House Bill 621 Would Bring Recreational Cannabis Tax Revenue to Indian Country

Mar 23, 2021

In November 2020, Montanans voted to pass I-190 to legalize possession and use of recreational cannabis and to establish a 20 percent tax on recreational cannabis sales. MBPC has chosen to use the race-neutral, scientific term “cannabis,” except when referencing state accounts.

What Is House Bill 621?

On Wednesday, March 24, House Tax is scheduled to hear House Bill (HB) 621. HB 621 would distribute 8.4 percent of recreational cannabis tax revenue to a newly created state-tribal marijuana revenue-sharing account for the Department of Revenue to provide tribal governments with grants for:

HB 621 would be a significant revenue boost for tribal governments. The fiscal note estimates that HB 621 would deposit roughly $382,000 into the account beginning in 2022, with that amount increasing annually to as much as $3.3 million in 2025. For comparison, the Department of Revenue’s latest biennial report notes that the 2020 tribal allocation was nearly $3.6 million for the cigarette tax.

Tribal Governments Need Revenue

Like all governments, tribal governments need revenue to fund programs and services on which Montanans rely. The power to generate revenue through taxation is inherent to tribal sovereignty. Yet, over time, state and local governments have hamstrung the ability of tribal governments to raise needed revenue by challenging tribal governments’ once-exclusive taxation authority. This means that tribal governments must provide many of the same services as other governments without the usual tax revenue on which those governments rely.

Tax revenue is an insignificant revenue source for tribal governments. While taxes represent the largest revenue source for the state and local governments in Montana, the largest source of tribal revenue comes from federal funding, most of which stems from the federal government’s trust responsibility to tribal nations. However, the federal government chronically fails to uphold this legally binding obligation. The Indian Health Service budget, for example, meets just more than half of American Indian health-care needs.

By competing with tribal nations for tax revenue, state and local governments worsen fiscal problems for tribal nations, extract wealth from tribal communities, and deny tribal governments the ability to adequately invest in their communities. (For more on taxation in Indian Country, see MBPC’s report, Policy Basics: Taxation Authority in Indian Country.)

House Bill 621 Would Help Pave a Path to Economic Recovery in Indian Country

HB 621 provides legislators with one tool to provide tribal nations with the fiscal relief they are overdue. The coronavirus pandemic has shone a brighter spotlight on deeply rooted inequities in Montana. Years of underinvestment, plus the outlined challenges to the ability of tribal governments to generate tax revenue, have resulted in outsized consequences of the pandemic for tribal communities. Recreational cannabis sales are estimated to bring millions of dollars of tax revenue into the state, meaning there is enough to share. The Legislature should vote yes on HB 621 to make this smart investment that helps pave the way to economic resilience and opportunity in Indian Country.

To make your voice heard through remote testimony, register through this link by noon on Tuesday, March 23.

Montana Budget & Policy Center

Shaping policy for a stronger Montana.

MBPC is a nonprofit organization focused on providing credible and timely research and analysis on budget, tax, and economic issues that impact low- and moderate-income Montana families.