Basic marijuana questions for tax and drug policy

For marijuana, how might drug policy and tax policy work in tandem?

Should federal law be changed to let marijuana sellers deduct advertising and other expenses? (Only the cost of marijuana is deductible now, thanks to 280E.) What would be the revenue cost if 280E were repealed, or targeted at selling expenses alone? (For another day – should expenses of advertising alcohol, sugar, tobacco, etc., become similarly nondeductible?)

What excise tax bases might the federal government use? Price, weight, THC potency, canopy grow area, electricity use, or what? Should there be more than one federal tax as time goes on? What about fees?

How much revenue is available? Continue reading Basic marijuana questions for tax and drug policy

Government-Owned Marijuana Stores Pay No Income Tax

Ben Leff, the tax professor who wanted nonprofit marijuana businesses to be exempt from federal income tax, just concludes that state and municipal stores seem to solve the problem.  Not just the 280E problem — they pay no tax at all.

“The Case for Government-Owned Marijuana Stores”

Benjamin Moses Leff

Last spring (3/7/15), a little store called the Cannabis Corner opened up in the small town of North Bonneville, Washington, about an hour by car from Portland, Oregon. Continue reading Government-Owned Marijuana Stores Pay No Income Tax

Oregon’s crazy tax rates

Report from Oregon: “Once the state’s new rec rules are fully implemented, the 25% tax will be downgraded to a 17% sales tax.”

That’s crazy. It illustrates how early in the process of figuring out how to tax marijuana we are – or else how Legislatures don’t work. Businesses will struggle at first. Any tax relief should happen early, not late.

The RAND Report, Considering Marijuana Legalization: Insights for Vermont and Other Jurisdictions, explains how taxes should go up over time. Why Oregon would ratchet them down is hard to figure.

“A brand-new legal marijuana market will not soon be stable. Fluctuating pretax prices would push after-tax prices around. Early on, the industry would likely suffer from lack of production capacity. Short supply would result in high early legal pretax prices.Adding high taxes to those high pretax prices would tend to drive consumers to bootleggers, whose main selling point would be lower prices. So revenue and drug policy would suffer from too ambitious a tax plan.

“Over time, legal businesses’ pretax costs should drop, for two reasons. Continue reading Oregon’s crazy tax rates