New Jersey Governor Phil Murphy is taking aim at the state’s booming cannabis industry with a steep tax increase that could shake up the market. His latest budget proposal includes a fivefold jump in the per-ounce tax on marijuana and an even larger levy on intoxicating hemp products. Critics warn that the move could backfire, making legal cannabis less competitive and fueling the underground market.
Major Tax Hike Could Hit Cannabis Prices Hard
Under Murphy’s plan, the cannabis tax would soar from its current rate to $15 per ounce, a significant jump that industry leaders say could push prices beyond what many consumers are willing to pay. On top of that, hemp-derived intoxicating products would face an even heavier $30 per-ounce fee.
New Jersey’s legal cannabis market, which has already pulled in $1 billion in sales, currently generates about $90 million in tax revenue. Murphy’s administration estimates the new tax rates would bring in an additional $70 million, part of a broader effort to raise $1.2 billion in revenue across multiple sectors.
But not everyone is convinced it’s a good idea. State Senate President Nicholas Scutari voiced concerns that higher taxes would drive more consumers toward unlicensed sellers, where prices are lower and regulations are non-existent.
“I don’t want to see our taxes for that product go up, which it already can’t compete with the gray market, the (illicit) market product,” Scutari told the New Jersey Monitor.
Cannabis Businesses Already Feeling the Pinch
New Jersey’s legal marijuana industry is still finding its footing, and this wouldn’t be the first tax increase operators have faced.
- Large cannabis cultivators holding a Class 1 License already pay a $2.50 per ounce “Social Equity Excise Fee (SEEF),” which took effect in January.
- That fee had already more than doubled in December, rising from $1.24 per ounce.
- If Murphy’s proposal goes through, the new SEEF would be $15 per ounce—marking the second major increase in just a few months.
At this rate, New Jersey would have one of the highest per-pound cannabis fees in the country, with taxes adding up to $240 per pound.
Adding to frustrations, the state has yet to distribute any revenue from the SEEF program, according to the Cannabis Business Times. That raises questions about whether the funds are being used effectively—or if they’re just another cash grab.
Intoxicating Hemp Products Face New $30 Per-Ounce Fee
Hemp-derived intoxicating products, such as Delta-8 and Delta-9 THC beverages, have been growing in popularity across New Jersey. But under Murphy’s plan, they’d face an additional $30 per ounce fee, on top of local sales taxes.
This isn’t the first time hemp has been targeted for extra taxation. Back in October, Murphy imposed sales taxes on hemp beverages, signaling the state’s growing interest in regulating the expanding industry.
For businesses in the space, the latest tax proposal could be a major blow. A $30 per-ounce fee would likely force price hikes, making it harder for these products to compete with both the traditional marijuana market and illicit sellers.
Could High Taxes Drive Customers Back to the Black Market?
New Jersey isn’t alone in looking to cannabis taxes as a revenue source. Pennsylvania Governor Josh Shapiro recently proposed a 20% tax on recreational cannabis as part of his pitch to legalize it in his state.
But there’s a fine line between taxing the industry for state benefits and taxing it out of competitiveness.
New Jersey is already seeing an issue with illicit market competition, and increasing prices could make that worse. Legal cannabis in the state is still more expensive than unregulated alternatives, and this tax hike could widen that gap even further.
So, will the higher tax rates actually bring in more money? Or will they just send consumers looking for cheaper options outside the legal market? That’s the big question Murphy’s plan will have to answer.