Month: August 2015

Keep TABOR out of NC petition — I signed it.  Here’s an email I got:

Dear NC Budget and Tax Center partners, Continue reading “Keep TABOR out of NC”

Lots of people would like to get licenses to grow cannabis.  If you wanted to avoid Big Marijuana and share the wealth from legality, you could hand out many licenses for small quantities rather than few licenses for large quantities.  The number 10,000 square feet of grow area came up unofficially on a trip to Humboldt County.  To spread the wealth widely, that could be a hard cap for everyone.

You’d need related party rules, so if Farmer Jones got to grow 10,000 square feet, Farmer Jones couldn’t create Jones Farm, Corporation, Inc., to grow another 10,000 square feet — and couldn’t be co-owner of another corporation with an allotment.  More here (http://marijuanalegalization.about.com/od/ModelsofLegalization/fl/Picking-Winners-Deciding-Who-Gets-to-Grow-Marijuana-Commercially.htm). [Broken link.]

Bernie Sanders is getting a lot of attention, but this is a long way from socialism.  Socialism is public ownership of the means of production. Hard grower caps are public allocation of privileges of production.

This is not a new and fresh idea. Tobacco quotas did the same kind of thing, starting in the 1930s. https://newrevenue.org/2015/03/09/marijuana-quotas-part-1/#more-3376 — with cite to Anthony Badger’s Prosperity Road.

Lots of licensees make enforcement difficult.  That’s a trade-off.

A fine point I’m trying to think through: Immature plants are specifically subject to Colorado’s producer excise tax – currently at a rate of $1.20 per plant. Colorado lawyer Rachel K. Gillette, who won the Allgreens case against the IRS, confirmed for me that seeds are not subject to that tax.  I’m thinking they should be treated the same.  So far. Continue reading “CO tax on plants and seeds?”

Original title:  Opposite of gateway is barrier?

A list of not-entirely-serious pros and cons about cannabis, here, mentioned the “con” argument that marijuana is a “gateway” drug (“If when you say cannabis you mean the Devil’s weed, the gateway to the nightmare of hard-drug addiction, the tempter of teenagers that terrifies parents, the cause of Willie Nelson’s feeling that the flesh was falling off his bones, . . .”).

But I didn’t mention a “pro” argument on the other side – that legalizing cannabis takes away the message that it’s in the same category as heroin and methamphetamine. In Vermont, for instance, 35 people died from heroin in 2014.

Shifting cannabis to the legal market would have two advantages. First, it would mean a consumer wouldn’t get cannabis and hard drugs from the same dealer.  That would tend to marginalize the hard drug dealer.  The cannabis consumer would have a completely different supplier — not the hard drug dealer.  Second, the shift would send a message to everyone, especially young people, that marijuana is not in the same category as those more dangerous drugs. Continue reading “Opposite of gateway is bypass?”

“What would you do if you had $1 million? Believe it or not, some of you might live in government-subsidized housing.” That was the pre-ad lead in to a story on the Fox News Grapevine Show 18 August 2015, which was not about the hugely more expensive mortgage interest deduction, which costs over $400 billion over five years.  That’s a huge government subsidy for housing. Here’s the transcript:

Helping Hand

You — the taxpayer — are subsidizing more than 25,000 families in public housing — even though they exceed the income limits. Continue reading “Mortgage interest deduction subsidizes housing”

Here’s a story from the Denver Post about huge marijuana grow operations starting up in Pueblo County, Colorado.

Here’s another story, by Joel Warner in the High Country News, where I suggest that those huge operations will have a first mover advantage, but that advantage may not last.  (These operations are unlikely to have intellectual property protection to keep the kind of first mover advantage that leads to a Winner-Take-All scenario, like Facebook.)  And a market glut could bring prices crashing down in the long run. Continue reading “Cannabis oversupply and price collapse?”

As a tax man, I don’t think a special tax rule for medical cannabis can be administered in a trustworthy way by government. So I oppose it.  Having a tax agency examine the medical condition of individuals — or taking someone’s word for it — is not a model I trust.

