Month: October 2015

Billionaire Carl Icahn is “currently preparing to form a Super PAC with an initial commitment of $150 million from [him] personally.”  His plan is here.  While allegedly providing a loophole-closer, stopping inversions, he quickly gets to his anti-tax plan: Tax foreign income of U.S. multinationals lightly, if at all.

One problem is that the multinationals have no problem sticking the “foreign” label on income that should be taxed here right away in full.

$150 million: with 435 House Members, and 100 Senators, that’s $280,000 each.   That’s a lot of money for candidates to ignore, and a lot to spend for a tax cut, but Money Talks.  Yikes.

http://carlicahn.com/needed-legislation-letter/

If marijuana is legal, should everyone be able to grow and sell all they want?  Free market absolutists would say yes, but there are two reasons to be cautious.  First, to protect the public:  Some people’s criminal records might make you worry they would sell to minors, or sell untaxed product.  Second, to protect the industry:  You might want to limit how much can be grown for sale; and if so, you might start by limiting who can grow commercially.

Unlimited commercial growing could flood the market and drive prices way down.  Ultra-cheap marijuana could alarm the federal government, leading to a crackdown.  It might increase the number of dependent users as well as use by minors, risking a political backlash among parents.  Although a price collapse might make consumers smile, it could wipe out small producers and leave the industry in the hands of a few big firms.

So if you want to limit growers, how might you do that?  Continue reading Picking Winners to Grow Marijuana

Once marijuana is legal generally, medical users no longer need to prove anything to obtain it. But should they pay tax? This post,[1] written for Vermont in early 2015, looks at a conundrum: Medicine is usually tax-exempt, and marijuana is medicine for some people, but it is a recreational intoxicant for others. Some recreational users fake conditions like chronic pain or insomnia to disguise themselves as patients. That phenomenon threatens a tax on marijuana — if medical marijuana gets a tax break.  (A version of this post with footnotes on the same page as text is Part I.A. of this document.)

Continue reading Taxation of Medical Cannabis after Legalization

A friend says that private industries “may be able to build in regulatory capture from the first day of legalized marijuana” in some states, and asks if the alcohol industry had any “influence on how the newly legal alcohol industry would be regulated after Prohibition was repealed.”

My impression is that regulatory capture didn’t happen so quickly after repeal of alcohol Prohibition.  Continue reading Regulatory Capture — 1933 vs. 2015 — Updated 18 October 2015

“In the 1790s federal excise tax was collected from distilleries based upon the capacity of the still and the number of months it distilled.  In 1798, [George] Washington paid a tax of $332 on stills [with a capacity] totaling 616 gallons operating for 12 months.”

That’s from DISCUS, the liquor lobby.  It brings to mind a cannabis canopy tax — based on number of crops per year.

Colorado now has seven categories of marijuana to weigh in its de facto weight-based marijuana tax. Wet bud and wet trim are to have different tax rates per gram than dry bud and dry trim. And there are completely new categories of wet and dry “whole plant”

Here’s the language:

(22)  “Wet” refers to Retail Marijuana that is not dried or cured. This term includes Whole Plants, Bud and Trim. With respect to any Wet Retail Marijuana, whether or not the marijuana is sold or Transferred before or after being trimmed, the plant material to be sold or Transferred must be weighed within 6 hours of the plant being harvested, and tax must be paid on that weight.

(23)  “Whole Plant” means a Retail Marijuana plant that is cut off just above the roots and not trimmed. The weight of the whole plant includes all bud, leaves, stems, and stalk. The Department treats 55% of the weight of a Whole Pant as Bud, 30% of the weight of the Whole Plant as Trim, and 15% of the weight of the Whole Plant as waste. These percentages are calculated into the Average Market Rate. The percentage treated as waste is not subject to the Retail Marijuana Excise Tax. Continue reading Beyond Bud-Trim

A new cannabis canopy tax is on the table in Humboldt County, California.  It follows two key principles of tax policy: Tax things you can measure, and collect early.

I.  Tax things you can measure

The square footage of area under cannabis cultivation is something you can actually measure. (I’ll use “canopy” here is a shorthand approximation of cultivation area.)  Some canopy, you can measure from the air. And some you can even find on Google maps.

Four of the first marijuana taxes in history, the 2010 wave of taxes in Albany, Berkeley, Long Beach, and Rancho Cordova, California, were based square feet of operations. Having the government measure the area being farmed is nothing new. For years, starting in the 1930s, U.S. tobacco farmers were allowed to grow on only a specified land area.

Sure, canopy is a crude way to tax cannabis. Taxing THC might be just right, in theory, as the RAND Vermont report points out. But we can’t measure THC reliably even for concentrates yet. And trying to tax bud (flowers) by THC is futile – like taxing tobacco by tar and nicotine content, which no one does. Yes, canopy doesn’t correlate well with THC, but you can measure it. And a canopy tax, in the long run, will probably be just one of several taxes on cannabis.

OK, indoor grows can’t be easily detected from the air, so the most environmentally unfriendly operations may have the easiest time evading tax. But we can figure out who is using electricity, and there are other ways to detect indoor growing. Continue reading Humboldt’s Principled Cannabis Tax