October 21, 2016 § Leave a comment
Quoted accurately by Bernie Becker:
THE PERILS OF TAXING POT: Recreational marijuana vendors — the legal ones at least — have some pretty well-documented issues with taxes. They have trouble finding banks willing to do business with them, for instance, and they can’t take normal business tax deductions.
But Pat Oglesby, a former lawyer for the Joint Committee on Taxation, writes that there could be a broader issue with how states where recreational marijuana is or might become legal are taxing the product. (Recreational marijuana is legal in four states, and on the ballot next month in five others.) Writing at The Huffington Post, Oglesby says it’s a trap to tie tax collections solely to price, which he argues will plummet as more states decide to legalize it. All five states with ballot measures have a tax on price, but Oglesby gives California credit for also tacking on a weight tax. “If federal legalization is the ultimate goal, it makes sense to try different taxes, especially the quantity-based kind the federal government uses for tobacco and alcohol. Seeing what taxes work well will give Congress comfort,” he wrote. « Read the rest of this entry »
October 21, 2016 § Leave a comment
Here are tables looking at the 5 adult-use cannabis initiatives on November ballots:
Can Legislature amend November marijuana initiatives?
CA: for taxes, only with 2/3 of each House; some amendments need only simple majority
NV: only after 3 years
AZ: only with 3/4 of each House
October 18, 2016 § 1 Comment
Here is an SEC filing from a company that wants to be a tax-advantaged REIT, renting to marijuana companies:
“We are a newly-formed, self-advised Maryland corporation focused on the acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for their regulated medical-use cannabis facilities. Initially, we intend to acquire our properties through sale-leaseback transactions and third-party purchases. We expect to lease our properties on a triple-net lease basis, where the tenant is responsible for all aspects of and costs related to the property and its operation during the lease term, including maintenance, taxes and insurance.”
October 17, 2016 § Leave a comment
Marijuana Taxes on 2016 Ballots
A non-California-centric condensation of Best Marijuana Taxes Yet: California’s Proposition 64, by Pat Oglesby
Marijuana legalization is reaching new heights of public approval, and voters will see new ballot proposals in five states this November. Weak taxes taint four of the initiatives — Arizona’s Proposition 205, Maine’s Question 1, Massachusetts’s Question, and 4 Nevada’s Question 2.
But California’s Proposition 64 contains the strongest marijuana tax structure voters have ever seen. Only California avoids the trap of tying tax collections directly to sure-to-fall prices, and the trap of collecting next to nothing from reportedly-medical users. But is it flexible enough?
The dangers of price taxes « Read the rest of this entry »
October 15, 2016 § Leave a comment
Excerpts from Joel Warner’s eye-opening article, EMBRACING POT: Weedtown, USA: Home to America’s First City-Owned Pot Shop:
Inside the Cannabis Corner’s . . . facility is a one-of-a-kind experiment. The shop, which opened its doors in 2015, is run by the city, making it the only government-operated cannabis store in the country. By September 2016, it had generated $2.2 million in revenue, « Read the rest of this entry »
October 10, 2016 § Leave a comment
Summary: I give California’s Proposition 64 very high marks for tax structure, avoiding two deadly tax traps “better than any marijuana initiative voters have ever seen..” I asked Rachel Barry, a public health expert and my good friend and conscientious colleague on the Newsom-ACLU California Blue Ribbon Commission on marijuana legalization, what she thinks of Proposition 64 from a public health perspective – does she oppose Proposition 64, or just severely criticize it? I asked because I wanted to quote her in my document.
That resulted in the following back and forth. I do not express an opinion on her views, but want to put them on the record:
I’ve been thinking a lot about this lately. I’m more of the severe critic. « Read the rest of this entry »
October 6, 2016 § Leave a comment
Best Marijuana Taxes Yet: California’s Proposition 64
Two devastating traps threaten taxes on newly legalized marijuana. One is the quicksand of inflexibility, leading to impotence during a whirlwind of market change. The other is playing favorites, opening an abyss of tax evasion. California’s Proposition 64, on the ballot in November, avoids those traps better than any marijuana initiative voters have ever seen.
The test of time
Taxing the embryonic legal marijuana industry is like buying clothes for an expected baby. Prepare for changes. The marijuana industry will evolve in ways we can’t predict. We don’t know the best way to tax marijuana, and even if we knew, that way will prove wrong as the market evolves, with free market entrepreneurs pursuing wild ideas, surprising everyone but themselves.
But we can foresee one trend. The early legal market will face a price war from the incumbent black market, but then pre-tax prices will drop, as the legal market is liberated from the “prohibition premium” — the extra costs and risks of operating illegally. That is, eventually, the legal industry will grow and become efficient, pushing pre-tax prices down – way down. Why should cannabis cost so much more than tea? Pre-tax, after federal legalization, it won’t.
Taxes calculated as a percentage of price are child’s play to create. A price-based tax will start strong. Then, as pre-tax prices collapse, so will price-based tax collections. « Read the rest of this entry »