Month: September 2015

If you want a bottle of liquor where I live, you can buy it only in a state store. That works. And some states might choose that model for cannabis. The notion that state stores are “impossible”?  Many folks who find absolute certainty in the law are not lawyers — and don’t focus on prosecutorial discretion, now in play already, as noted below.  UPDATE:  State universities in Louisiana have formally applied to the state to grow cannabis:  Details are at https://newrevenue.org/2016/06/26/4815/.

Marijuana Under President Sanders
Pat Oglesby
Posted: 09/29/2015 1:10 pm EDT Updated: 09/29/2015 1:59 pm EDT
http://www.huffingtonpost.com/pat-oglesby/marijuana-under-president_b_8207864.html

Bernie Sanders, a self-described socialist, is soaring in the Presidential polls. With marijuana laws in flux, Sanders reportedly “will consider” outright legalization. It’s natural to ask: What, exactly, might socialist marijuana laws look like?

Socialism can mean government ownership of all businesses. Now Senator Sanders wouldn’t go nearly that far. But there’s a baby step of government ownership: State [cannabis] stores. State stores distribute alcohol responsibly today in many states. In Senator Sanders’s Vermont, privately-owned retail locations “sell spirits for the State.”

Unleashing the power of the free market to innovate and to please in most consumer businesses — that’s hard to argue with. But when it comes to intoxicants, “the private profit motive . . . makes inevitable the stimulation of sales.” That warning, about liquor, comes from the classic 1933 Rockefeller report, Toward Liquor Control. John D. Rockefeller, Jr., was the opposite of a socialist, Continue reading “President Sanders and State Marijuana Stores”

A prestigious group of international tax professors argues against “a highly-preferential rate of tax on the $2.1 trillion in untaxed foreign profits of U.S. multinationals,” just as Donald Trump calls for a low 10-percent rate on that huge amount. The professors say:

“In sum, we do not believe these companies should be rewarded with a discounted tax rate, regardless of whether the money will be used for productive investments, which is highly unlikely given the discredited experience with the 2004 repatriation tax holiday documented by numerous experts. The understanding under deferral has always been that these earnings would eventually be taxed at the full rate less credits and deductions. That should not change, so we urge you not to buckle under pressure from corporations whose offshore profits have ballooned nearly fivefold since the last repatriation holiday – from about $435 billion in 2005 to $2.1 trillion today – in anticipation of another holiday that would let them avoid paying what they owe.”

How to tax this offshore stash is a test of politicians for me.  If they want to tax it all right away, they’re on the people’s side.  If not, they are on the corporations’ side.  I quit giving to some Democrats because of this single issue.

Here is my 2012 humor piece from Tax Notes (footnotes omitted), to the tune of the Beatles’ Revolution:

You1 say you want repatriation:
A tax-free corp’rate holiday.2
You talk about the job creation
That you’ll produce once you can pay
Big dividends out of the cash that you’ve stashed offshore;
But that didn’t work when we tried in two thousand four.3
Why don’t you go and pay That tax? Your tax. Your tax.

You say don’t tax your foreign income:
It came from Ireland or somewhere.
Through paper comp’nies there have been some
Shenanigans to shift it there.4
With so much intangibles income concealed through Dutch
Sandwiches we don’t believe we can trust5 you much.
You just don’t want to pay That tax. Your tax. Your tax.

You’ve come up with a new solution6
Because you didn’t hire last time:
Now, when you make a distribution,
The whole economy will climb.
But when you were shifting that income the rules were clear:
Pay tax on the income whenever you bring it here.
So go ahead and pay That tax. Your tax. Your tax.

You say your plan will help the budget,7
But one good pop8 is all we’ll get.
We won’t misjudge it; you can’t fudge it:
Your scheme will just create more debt.
Now if in your fantasy our Uncle Sam should drown,9
You don’t give a damn if your schemes bring the country down.
We ought to make you pay That tax.
Your tax.
Your tax.
Your tax.
Your tax.
Your tax.
Your tax.
Your tax.
Your tax.

Footnotes and all are at https://newtax.files.wordpress.com/2012/07/ssrn-id21032691.pdf.

After six years of studying taxation of marijuana, my firmest conclusion is that we should raise alcohol taxes. Figuring how much tax the marijuana market can stand, and how soon, is really hard.  The illegal market stands ready to take market share whenever cannabis taxes are too high.

But in the USA, it’s clear to me that the alcohol market can stand a lot more tax before bootlegging becomes a noticeable problem.

In Junior Johnson’s pre-NASCAR alcohol-running heyday, some 60 years ago, “A gallon of whiskey [bore] $11 tax. You could make it for 75 cents to a dollar and sell it for $3 or $4.”*

OK, he was either (1) rounding from $10.50 to $11, or (2) including state taxes. The federal excise tax per proof gallon was $10.50. Still, despite that huge price advantage for bootlegged product, legal product dominated the market.  A key reason not to raise taxes is to keep the black market at bay, but we could raise alcohol taxes a lot before the black market can compete on price.

Today’s non-indexed tax of $13.50 per proof gallon has far from kept up with inflation. Since the early 1990s, that nominal rate has lost about 60 percent of its real impact.

