Alaska Cannabis Tax Reform: Why HB 119, HB 91, and SB 73 Keep Dying—And Why They Shouldn't

CBDT Analysis of Alaska's Repeated Failed Attempts to Fix the Highest Cannabis Tax in America

The Silent Majority 420 | November 2025

The Bills at a Glance

Three bills. Two legislative sessions. Bipartisan support. Zero reforms enacted.

Alaska's cannabis industry continues operating under a tax structure that even the Governor's own task force called unsustainable—while legislators watch neighboring states capture revenue Alaska is losing to the black market.

The Problem: $50 Per Ounce Is Killing Legal Cannabis

Per Alaska Statute 43.61.010, Alaska imposes a $50 per ounce cultivation tax on mature cannabis flower—the highest cannabis tax in the United States.

When voters legalized cannabis in 2014, $50/oz represented roughly 10-15% of wholesale value. A decade later, wholesale prices have collapsed while the flat tax remains unchanged. That $50/oz now represents 25-40% of product value before retail markup.

The math:

• Wholesale price (2016): ~$350/oz → $50 tax = 14% burden
• Wholesale price (2024): ~$150/oz → $50 tax = 33% burden

The tax burden more than doubled without legislators changing a single word of the statute.

Impact on Retail Prices

The cultivation tax translates to approximately $800 per pound added to costs before product ever reaches a dispensary shelf. Combined with Alaska's structural cost premiums (isolation, energy, labor), legal cannabis retails at $12-17 per gram while illicit markets offer $8-12 per gram.

That 25-50% price gap ensures the black market thrives.

What the Bills Proposed

HB 119 (2024): The 7% Solution

Sponsors: House Rules Committee by request of Governor Dunleavy's Advisory Task Force on Recreational Cannabis

Core provisions:

• Eliminate $50/oz cultivation tax
• Implement 7% statewide retail sales tax on cannabis
• Biannual licensing (aligning with alcohol industry)
• Streamlined registration for marijuana establishments

The case for HB 119: The Governor's Advisory Task Force—13 members meeting six times between December 2022 and January 2023—unanimously recommended transitioning from weight-based to sales-based taxation. Their logic: tax revenue should scale with market value, not penalize cultivators when prices decline.

What happened: Passed House 36-3 on May 10, 2024. Referred to Senate Finance on May 11, 2024. Never received a hearing. Died when session ended.

HB 91 (2025): Local Option Addition

Sponsor: Rep. Ashley Carrick (D-Fairbanks)

Core provisions:

• Replace $50/oz cultivation tax with 6% retail sales tax
• Allow local governments to levy additional taxes (local option)
• Designed to give municipalities revenue-sharing incentive

The case for HB 91: Addressed concerns that state-only tax reform would leave municipalities without cannabis revenue. Local option could build political support from city councils currently skeptical of the industry.

What happened: Passed House State Affairs Committee. Received single hearing in House Finance on April 30, 2025. Held and never moved. The 2025 legislative session was consumed by Alaska's budget crisis—lawmakers prioritized education funding, energy needs, and retirement obligations over cannabis reform.

SB 73 (2025): Senate Companion

Sponsor: Sen. Matt Claman (D-Anchorage)

Core provisions: Mirrored HB 91—6% retail tax, local option, small cultivator exemptions

What happened: Passed Senate Labor & Commerce Committee. Received hearing in Senate Finance on March 6, 2025. Held and never advanced. Same budget crisis, same outcome.

Why Tax Reform Keeps Failing

The Revenue Trap

Here's the paradox killing these bills: reforming the tax structure would temporarily reduce state revenue, even if it ultimately grows the legal market and increases long-term collections.

The Alaska Department of Revenue's fiscal analysis of HB 119 projected short-term revenue decline as the market adjusted. For a legislature already struggling to balance budgets without touching the Permanent Fund, any revenue reduction—even temporary—is politically toxic.

2025 budget context:

• Reduced oil revenues
• Reluctance to draw from state savings
• Historically low $1,000 Permanent Fund Dividend approved
• House Finance Committee overwhelmed with "must-pass" legislation

Cannabis tax reform was a "nice to have" competing against "need to have" priorities.

The First-Mover Problem

Alaska would become the first state to impose a statewide sales tax—but only on cannabis. Some legislators balked at setting this precedent, fearing it opens the door to broader sales tax discussions in a state that has historically rejected them.

HB 119's fiscal note explicitly acknowledged this concern. For anti-tax conservatives, voting for any sales tax—even one replacing a higher effective tax—feels like crossing a line.

Senate Finance: Where Cannabis Bills Die

Both HB 119 (2024) and SB 73 (2025) cleared earlier committees only to die in Senate Finance without floor votes. The pattern suggests Senate Finance leadership simply isn't prioritizing cannabis reform, regardless of bill merit or House support.

CBDT Framework: What Tax Reform Would Actually Accomplish

The Consumer-Driven Black Market Displacement (CBDT) Framework identifies price competitiveness as the 4× dominant variable in determining legal market capture. Alaska's current tax structure directly undermines this most critical factor.

