Blowing Smoke: Justice right to veto tax break for big marijuana

Giving a tax break to big marijuana businesses that allegedly have a financial advantage over small ones makes absolutely no sense. Yet a bill passed by the West Virginia Legislature would have done just that.

Gov. Jim Justice was right to veto the measure. Any attempt to resurrect it ought to be rejected, too.

With the state’s medicinal marijuana program far behind schedule, lawmakers this year were told they needed to enact corrections to overcome some obstacles. They did.

Justice signed one of those bills, on how those involved in the industry can conduct banking business. But he vetoed another measure, House Bill 2079.

Current law prohibits growers and processors of the marijuana product permitted by law from also owning dispensaries where the product is sold. The still-new state law continues a ban on sale of marijuana for smoking, but permits those with legitimate medical needs to buy products containing the plant’s active ingredient, THC.

Delegate Mike Pushkin, D-Kanawha, was lead sponsor of HB 2079. It would allow vertical integration — that is, the same company owning marijuana growing, processing and dispensary facilities. Pushkin insists that without vertical integration, dispensaries cannot make profits.

He may or may not be right about that. Some states allow vertical integration in the marijuana industry and some do not, according to Marijuana Business Daily (yes, the industry has grown to the point that it has a trade publication). There is even some argument over whether integration or ownership solely of retail sales outlets is wiser.

In Washington state, where there are about 430 marijuana dispensaries and the product is legal for recreational use, the law bans vertical integration.

Still, perhaps because the market would be far smaller in West Virginia, Pushkin may be right.

But the bill sent to Justice not only permitted vertical integration, it gave it a big tax break.

Under current law, marijuana growers and processors selling to unaffiliated dispensaries must pay a 10 percent tax on gross receipts. HB 2079 would have kept that in place — but the tax would have dropped to 5 percent for integrated businesses.

It would have given big marijuana businesses a tax break over small ones.

Pushkin insists the veto will set the medicinal marijuana business in West Virginia back a full year. Nonsense. Legislators are to hold a special session later this spring. They can send an acceptable version of HB 2079, minus the tax break, to the governor then.

Justice was right to veto the existing bill — and not let big marijuana business pull a fast one on Mountain State residents.