Month: July 2014

My old friend and former Joint Committee on Taxation Foreign Team colleague Patrick Driessen, no longer on staff, emails:

“I just congratulated a former JCT attorney for assisting on an inversion.  I told him that, notwithstanding what Secretary Lew just said, anybody helping to complete an inversion IS being a real patriot, on the theory that If we only have 10 more inversions this year, then we get something like the Levin bill which is at best a 7874 bandaid.  But if we get 25 more inversions this year, people will start looking at formulary and tell the lawyers to find a new sacred cow — other than transfer pricing, and with 50 more inversions this year, we get what I really want, which is to abolish the corporate tax, raise the individual income tax rates at the top, put in a VAT with a demogrant, and tighten the estate and gift tax (including policing the many phony self-glorifying foundations out there).  Continue reading “Helping “deserters” is patriotic?”

Oregon marijuana tax revenue would amount to $38.5 million in year 1, says ECONorthwest.  The work was paid for by proponents, but I don’t detect bias.

The estimate assumes

— no movement from medical to recreational (because of low taxes, high medical fees).

— 60 percent market share for black/gray market after legalization. If law enforcement steps up, that number should go down over time.

— Big impact of 280E on growers (but that’s unrealistic, since nearly all growers’ expenses are deductible cost of goods sold; 280E hurts retailers much, much more – it hits anyone who does marketing or has a showroom).

— Steady prices during the first two years of legalization (after a minor initial drop). I would think prices would start dropping pronto.  But they might spike at first, as they have in CO and WA, though Oregon aims at creating more lead time to get supply ready.

Tax has been called the “Swiss Army Knife of public policy.”  In the two states where recreational marijuana is legal, medical marijuana patients don’t pay tax on what they buy.  That’s one way of providing relief to sick people.  Berkeley, California, is considering another way.  The New York Times reports:  “marijuana dispensaries will have to set aside 2 percent of their product — which must be of equivalent quality to the marijuana they’re selling at market prices — and give it free to city residents with incomes below $32,000.” Continue reading “Beyond the Swiss Army Knife for medical marijuana”

I can’t understand the figures for sales of recreational marijuana in Colorado in April, the fourth month below:  How could 10 percent of marijuana sales be greater than 2.9 percent of all sales?  I’ve asked the Department of Revenue for help in understanding what is going on.  All figures come from links on http://www.colorado.gov/cs/Satellite/Revenue-Main/XRM/1251633259746. Continue reading “Confusion over Colorado marijuana taxes”

A quick look at Craigslist for Denver,  http://denver.craigslist.org/search/sss?query=free+marijuana, searching for free marijuana, shows (along with free delivery and other non-tax-motivated offers) several deals where the purchaser who buys some non-marijuana item gets a certain amount marijuana free.  Does that avoid the 10 percent retail tax on marijuana?  I wouldn’t be surprised to see taxpayers take the position that no tax is owed.

In January, recreational marijuana stores in Colorado sold just north of $350,000 worth of stuff that did not bear the 10-percent marijuana tax.  The math is explained here.   By May, that figure had more than quadrupled, to over $1.4 million. Continue reading “Sales of non-marijuana items in Colorado recreational stores quadruple”

It looks to me like sales of non-marijuana items in recreational stores have risen from 2.5 percent in January to 6.5 percent in May.

Hmm.  Does that mean stores are “bundling” normally taxable marijuana with free-of-10%-tax vaporizers or something?  For instance, buy an untaxed vaporizer, get your marijuana free as part of the vaporizer price?  I have no idea, but there is an incentive to do that — if taxpayers think that works.  As an old friend from the Joint Committee staff used to put it, the job of the tax lawyer is to turn This into That.

Folks in Colorado know a lot more than I do.

Details here.

My mistake:  I thought I could figure out the ratio of recreational marijuana sales to medical marijuana sales in Colorado (and gross sales) by comparing sales tax figures.  Both bear the same 2.9 percent sales tax, so I took sales taxes reported by recreational businesses and divided by .029 to get total recreational sales.  Then I did the same for medical marijuana businesses (which report separately in Colorado).