Current State: 48-55% Legal Market Share

Alaska's legal market captures barely half of total cannabis demand despite a decade of operation. The CBDT model attributes this underperformance primarily to:

1. Price gap: Legal cannabis costs 25-50% more than illicit
2. Tax burden: Highest in nation, compounding structural costs
3. Geographic challenges: Cannot be solved by policy

Tax reform addresses #2, which partially mitigates #1.

With Tax Reform: 58-65% Legal Market Share

Switching from $50/oz cultivation tax to 6-7% retail sales tax would:

• Reduce consumer prices by approximately 15-20%
• Narrow price gap with illicit market from 25-50% to 10-25%
• Improve cultivator margins, reducing business failures
• Increase transaction volume, partially offsetting lower per-unit tax

Projected market share improvement: +10-12 percentage points within 24 months

This doesn't solve Alaska's geographic constraints (the state's ceiling remains ~65-75% even with perfect policy), but it moves Alaska from significant underperformance to acceptable performance given structural challenges.

Revenue Modeling

Short-term: Revenue dips as rate decreases faster than volume increases.

Long-term: Larger legal market at lower rate generates equal or greater revenue while achieving policy goals (black market reduction, public safety, legitimate employment).

This is the trade-off legislators refuse to make.

The Industry Perspective

Alaska Marijuana Industry Association legislative liaison Lacy Wilcox has called the situation "desperate" in testimony before House Labor & Commerce:

"It's a $50 an ounce tax, that translates to $800 a pound. If the going rate of wholesale cannabis sold to a store from my farm is $2,000, you do the math. It's not very much leftover to pay for the lights, the water and the people who grow it. The margins are pretty slim."

The Alcohol & Marijuana Control Office (AMCO) board voted 4-1 in favor of tax reform, supporting a reduction from $50 to $12.50 per ounce as a short-term remedy while transitioning to retail sales tax long-term.

When both the regulated industry AND the regulator agree the tax structure is broken, continued legislative inaction represents policy failure.

What Happens Next

2026 Legislative Session

All three bills (or their successors) remain technically alive for the second session of Alaska's 34th Legislature. However, prospects depend on:

1. Budget situation: If fiscal pressure eases, cannabis reform may get bandwidth
2. Senate Finance leadership: Current gatekeepers have shown no interest
3. Federal reform: Schedule III rescheduling could change political calculus
4. Neighboring state competition: If other states capture Alaska tourists' cannabis spending, revenue loss becomes harder to ignore

The Federal Wildcard

If cannabis is rescheduled to Schedule III, eliminating the 280E tax penalty, Alaska's federal tax burden drops significantly. This could:

• Reduce urgency for state tax reform (prices drop anyway)
• Increase urgency for state tax reform (opportunity to optimize while federal window opens)

The political response is unpredictable.

CBDT Verdict: Tax Reform Is Necessary But Not Sufficient

Would HB 119/HB 91/SB 73 improve Alaska's legal market capture? Yes—approximately +10-12 percentage points.

Would tax reform alone optimize Alaska's market? No. Alaska also needs:

• Statewide delivery authorization (including drone delivery for remote communities)
• SAFE Banking Act passage (cash-only operations are particularly burdensome in bush Alaska)
• 280E elimination (federal tax reform)

Should Alaska pass tax reform? Unambiguously yes. The current structure is indefensible—a flat tax that becomes more punitive as wholesale prices decline, designed for 2014 market conditions that no longer exist.

Will Alaska pass tax reform? Uncertain. The 2024 and 2025 sessions demonstrated that bipartisan support (36-3 House vote), industry consensus, regulatory endorsement, and Governor's task force recommendations are insufficient to overcome Senate Finance Committee inertia and short-term revenue concerns.

The Broader Lesson

Alaska's tax reform saga illustrates a common pattern in cannabis policy: legislators optimize for short-term revenue rather than long-term market capture.

California made this mistake with high taxes and local fees, achieving only 50% legal market share. Illinois made this mistake with limited licenses and high taxes, creating a quasi-monopoly that serves operators rather than consumers.

States that prioritized market capture—Oregon (82%), Colorado (84%), Michigan (85%)—now generate more total revenue at lower rates than high-tax states generate at punitive rates.

Alaska has the data. Alaska has the recommendations. Alaska has bipartisan legislative support.

What Alaska lacks is a Senate Finance Committee willing to accept short-term revenue reduction for long-term policy success.

Until that changes, the highest cannabis tax in America will continue ensuring Alaska's black market thrives.

CBDT Framework Citation

This analysis applies the Consumer-Driven Black Market Displacement Framework:

The Silent Majority 420, "Consumer-Driven Black Market Displacement (CBDT) Framework: A Behavioral-Utility Heuristic for Illicit-to-Legal Market Transition," Zenodo, 2025. DOI: 10.5281/zenodo.17593077

Validation data: Harvard Dataverse, DOI: 10.7910/DVN/MDVDTQ

Related: Alaska Cannabis Market Analysis | Federal Cannabis Bills Tracker

The Silent Majority 420 is an independent cannabis policy analyst. The CBDT Framework represents the first validated consumer-utility model for predicting market outcomes in vice legalization.

Analysis licensed CC BY 4.0