Ask Our Experts: New Jersey’s Adult-Use Legalization Referendum
Q: Among the states voting next month about legalized markets, which are the most significant to the industry and any national reform?
By Josh Adams, Senior Industry Analyst, New Frontier Data
A: Voters in four states (Arizona, Montana, New Jersey, and South Dakota) will go to the polls this November to vote whether to legalize adult-use cannabis, while Mississippians will consider a program for medical use.
Among those, New Jersey represents the largest potential recreational market, and if the initiative is passed the Garden State will serve as a key hub for legal cannabis on the East Coast. Recent polling indicates that a solid majority (68%) of New Jersians support the initiative. Public Question 1, the Marijuana Legalization Amendment, would allow for sale and possession by adults aged 21 and older. Additional details about the regulation and supervision of the adult-use cannabis market will be established by the state’s Cannabis Regulatory Commission upon passage of the initiative.
New Frontier Data estimates that New Jersey, with a population of 8.9 million residents, has nearly 1 million cannabis consumers in total (i.e., either legal or illicit). If Public Question 1 passes, its legal adult-use market is projected to generate $773 million in revenue in its first year, growing beyond $1.8 billion in revenue by 2025. In 2019, New Jersey’s medical market accounted for $77 million in sales.
One of the more innovative aspects of the New Jersey initiative is that taxes on cannabis products would be set at the state sales tax rate, the same as other consumer packaged goods. Thus, should the initiative pass, New Jersey will charge the lowest cannabis taxes of any legal market.
On a recent Cannaweek podcast, New Frontier Data spoke with Scott Rudder of the New Jersey CannaBusiness Association, who emphasized the importance of tax revenue both in the context of budget shortfalls as well as providing a catalyst for advancing legalization. Rudder spoke about the impact of COVID-19-induced shifts in attitudes and policy, noting that for “those mayors who were depending upon property taxes to fund their local municipalities, a lot of those people that were paying their mortgage and paying their taxes are not able to do so right now. So there’s a lot of property taxes that aren’t being paid and when mayors are putting together the budgets going into next year, they’re going to look for every revenue source they can get before they lay off police officers, fire fighters, sanitation workers, school employees and so forth.”
Specifically, Rudder said that the legalization framework in New Jersey allows local municipalities to assess an additional 2% tax on cannabis sales. By having a dispensary in town, the municipalities can generate several hundred thousands of dollars in tax revenue from an entirely new industry, and help compensate for budgetary shortfalls.
Given its proximity to New York City and Philadelphia, as well as being easily accessible to major East Coast cities, passage of Public Question 1 would also establish New Jersey as a desirable destination for cannabis-driven tourism. As such, the potential consumer base for New Jersey’s cannabis industry would expand significantly past its own borders, creating a unique opportunity for both business operators and investors.
New Frontier Data is closely tracking the respective state ballot measures, with updated projections for economic impacts and market opportunities. For more information about the New Jersey initiative, consult the state fact sheet or access full election coverage here.