Rabbi Joke Applied to Marijuana Taxation

Here’s the original joke from the public domain:

In the small villages of eastern Europe, the rabbi was the undisputed leader of the Jewish people of his village. Not only was he the master of religious wisdom and law, but he often served as the arbiter of civil disputes as well. There is told the tale of 2 individuals who had a major dispute and agreed to go to the rabbi for resolution. The first party to the dispute came to the rabbi and carefully outlined his side of the argument. The rabbi listened intently and finally said, “My friend, you are right.” The man went away satisfied. Later in the day, the other party to the dispute arrived and told the rabbi his side of the issue. The rabbi again listened carefully, was impressed with the arguments, and replied after some thought, “You are right.” Later, the rabbi’s wife, who had overheard the rabbi’s conversations with both men, said to him, “Rabbi, you told both the first party and the second party that they were right. How can this be?” To which the rabbi replied, “And you are right too!”

http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1180570/

If the first man said “Marijuana taxes will be too high,” he could be right, as start-ups struggle with unfamiliar issues, pay one-time expenses to get licenses and acquire capital, and make expensive mistakes that they won’t make again.  In the early days, pre-tax prices from the legal sector may be too high to compete effectively with the illegal sector.

If the second party said “Marijuana taxes will be too low,” he could be right as innovation, the profit motive, and economies of scale kick in to drive pre-tax prices so low that the after-tax price draws the ire of worried parents and even the federal government, concerned about interstate leakage as well as youth use.

So maybe everyone, including the rabbi, was right.  Flexible tax rates are the solution, since we aren’t going to see state monopolies in the USA any time soon.  But getting marijuana advocates — or state legislatures — to trust someone to set tax rates may not be the work of a moment.

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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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