Marijuana tax base: Grams?

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.

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Author: patoglesby

From 1982 to 1990, I worked in tax policy for Committees of the United States Congress. In recent years, I was Adjunct Lecturer at UNC-Chapel Hill's Business School and then Adjunct Professor at its Law School.

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