Here’s another reason, from my co-presenter at a Continuing Legal Education event sponsored by the North Carolina Bar Association, Ben Scales, an Asheville lawyer and activist.

I’ve been working for cannabis law reform for more than 20 years, alongside many of the leaders of the movement. Over that time, my positions have evolved. I’ve always believed that cannabis should be legal for all uses, but I’ve spent the last 10 years or so focused on seeking safe access for qualified patients.  My thinking was: let’s let the sick and dying get theirs first.

I’ve now come around to believing that that strategy is a “box canyon” that will hinder, rather than further, the progress toward the ultimate goal of cannabis freedom. While I certainly understand that cannabis has medical benefits, I don’t think it’s properly classified as a medicine. Continue reading “No special rule for medical cannabis — Guest post by Ben Scales”

My state of North Carolina is considering a Taxpayer Bill of Rights, like Colorado has. Some current Legislators want to tie the hands of future Legislators, who might be of the other party. Well, from the Denver Post, here’s the kind of crazy outcome that leads to:

Colorado will repeal sales taxes on marijuana Sept. 16, thanks to a quirk in its constitution.

The one-time-only holiday from the 10 percent state sales tax on recreational pot is likely to generate buzz in the first state in the nation to legalize marijuana.

The little-noticed provision is part of a larger bill that Gov. John Hickenlooper signed into law Thursday that includes a ballot initiative in November and a permanent tax cut on recreational pot sales in 2017.

“This fiscal glitch that we have with the constitution … that’s part of the magic of living in Colorado,” the Democratic governor said.

The impetus is the Taxpayer’s Bill of Rights, a measure championed by conservatives. The constitutional provision requires voters to approve new taxes based on estimates of collections and state spending. If the actual amount exceeds the estimates, refunds are necessary.

Colorado isn’t collecting more pot taxes than expected — actually, the amount is far less than projections — but total state spending exceeded initial estimates because of the improving economy.

Full story here or at http://www.denverpost.com/news/ci_28252221/colorado-offer-one-day-tax-holiday-marijuana

Tax scholar and Columbia Professor Mike Graetz, whom I knew briefly in the 1980s, has released a detailed look at carbon taxes, subsidies for energy efficiency, cap-and-trade, and more.  It’s downloadable here or at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2640659.  He makes the case for carbon taxes, but despairs of their enactment.

Here’s a description of the book from which that download is excerpted, from http://taxprof.typepad.com/taxprof_blog/2015/08/graetz-the-end-of-energy.html#more:

In The End of Energy, Michael Graetz shows us that we have been living an energy delusion for forty years. Continue reading “Carbon taxes — Mike Graetz”

The International Centre for Science in Drug Policy says here that we shouldn’t worry that Big Marijuana will be the kind of problem that Big Tobacco is. “Restrictions on advertising, requirements for product labelling on health harms, and investments in public education are regulatory controls that do not foster a large commercialized industry and can be adopted,”

The part about advertising is true in Uruguay and in many other places. But in the United States, advertising is harder to stop for cannabis than for tobacco. Big Tobacco signed away some of its Constitutional right to advertise in the Master Settlement Agreement.  That is, they agreed, as part of the deal settling lawsuits, to limit advertising that they had a Constitutional right to publish.  There’s no reason to think the cannabis industry will sign away anything. Is there? Continue reading “Cannabis ads”

The market situation with illegal cannabis in some jurisdictions today calls to mind the situation with liquor before the Union started taxing it to help finance the Civil War. Here’s an excerpt from The elements of public finance, the 1899 classic by Winthrop More Daniels.           

It took decades to get the new tax humming.

