Expert: Bud-Trim Line

Question:  

Updating https://newrevenue.org/2014/05/12/can-the-bud-trim-line-hold/:  Let’s say there’s a huge tax on bud and a small tax on trim.  Would that give producers an incentive to cheat – to shift bud, at the margin, just a little, into the trim category and then use it to make concentrates?

Might not a tax-evader deliberately characterize bud as trim to boost the THC content – and thus value – of concentrates?  That evasion depends on the purchaser believing that he is getting a better, more valuable product — edible, vaporizer cartridge, or whatever.  And that belief would need to come from THC labeling (however inaccurate) or some other claim or experience or report. 

Industry expert’s response:

My first impression is, yes it could be more economical to move lesser buds over into the trim pile.  A lot of that depends on the market.  In some markets small buds are desired by the consumer, for less mold and easier utility.  Under that pressure, it might still be beneficial to sell smaller buds as is.  There is also a market for big boutique buds, the ones that look like the ‘bud porn’ you see in trade magazines.  Those larger buds will always go directly to sale as bud. Additionally, if there is some kind of hiccup in production, some plants could produce some seeds and those wouldn’t be viable for sale in the bud market. So there a number of pressures besides taxes that move the line between bud and trim.

The difference in weight between a closely manicured bud and a shaggy bud is miniscule.  It is purely a consumer preference, so they FEEL they are getting the most bang for their buck. Like with any farmer, the prettiest product goes to market and the stuff with the bumps, or mars, or weird shapes goes to the farmer’s family OR to the cannery (or applesauce maker, etc). They know it’s just as good, it’s just not as pretty.

Not all large producers use machine trimming.  I can’t even say a majority do.  Once you have trained trimmers, you can get at least a pound of trimmed bud a day from them.  At $15/hr, that’s $120/dry pound for trimming.

One error that I see is that stronger bud = stronger concentrate. This is completely erroneous. You may get MORE concentrate from bud than you would from trim, but it wouldn’t be stronger…because… chemistry. However that doesn’t change the veracity of your conclusions.  The grower (or processor) would get more concentrate to make edibles or e-cigs, or dabs. (The strength of the concentrate depends more on your extraction process than on the starting material)

In the article the author suggests that growers would ‘shake’ the trichomes off their plants to somehow screw the system.  This is small time hackery, big time producers have no time or patience for that kind of foolishness.  It’s like manipulating a gas tax because some people drain the hose at the pump.

The price of trim is significantly lower than manicured bud.  In the past people just threw that stuff out.  It’s only gained significant value lately because extractions have brought around so many uses for trim, and the dab revolution, of course.  To me, the dab revolution has had the greatest impact on the market.  That is the single item that has given significant value to trim and rocks any previous theories on market structure. BUT making dabs still requires a middleman, an extractor, which keeps the sale of the majority of  trim in the wholesale side of the market.

I don’t think it’s prudent to try to manipulate the tax structure every time someone thinks of a loophole.  These are pot growers, they are super market savvy, and their whole lives have been lived in the loopholes. They are FAR more savvy about loopholes than any ‘tax designer’ could perceive.  One has to design regulatory and taxing systems in such a way as it is most natural to use.  Any kinks in the system will be immediately looped around.  I think as far as taxes go, you want a large, fairly tight sieve rather than a small leak-proof bowl in which to collect.  Grasp too tightly and you could lose it all.

 

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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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