As U.S. Virgin Islands Governor Reintroduces Cannabis Legalization, Debate Returns to Taxes

Lawmakers in the U.S. Virgin Islands announced a renewed push to join the growing number of states and territories taking steps to legalize the adult use of cannabis.

The Virgin Islands Cannabis Use Act would allow anyone age 21 or older to purchase and consume cannabis. It would also create a regulatory framework for micro and commercial cannabis cultivation, processing, and on-site cannabis consumption licenses, among other types. While there is a residency requirement to own a business license, cannabis will be available to non-residents.

In a letter to Senate President Novelle Francis Jr., Governor Albert Bryan Jr. said the reworked bill is the result of a series of public consultations, and meetings with multiple Senators, to gain support. The bill failed to pass the Senate when it was first proposed last December. 

Bryan urged the 15-member legislature of the U.S. Virgin Islands—a group of islands that comprises Saint Croix, Saint Thomas, and Saint John—to move to expedite the legislation, which he says is a source of stable revenue to fund its frail Government Employees Retirement System (GERS). The System, according to its Board of Trustees, faces insolvency by 2025 and has been forced over the last decade to liquidate parts of its investment fund to make required payments. The legalization bill sends 75 percent of all revenues from cannabis taxes and licensing fees towards the fund.

“Consideration of this proposed bill is exigent given that the principal benefit of the revenues derived from this bill is directed to assisting the stoppage of the hemorrhaging of the Government Employees Retirement System,” Bryan said. 

Other similarly dire factors loom large as well, due to the COVID-19 pandemic. The Virgin Islands depend on tourism and related trades for almost two thirds of its Gross Domestic Product, according to Moody’s Investors Service, and has seen an almost complete closure of all tourism-related economic activity. Analysts at S&P Global Ratings predict that tourism in the Caribbean will probably decline by 60 to 70 percent between April and December, compared with last year, and wouldn’t return to pre-pandemic levels for at least another year. 

“It is also important that we utilize the present time while we are putting our economy back together in readiness for the post-COVID pandemic environment, to put this revenue mechanism in place,” Bryan said.

A similar bill that was introduced last year caused concerns among legislators, in particular when it came to tax revenue allocation. 

At the time, Senator Janelle Sarauw, who proposed separate bills to expunge criminal records and clear the way for adult use, called into question the narrative that the bill could save the retirement fund, when in fact it would make limited contributions to that effort. Senator Donna Frett-Gregory raised similar concerns, pointing out that sending $20 million in estimated cannabis tax revenue to the fund, which is an underfunded liability of hundreds of million dollars, wouldn’t generate a practical solution. 

Gemma Wenner, a native of Saint Thomas, and a professor of tourism and hospitality at the Southern Illinois University (SIU) who studies the industry and its implications across the region, agrees. Wenner told Cannabis Wire that the proposed legislation could create an inflexible framework and limit the economic impact of legalization on the islands.

Gemma added that while efforts should be made to save the fund, a larger percentage of the money generated from cannabis sales and licenses should go toward improving infrastructure and toward training to improve the other sectors in the short to medium term. This, she believes, would have a larger economic impact in the long term.

“I think if tourism is bringing in most of the money for the island, short term, most of any revenue generated from legalization should be earmarked for boosting that section,” said Wenner, who wrote paper on the emergence of the cannabis industry in the region titled Marijuana Tourism: Disruptive Innovation for Small Island Developing States.

Kevin Edmonds, an assistant professor in the University of Toronto International Development Studies Department, has yet another view as to where the cannabis revenue should go.

“I think the U.S. Virgin Islands plan is a step in the right direction,” Edmonds told Cannabis Wire, adding that the proposal isn’t an ideal solution to treat the pension deficit, it is preferable to what some jurisdictions have done, such as to put revenue into a general fund.

“The ideal situation would be where the tax revenues would go towards restorative justice programs, whereby those previously punished and demonized would benefit.”

More As U.S. Virgin Islands Governor Reintroduces Cannabis Legalization, Debate Returns to Taxes