Working on RAND’s Insights for Vermont let me know that I’m not the only one thinking that “the total social cost associated with alcohol abuse is very much larger than all costs and outcomes related directly to marijuana use.” And exposed me to the idea that “even a 10-percent reduction in alcohol abuse accompanying the doubling in marijuana use could be a net win for society.”

So I am all for increasing taxes on alcohol.  When I get time, this will be a new project for the Center for New Revenue.

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• (Source: Junior Johnson, quoted in Peter Golenbock, American Zoom: Stock Car Racing – From the Dirt Tracks to Daytona, page 22 (MacMillan 1993).)

Not allowing tax deductions makes sense for marijuana advertising, both federally and in California (hot links explain in detail).

Now Hillary Clinton’s health care “plan, to be laid out in Iowa on Tuesday, also would attempt to dissuade drug companies from spending large sums on consumer advertising by barring that from counting as a tax-deductible business expense.”

The rationales for denying deductions are a little different for prescription drugs and for cannabis, but both aim at preventing persuasion to use drugs. And there is no Constitutional right to a tax deduction for advertising, as 280E proves.   Continue reading “No deduction for drug ads!”

Unindexed excise taxes, to me, show one of two things: ignorance about the need to index; or control of the law by the special-interest taxpayers, rather than the public.

But I learned a lesson from Senator Bentsen’s Finance Committee Health Counsel long ago: She had a plaque on her wall saying something like, “In politics, there are no permanent victories.” So I think Republican candidate Ben Carson overstated the ability of indexing to solve problems:

CARSON: “Negotiate a reasonable minimum wage, and index that so that we never have to have this conversation again in the history of America.” Continue reading “I like indexing, but . . .”

Yes, the IRS is auditing me.  I kept pretty good records, but getting them organized to present to the Service is a hassle.  One of our doctors is a four-mile round trip away.  To get the medical mileage deduction (in 2015, 23 cents a mile) for that trip brings a tax deduction of 92 cents.  If I pay at a 30 percent rate, that saves me about 28 cents in tax.  The recordkeeping and record production is not worth that.  But I’m producing the records anyway, if only to show the IRS I didn’t make up the numbers.  Whew.

Suquamish tribe is federally recognized. It’s going to sell marijuana. “As governmental entities, federally recognized tribes are not subject to income taxes.” – IRS. But that doesn’t cover all income: Continue reading “Income tax on Suquamish pot sales?”

Colorado’s one-day marijuana tax holiday is a total laughingstock. Marijuana will be exempt from all state excise taxes for one day, September 15. Colorado’s Taxpayer’s Bill of Rights, TABOR, is the reason.  My state is considering a TABOR-like Constitutional amendment.  I’m against it.

TABOR reportedly has a “requirement that the taxes revert to zero” at some point if collections exceeded estimates. (“Think of it as a back-to-school sales tax break, but for stoners.”) Not marijuana taxes, which came in short of estimates, but total state collections. Continue reading “Pot tax holiday = Laughingstock”

Colorado’s one-day marijuana tax holiday is a total laughingstock.  It’s the flimsiest tax cut imaginable.

TABOR is the reason. More about that soon.

Section 20. The Taxpayer’s Bill of Rights.

(1) General provisions. This section takes effect December 31, 1992 or as stated. Its preferred interpretation shall reasonably restrain most the growth of government. All provisions are self-executing and severable and supersede conflicting state constitutional, state statutory, charter, or other state or local provisions. Other limits on district revenue, spending, and debt may be weakened only by future voter approval. Individual or class action enforcement suits may be filed and shall have the highest civil priority of resolution. Successful plaintiffs are allowed costs and reasonable attorney fees, but a district is not unless a suit against it be ruled frivolous. Continue reading “Colorado’s TABOR”

If a new federal excise tax is part of a package containing explicit legalization, objections could arise under decades-old multilateral narcotics treaties that require us to outlaw marijuana. But 280E now is a penalty consistent with illegality of marijuana, so 280E raises revenue but doesn’t violate treaties.

That’s from http://www.huffingtonpost.com/pat-oglesby/marijuana-advertising-the_b_3810341.html, pasted below.  I haven’t heard an argument to the contrary.

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If you search this website for 280E, there’s lots more, including the  Report from Bob Dole’s Finance Committee.  Another piece, on California’s quirky 280E situation, is exclusively licensed, so I provide only a link: http://marijuanalegalization.about.com/od/RelatedIssues/fl/Down-the-Rabbit-Hole-of-Cannabis-Taxation-and-Advertising.htm, and the intro:

California tax law treats cannabis businesses owned by individuals worse than cannabis businesses owned by corporations.  Strange.  Here’s how:  Continue reading “280E material”

From KRDO in Colorado: “Two marijuana questions will be on the November ballot in Pueblo County.  Pueblo County Commissioners voted Monday to let the voters decide whether to put an excise tax on marijuana grows that send recreational pot to facilities. The tax would increase starting in 2016 by one percent each year for five years.  The revenue from the tax, if approved, would go toward college scholarships and community projects.”

Other phase-ins of rates are mentioned here: Continue reading “More tax rates that climb over time”