3 scenarios:

1. Repeal of the 280E would be scored as a revenue loser by the Joint Tax Committee.
2. Repeal of the Controlled Substances Act, or legislative removal of marijuana from the CSA’s bad list referred to in 280E, would be scored as a revenue loser by the Congressional Budget Office in coordination with Joint Tax.   For example, when Congress enacted requirements that the motor fuel fleet have certain specified amounts of biofuels, the budget needed to take account of the tax benefits for ethanol and biodiesel.  So, as that legislation proceeded, Joint Tax worked with the CBO in reporting its budgetary cost.
3. Administrative removal of marijuana from the CSA’s bad list would entail adjusting the base line down to reflect the revenue loss.  In that case, the deficit would be known to be bigger because of administrative action.  This third scenario does not bring into play restraints on Congressional budget busting, since Congress does not act.

Loosening rather than repeal or effective repeal of 280E would be scored similarly, but with less budget damage.

++++

I’ve been saying that cannabis reformers might put banking reform ahead of 280E repeal on their wish lists, because cutting taxes is hard in a time of deficits. Repeal by Act of Congress would be a revenue loser, and would have to be paid for. The obvious way to pay for it is a federal marijuana tax.

But Dale Gieringer of California NORML points out that New York Times calls for removing marijuana from the Controlled Substances Act altogether. That would take away the 280E problem for the industry, because 280E operates by cross-reference to that Act. Here’s the kicker: If 280E is removed administratively, the revenue loss won’t be scored;  Continue reading “Revenue loss from 280E”

As a fan of British novelist Anthony Trollope, I appreciate this excerpt by Adam Gopnik in the New Yorker about political reform involving moving ideas “into the realm of the plausible”:

Trollope, quite uncynically, understands both what’s necessary to make the world go round and which way the world ought to be made to turn. Continue reading “Trollope on Reform”

Corrected and updated here or at https://newrevenue.org/2015/08/10/revenue-loss-from-280e/.

The New York Times calls for broad federal cannabis reform, including rescheduling and access to banking. But it doesn’t mention another key demand of reformers – getting Congress to repeal the extraordinary federal tax on cannabis. That’s 280E, which denies deductions to cannabis businesses other than for cost of goods sold.

There are at least three reasons for reformers to put 280E at the bottom of their wish lists.

— As a practical matter, cutting taxes is hard in a time of deficits. Repeal would be a revenue loser, and would have to be paid for. The obvious way to pay for it is a federal marijuana tax. Continue reading “NYT and 280E — Update 3:37 EDT 9 August 2015”

How to stop the “Free pot with purchase of pipe” scam that tries to beat a percentage of price tax, a new HuffPo article:  Bungling Bundling? Taxing Marijuana in Washington State: Here or http://www.huffingtonpost.com/pat-oglesby/bungling-bundling-axing-m_b_7918092.html,  Pasted below, too. Continue reading “Bungling Bundling?”

This is so preliminary . . . but here goes.  Lots of thinking remains to do.

So Washington state went and changed its entire cannabis tax, with part of the rationale being to make the entire tax burden deductible under 280E. That’s why Washington transferred the burden from the seller (who arguably included the tax in income and couldn’t deduct it) to the buyer, who suffered no 280E problem.  You can read about WA’s rationale at https://newrevenue.org/2014/12/04/wa-fix-for-280e-problem/.

Now the IRS says that Washington’s cannabis taxes were never, ever included in income. That result makes total sense. It not just comports with the statute, it avoids an irrational form-over-substance distinction, which would have made the tax a problem only if the seller paid, but not if the buyer paid. That would have been pointless.

So now what for 280E? I saw the thought somewhere that this IRS announcement portends loosening of 280E. Maybe. For sure, when the idea of repealing 280E comes up, the revenue estimate won’t reflect a huge loss from allowing deductions for state taxes, because they are deductible under the base line.

Putting a 280E penalty on state taxes would have been an outrage.  But what’s left of 280E is more defensible now that state taxes are clearly deductible. Advertising is a frill for marijuana legalization, but anathema to opponents. More here

Continue reading “What’s next for 280E?”

Here is the IRS advice, thanks to Kristen Wyatt of AP.  Or click on http://www.irs.gov/pub/irs-wd/201531016.pdf.

Pasted is an unformatted version: