Here are three big issues that I overlooked in “Laws to Tax Marijuana,” printed in State Tax Notes on January 24, 2011. The three biggest I’ve discovered so far, anyway. And a few small mistakes.
1. The high probability that collapsing prices will gut a percentage-of-price tax base. The 2105 RAND Report on Vermont puts it this way Continue reading Mistakes in 2011 “Laws to Tax Marijuana”
April 15, 2015: I take this back. A more useful post is here: https://newrevenue.org/2015/04/15/280e-and-fees-arkley/
Drafters of state marijuana revenue proposals might try to help the industry by making sure state taxes are federally income-tax-deductible under Code section 280E. That could be tricky. Lots more here.
State fees, as opposed to taxes, have a big advantage for states: A state can collect fees for licenses and applications and so on up front — to finance the operation of putting a new system in place. The state needs to spend money to make money, Continue reading 280E and fees — Withdrawn and superseded
This Congressional Research Service document about alcohol excises is in the public domain but it’s so hard to find that I’m saving it here: Alcohol Excises — Lowry. A more general document is by the same author, Sean Lowry, is here or at https://newtax.files.wordpress.com/2014/11/federal-excise-taxes-lowry.pdf, His piece on marijuana excises, with Jane Gravelle, is here or at https://newtax.files.wordpress.com/2015/01/fed-mj-tax-r43785.pdf.
What will happen if tax laws change? Republicans, newly in control of Congress, want to change the rules. Here are the stakes: the official predictions of what will happen determine whether a tax bill is a budget-buster – so maybe if it can pass or not.
CBO and Joint Tax have been not using, for budget purposes, so-called dynamic scoring, but the new 114th Congress is working on that. “Current rules require calculating a policy’s direct cost to the government, which includes looking at how affected individuals and firms would react to the policy. But dynamic scoring goes further by requiring that budget estimates also take into account how policies could affect the total size of the economy.” http://www.whitehouse.gov/blog/2015/01/06/dynamic-scoring-not-answer. Continue reading Dynamic scoring for sin taxes
Beau Kilmer, beneficent captain of the RAND team that wrote the Report Considering Marijuana Legalization: Insights for Vermont and Other Jurisdictions, has come up with 9 Ps to help analyze marijuana legalization: Production, profit, promotion, prevention, penalties, potency, purity, price, and permanency. (I’d add “Patients,” to address whether tax exemption for medical marijuana makes sense, but that’s a side issue, addressed here. And “Patience” will come in handy.)
As a corollary to those Ps, here is a way to think about marijuana’s tax base (the measuring stick to which a numerical rate is applied), discussed at pages 76-87 of that Report, using six more Ps:
Pounds Continue reading 6 Ps for marijuana tax bases
At one extreme is a seed-to-sale monopoly. To provide security, the state could put the growing outdoors, surrounded by fences and cameras, in the middle of the campus of a land grant University, or at the state’s version of a College of Agriculture and Life Sciences. To identify legal product, scientists might develop genetic or biological markers.