Not so fast!  Professional journalists got this right.  It turns out that those sales taxes cover not just marijuana, but everything sold in the stores – pipes, papers, T-shirts, trinkets, you name it.  (Thanks to Natriece Bryant of the Colorado Department of Revenue for confirming that treatment.)

It’s easy to calculate sales of recreational marijuana:  take the 10-percent retail tax reported by the State, and multiply it by 10 (divide it by .10).  (I thought my 2.9 percent method was close enough, and had the advantage of comparing recreational and medical marijuana sales directly.)

Getting it right alerted me to a phenomenon:  In January, only 2.5 percent of sales of recreational marijuana stores were accounted for by non-marijuana items (pipes and so on).   By May, that figure had risen to 6.5 percent.

Here are the figures: Continue reading “Calculating Colorado marijuana sales”

When Prohibition was repealed, the federal government was deluged with applications to import liquor.  Granting quotas to all applicants seemed likely to create a situation where “nobody would have got enough to do business with.”

There are various ways of dealing with excess applicants, like holding a lottery, as Washington state is doing; selling licenses to the high bidder; or, as the Roosevelt Administration did in 1933, considering each application on its merits and deciding yes or no for each application.  Here are details, with highlights bolded, stated by the head of the Federal Alcohol Control Administration: Continue reading “Quotas for intoxicant businesses in 1933”

I’m on the record saying the tax structure of the marijuana initiative in Oregon is a step forward.

Kopilak said the initiative reflects the work of not only advocates but also national tax experts, including Pat Oglesby, chief tax counsel on the U.S. Senate Finance Committee from 1988 and 1990.

On Oglesby’s advice, New Approach Oregon opted to tax marijuana by weight early in the production process instead of at the retail end. Washington, by comparison, taxes marijuana at three levels, from producer to processor, processor to retailer and retailer to consumer.

I’m not endorsing the rate or level of tax.  I suspect this tax rate, like others, will prove too high at first, too low later.

Sales of both recreational and medical marijuana inched up from April to May in Colorado, I THOUGHT.

Those figures come simply from dividing the sales tax rate (2.9 percent) into officially reported (on highlighted links below) sales taxes received: Continue reading “Colorado recreational and medical marijuana sales rise slowly? UPDATE”

In “Tax Justice: A Christian Response to a New Gilded Age,” the Presbyterian General Assembly recently adopted some recommendations for international tax reform.  Here are two key points:

F.            International Corporate Tax Avoidance

1.    With respect to laws, including “transfer pricing” laws (described more fully in the background section), which today facilitate the movement of income by businesses to tax havens, the church should support work that has been begun to cause nations to change laws so that tax avoidance through income-shifting to tax havens is no longer permitted. This is to affirm the direction of charitable and religious organizations and research institutes seeking tax justice, as well as intergovernmental bodies including the OECD (Organization for Economic Co-Operation and Development) and G-20 governments working for greater tax policy coordination. The toleration of today’s porous tax laws by countries around the world reflects a dangerous “race to the bottom” by which countries compete to offer tax favoritism to businesses; the result is to deprive governments, particularly of poor countries that depend especially heavily on revenues from international businesses, of funds needed for urgent social needs. Continue reading “Presbyterians blast tax havens and check the box”

The Tax Code rule giving special treatment to “ministers of the gospel” (Those words are really in the Tax Code) – exempting their housing from income – has found an opponent in the Presbyterian Church.  Looking at taxation in the context of social justice, the Church calls for a phase-out:

“6. Particular taxes or exclusions from taxes should treat religious organizations equally with charitable and nonprofit organizations; religious organizations should not be singled out for either penalty or privilege except for the exemption of property essential to the core functions of religion.

“7.  Special tax exemptions or burdens for the property and income of ministers or other church employees are inappropriate.  They should be phased out over a period long enough to accommodate the reliance of many churches on existing exemptions.”

Revenue from the 15 percent “wholesale” excise tax on recreational marijuana was supposed to run about $2 million every month ($13 million for the first six months, January through June 2014).  Instead, for the first four months, under $2 million was collected overall.

I don’t know the underlying assumptions behind that $2 million per month estimate, but four factors – beyond just the error inherent in any estimate – may contribute to the early shortfall: Continue reading “Shortfall in Colorado’s 15 percent marijuana tax”