Marijuana Social Equity Programs Should Be Redesigned To Directly Support People Harmed By Criminalization (Op-Ed)

“Social equity should not simply be a false mantra for politically connected and well-capitalized opportunists to distort new marijuana markets or exploit the public purse.”

By Geoffrey Lawrence, Reason Foundation & Khurshid Khoja, Greenbridge Corporate Counsel

Ohio voters recently legalized the recreational use of marijuana by adults. In total, 24 states have legalized recreational marijuana use, and Florida, Hawaii, New Hampshire, Pennsylvania and Wisconsin may all soon join these ranks. This metaphorical genie is not going back in the bottle, nor should it because drug prohibition breeds violence and has ruined many lives.

As part of the growing bipartisan recognition that cannabis should be legal and the failed war on drugs has wrongly imprisoned many Americans, social equity programs are increasingly included in marijuana legalization efforts. Social equity programs are intended to deliver restorative justice to persons who were imprisoned or otherwise impacted through the enforcement of drug prohibition policies. Ohio’s marijuana initiative makes it the 17th state to create a statewide social equity program. 

Most states, including California, New York, Arizona and Michigan, and cities, like New York City and Oakland, have implemented social equity programs in two ways. First, they reserve a subset of available cannabis business licenses for individuals who meet the legal definition of a “qualified social equity applicant.” These definitions vary, but no jurisdiction identifies them solely as individuals who were arrested or incarcerated for a marijuana-related offense. 

Instead, individuals typically qualify for licenses that allow them to enter the legal cannabis industry because they lived in a neighborhood that had disproportionately high arrest rates or below-average income. Persons never directly affected by the drug war can frequently access these benefits on equal terms with those affected. Often, large corporate interests have hired or partnered with individuals who meet social equity criteria to act (often unwittingly) as mere figureheads on license applications.

For example, an analysis of applications submitted in Arizona’s special licensing round exclusive to social equity applicants revealed at least 58 percent of applications held ties to large cannabis corporations. Similarly, contracts have been exposed showing businesses duping individuals into serving as applicants, paying them modest sums upon receiving a license, but giving them no rights to earnings nor control of the licensed business.

Second, in the social equity efforts states and cities divert a share of marijuana tax revenue toward grants to a broad range of community-based organizations, including those that strive to offer job training or pursue more nebulous goals like “addressing the root causes of violence.” 

Whatever the merits of restorative justice, this money also fails to make it to the actual victims of decades of bad policies. State laws governing these grants rarely impose audit requirements on the recipient organizations. Nor do they impose performance metrics by which recipient organizations should demonstrate their proficiency. Grant money can simply be absorbed by the officers and directors of these organizations as salary.

If criminal justice reform advocates are intent on including social equity programs within marijuana legalization laws, those programs need to be redesigned.

First, governments should make it far easier for cannabis entrepreneurs to transition from the illicit to the regulated marketplace. Business licenses that cost millions of dollars to acquire and maintain cannot facilitate social equity.

Second, any benefit intended to compensate drug war victims should be offered directly to those persons. We should not create pathways for nonvictims to intercept this relief.

We believe compensation could be offered to victims without imposing additional burdens on unrelated third parties. A viable way to finance this restitution could be through tax credits offered to marijuana companies that agree to deposit equity shares into a fiduciary account for the benefit of these victims. Over time, the stock portfolio accumulated within this publicly administered trust account would receive earnings distributions or capital gains from which it, in turn, could make ongoing distributions to drug war victims and their direct families.

This would be in the companies’ interests because it would reduce their tax bills and improve immediate cash flow. While the tax system is already overcomplicated and special tax breaks should be eliminated, this approach makes sense because cannabis taxes are frequently excessive.

We don’t believe it’s prudent to assess taxes to finance restorative justice payments. Many taxpayers never consented to the drug war and shouldn’t be penalized because the government enforced drug laws in arbitrary and discriminatory ways. Excise taxes on legal marijuana products are viewed as social equity efforts but make these products uncompetitive with illicit competitors and allow those illicit competitors to thrive by providing far less expensive products even after states legalize marijuana. 

Individuals who suffered the gravest injuries directly as a result of cannabis criminalization—having their freedom stripped, their families shattered, their lives stunted and their economic opportunities blunted—are still owed true restorative justice.

Social equity should not simply be a false mantra for politically connected and well-capitalized opportunists to distort new marijuana markets or exploit the public purse. We believe there is ample evidence showing the drug war was designed and executed to be discriminatory, but efforts toward restorative justice should not enable corruption nor create new injustices.

Geoffrey Lawrence is research director at Reason Foundation. Khurshid Khoja is founder and CEO of Greenbridge Corporate Counsel and chair emeritus of the National Cannabis Industry Association.

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Photo courtesy of Chris Wallis // Side Pocket Images.