Rhode Island’s Medical Marijuana Tax Revenue Less Than Expected

In Rhode Island, state officials have begun to dial back expectations for the amount of tax revenue generated by its medical marijuana program. In 2012, the Rhode Island Department of Revenue projected that by 2016 the state’s medical marijuana program would generate a total of $3.1 million, gathered from a 4 percent surcharge and a 7 percent sales tax.

Current projections for 2016 place the total tax revenue generated at $1.7 million, a little more than half of what was projected back in 2012. While tax revenue has grown slower than expected, the number of medical marijuana patients has skyrocketed from 4,241 in 2011 to 11,620 in 2015.

One possible explanation for the disparity between patient growth and tax revenue has been the proliferation of medical marijuana caregivers. In Rhode Island, caregivers are able to provide marijuana to up to five patients tax free. This tax free status has helped incentivize patients to avoid compassion centers, causing caregivers to multiply in number.

Speaking with the Associated Press, Chris Riley, a spokesmen for the Thomas C. Slater Compassion Center, said that caregivers have become a competitive factor in the legal industry. “There are people out there who’ve made this a fulltime business,” Reilly said.  “It’s a competitive force that’s real.”

But while caregivers certainly do present competition to the state’s three compassion centers, their role might also be a little overstated.

There are approximately 3,245 medical marijuana caregivers in Rhode Island right now. With a five patient limit, and only 11,620 patients statewide, that means that on average caregivers are seeing approximately three patients.

There are some caregivers that do better than others, and some that might even stretch their patient limit, but regardless the whole picture is not being shown. Another likely culprit in the state’s sagging tax revenue is home cultivation.

Patients are allowed to cultivate up to 12 mature marijuana plants and 12 seedlings; or cooperatively grow between 24-48 marijuana plants with other marijuana patients. That could provide patients enough incentive to circumvent the entire compassion center market.

Regardless of whether caregivers, homegrowers, or something else is responsible for Rhode Island’s disappointing tax figures, it is still important to remember that Rhode Island is not only a new market for legal marijuana, but also a very different one as well.

Rhode Island does not have as many market participants as say Colorado, which means the market will adjust differently. Expectations are only as good as the facts that surround them, so time will tell if Rhode Island is a success or a disappointment.

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