CO and WA: Do you want your marijuana taxed or tax-free?

Will government in full-legalization states always need to keep trying to distinguish between patients and everyone else? Maybe, with full legalization, (1) economies of scale will kick in and (2) the prohibition premium will fade so much that non-medical users will pay an after-tax price lower than patients have ever paid (or maybe even hoped for). Even if the two groups (healthy folks and patients) are “served by the same system,” some costs of deciding who is a patient and who is not will continue — like doctor’s fees. Another category of costs is non-financial, like the disrespect for law that comes from healthy people beating the system and evading tax by pretending to be sick. But let me be clear: I am convinced that marijuana has real medical uses. To the extent that the public has confidence that medical recommendations do in fact separate sick people from healthy people, I backtrack.

Discussion is proceeding at the Samefacts blog.


Marijuana Taxation Is Inevitable Now

Folks in favor of the legalizing marijuana could, until today, point to a plausible tax-free scenario:  A state could just repeal its Prohibition laws, as New York did for alcohol in the early 1920s.  In that case, the state would collect no tax, but would leave enforcement of non-tax laws to the federal government.  A variation on that scenario would have happened if the federal government had shut down the regulatory schemes in Washington or Colorado, leaving possession legal.

But Eric Holder’s announcement, that the Administration will let state legality operate, takes away the possibility of tax-free marijuana, as a practical matter.  Marijuana, where legal, is no more likely to be tax-free than wine, taxed in every state, even California.

Marijuana Advertising: The Federal Tax Stalemate

Huffington Post blog entry they just posted for me here:

How Denver City Council voted 13-0 to ban outdoor marijuana advertising:

Here’s the text of the HuffPo piece:

Marijuana Advertising: The Federal Tax Stalemate

“Marijuana Industry Eager to Pay Taxes — and Cash in on Deductions” says a recent McClatchy headline. There’s a conundrum: The state-legal marijuana industry (1) understands that a new federal excise tax would give it legitimacy, but (2) seeks repeal of the discriminatory Reagan-era statute saying that taxpayers “trafficking” in “narcotics” cannot deduct ordinary business expenses on their Federal income tax returns.

But that current no-tax-deduction rule makes marijuana advertising nondeductible – and that probably makes sense. For most proponents of marijuana legalization, advertising is a frill, not an essential. But for opponents of legalization, marijuana advertising is anathema. Continue reading “Marijuana Advertising: The Federal Tax Stalemate”

Toward Liquor Control — John D. Rockefeller, Jr.

Excerpts from Prohibitionist Rockefeller’s Foreword to the book Toward Liquor Control by Fosdick and Scott that proposed state liquor sales:

I was born a teetotaler and I have been a teetotaler on principle all my life.  It is my earnest conviction that total abstinence is the wisest, best, and safest position for both the individual and society.  In the attempt to bring about total abstinence through prohibition an evil even greater than intemperance resulted – namely, a nation-wide disregard for law.
Only as the profit motive is eliminated is there any hope of controlling the liquor traffic in the interest of a decent society.


In 2013, living in a liquor monopoly state and having lived elsewhere half my life before age 40, I can’t find a more appealing and unifying issue than liquor control.  Washington State abandoned it after a huge push by Costco, so I’m figuring some economic extremists will take a run at it here in North Carolina.  With all the disharmony here, I’m looking for an issue where I can agree with Brother Rockefeller’s fellow Baptist believers, and liquor control looks like a start.

U.S. Federalism Fails at Experimentation: Marijuana Revenue in Uruguay

The most sensible and cautious approach to marijuana legalization, it seems to me, is state monopoly.  Monopoly short-circuits the great motivating force of capitalism, the profit motive, and can operate without advertising.  And monopoly allows for instantaneous price adjustments to combat bootlegging.

But in the USA, states are scared that the Federal Government would shut down a marijuana monopoly, for reasons that Rob Mikos of Vanderbilt articulates.  I wonder if the Federal Government might not turn a blind eye to a scheme that’s demonstrably more cautious than the private enterprise ganjapreneur models that are taking hold, but most folks think Mikos is right, and that the safe approach to state legalization is private .

So the usual advantage of our Federalist system, where the states can be laboratories of experimentation, does not come into play.  The first marijuana monopoly is happening in an entire country, Uruguay.  It’s not strange that the first country to try it is a small one, because the chances of  the first experiment succeeding are slim.   A small country should be more nimble than a big one:  A battleship is harder to turn around than a PT boat.

NYC Comptroller Proposes Marijuana Tax

A lengthy proposal from the Comptroller of New York City to tax marijuana proposes a 20 percent marijuana excise.  The proposal assumes “that, as a matter of public policy, a goal of legalization would not be to lower the retail price.”  That language could be read as being indifferent to price (legalization has several goals, but lowering the price is not one of them; maybe reducing alcohol abuse is not a stated goal either).  That reading falls short of the  cautious approach of saying that a goal would be to maintain at least the current retail price, which would be clear if the proposal had said, ” a goal of legalization would be not to lower the retail price.”  But it’s a step Continue reading “NYC Comptroller Proposes Marijuana Tax”

Can the center hold?

The Greek left (exemplified by the tax collectors’ union) and some folks in the American right are trying the same approach.   When Greek tax collectors went on strike, I worried for their country.  Now, in America, House Republicans propose to cut the IRS budget by $3 billion, that is, 25 percent.  That’s starving the beast, all right – working for the collapse of the government.

Raleigh News & Observer corrects error . . . online — and in print

Rob Christensen’s column now has corrected  sub silentio the attribution of “riverboat gamble” to Bob Dole that I complained about here.  So the online version now gets the attribution right:

Trickle-down economics. Yes, the same warmed-over philosophy that the elder George Bush once called “voodoo economics” and Howard Baker called “a riverboat gamble.”

Waiting to see if the print version (to which I still subscribe) ‘fesses up.   UPDATE:  Corrected on page A2, August 8.

Tax rates: Carbon and Marijuana

An old friend who stayed in tax policy work as I went and came says a place to start studying the carbon tax is THE DESIGN OF A CARBON TAX, by Gilbert Metcalf and David Weisbach.

The authors “recommend full or partial delegation of rate setting authority to an agency to ensure that rates reflect new information about the costs of carbon emissions and of abatement.”  That approach is in line with my view that we don’t yet know enough about marijuana markets to set tax rates by legislation.  Taxing either substance will be a trial-and-error process.