This is good news for the cannabis industry. My read of the ILM below is that for purposes of 280E, an excise tax, by its terms imposed on the seller, does not come into the seller’s income, and thus creates no 280E problem. A “reduction in the amount realized” I take to mean an amount that is not includible in income. I would think a tax on weight or THC content could be structured like a percentage tax.
A reliable source from Tax Analysts sent me ILM 201531016, saying this:
In a legal memorandum, the IRS determined that a taxpayer who paid marijuana excise tax to the state of Washington should treat the expenditure as a reduction in the amount realized on the sale of the property. Continue reading State tax problem under 280E goes away
Louisiana’s new cannabis law gives LSU and HBCU Southern U. the right of first refusal to grow. That seems cautious, and a useful plan.
But if they refuse, there is to be an auction, with a single winner, for the right to grow. People worry about political influence that benefits the cannabis industry. Search RAND’s Insights for Vermont, http://www.rand.org/pubs/research_reports/RR864.html for the word “lobby” and you’ll find lots of concern.
The Louisiana Legislature must share that concern about political influence, as indicated by Louisiana’s new rule that would cut back on it. Here is the new law’s restriction on who may bid at auction (complete with line numbers):
No company that has made a contribution to a candidate in a
5 Louisiana election governed by the provisions of the Campaign Finance
6 Disclosure Act within the five years prior to bidding for the license, or is
7 controlled wholly or in part by a person who made such a contribution within
8 the five years prior to the company bidding for the license, may be eligible for
9 the license. Continue reading No licenses for donors
G.K. Chesterton said, “Anything worth doing is worth doing badly.” He meant that it’s OK for awkward folks to dance, and for poor musicians to play. I would like to be funny enough to be a comedian. Well, I’m not, but now that I’m 68, I’m letting fly.
Please click here for “Cannabis Pros and Cons, ‘If By Whiskey’ Style,” which my editor, Deborah Harlow, introduces this way: “Debate over marijuana legalization often tends toward polemics and hyperbole. Pat Oglesby, borrowing heavily from Legislator Noah Sweat, takes playful aim at that debate.”
Excerpts: Continue reading Cannabis Humor?
Regressivity of cannabis taxes is likely a non-problem, for two distinct reasons.
- In the long run, cannabis prices after and including tax are very likely to be LOWER after legalization than untaxed black market prices before legalization. Consumers will pay less, not more.
- This second reason is bigger picture. “Surprisingly, the progressivity of a tax system’s rate structure is negatively correlated with the reduction in inequality a country achieves. ” (Kleinbard, We Are Better Than This: How Government Should Spend Our Money, Oxford University Press, 2014, p. 362). Kleinbard says, reasonably enough, that a fiscal system should be judged as a whole, not piece by piece. And although you might try to isolate the tax feature of a marijuana legalization plan and label it regressive, countries that depend on regressive taxes, like a Value Added Tax, have less inequality than the United States. Think Europe. And if revenue from cannabis goes for uses that decrease inequality, which might, in the long run, include treatment, health care programs, and youth prevention, all of which might help people function in the economy, it doesn’t seem fair to consider only the tax without considering the use of the tax revenue.
All this come from RAND’s Insights for Vermont, http://www.rand.org/pubs/research_reports/RR864.html, page 78, footnote 5.
Here’s a quote from the California Blue Ribbon Commission Report, in a section called “Tax Bases Over Time”:
“The Commission emphasizes the view that legalization is a process that will take time, not a one-time fix with all rules in place from the beginning and static in perpetuity. The state may benefit from implementing tax rules in phases or steps. Steps in the process may reflect and co-exist with an evolving and maturing marketplace. For instance, a low square footage tax or fee could be imposed at the outset of legal production. Shortly thereafter, the very first commercial sales might well bear a modest ad valorem excise tax. But the state could decide initially to delay imposition of weight-based or potency-based taxes for some period of time. There are two reasons to delay or phase in these taxes: first, to give the legal market time to compete with the illicit market, and second, to give the Board of Equalization time to create the rules and structure to collect the tax.”
The RAND Report for Vermont points Continue reading Cumulating tax bases — CA BRC
The California Blue Ribbon Commission report on marijuana legalization is here or at https://www.safeandsmartpolicy.org/wp-content/uploads/2015/07/BRCPathwaysReport.pdf. The major tax part starts on page 48, but there is some tax material scattered throughout. I don’t agree with all of it, but I’m delighted to have been part of the Commission.
A few years ago, the economists Gregory DeAngelo and Benjamin Hansen wrote a paper looking at road deaths and injuries in the state of Oregon, which—in part because of a “tax revolt”—has cut the size of its highway patrol repeatedly since the end of the nineteen-seventies. “We find that Oregon would have experienced 2,302 fewer fatalities from 1979-2005 if the number of state police had been maintained at their 1979 levels,” the two concluded. Continue reading Oregon tax cut linked to 2,302 deaths