As a base for a marijuana tax, percentage of price has an apparent advantage of seeming reasonable on its face in some cases — that’s what I heard a lot at the Drug Policy Alliance conference in Denver. That is, an objection to a weight base (in addition to “it encourages high potency”) is that a series of three 25-percent excise taxes like those in Washington state’s law may seem reasonable, and a tax of say $50 an ounce might seem so outrageously high as to be unenforceable. We don’t tax anything at $50 an ounce.
But those 25-percent taxes could be in fact higher — until economies of scale kick in. The official Washington State revenue estimate for those three levels of tax was $5.97 a gram, or over $165 an ounce. (“Gangs, Ganjapreneurs, or Government” has these numbers at pages 258-260.)
But if you re-describe the base in grams, which the marijuana trade often uses, $1.77 a gram is the equivalent of $50 an ounce. You get a more reasonable sounding number. Maybe. And then you can round it up to $2 or smooth it down to $1.75, or whatever you want. And $50 is not my number. I’m studying the structure, not the number.
Don’t forget indexing any dollar-denominated tax base. A percentage base takes care of inflation automatically.
The Center for New Revenue 