work for hedge funds, which are going through a downturn of their own. Not only that, but President Trump, who campaigned on promises to lower taxes, wants to repeal a state tax deduction, which would greatly affect both high-income earners, as well as states looking to tax them more.
Taxing the rich (more) not an option
Not only does this news do nothing to reverse a budget crisis that’s caused all three major ratings firms to downgrade Connecticut’s credit rating, but even Democratic Gov. Dannel Malloy’s administration concedes that, after two failed tries, the state simply can’t increase taxes on the wealthy yet again to try to get back in the black.
“You can’t go back to that well again,” says Kevin Sullivan, commissioner of Connecticut’s Department of Revenue Services. “The idea that there is yet another significant amount, in terms of long-term stability, to get out of that portion of the population is just not true.”
While Connecticut has the highest per capita income in the nation according to the Bureau of Economic Analysis, a recent report issued by Standard & Poors includes the state among seven at risk for severe fiscal problems despite the broader economy’s “gathering momentum.” In a recent downgrade, Moody’s Investors Service highlighted the state’s shrinking population since 2013 as a key contributor to Connecticut’s lagging housing market and poor job numbers. Increases in the state’s pension obligations, health-care expenses, and debt services are expected to lead to a $5.1 billion deficit over the next two fiscal years.
So, how can Connecticut turn things around?
How about a canna-tax fix?
Well, while the state’s lawmakers have proposed building at least one more casino, adding highway tolls, and seeking additional concessions from state employees, House and Senate Democrats’ idea to legalize the sale of recreational marijuana has sparked a great deal of buzz.
Though the idea hasn’t gone very far in past legislative sessions, the state’s current deficit-plagued budget could lead to serious progress when it comes to legalization. According to a report in the Miami Herald, Connecticut State Democrats’ estimate that legalizing the sale of marijuana could generate $60 million in this fiscal year, and another $180 million in the next.
Lawmakers cite the obvious opportunity the legislation provides to regulate — and deliver considerable tax revenue from — a currently illegal industry. House Majority Leader Matt Ritter, a Democrat, said the idea was presented in order to to “leave a lot of options on the table" to consider when it comes to finalizing a budget deal.
Roadblocks to legalization in the Constitution State
As much sense as legalization might make, however, hurdles remain.
For starters, it’s unclear whether there’s enough support in the Connecticut General Assembly for such a move. Similar bills generated underwhelming support earlier this year, and not only is Molloy not a fan of the idea, but he also questions the projected revenue numbers.
"There's no immediate amount of money to be had," he charges, citing Massachusetts, where residents can now legally possess, use, and grow small amounts of pot, but where there also won’t be any retail shops to tax until the middle of next year.
Stay tuned for future updates on the state of the Constitution State.