In Vermont, a legislative “committee passed an amendment 4-3 that prohibits dispensaries from selling non-marijuana products in a bundle with marijuana. Sen. Michael Sirotkin, D-Chittenden, presented the amendment, saying he did not want dispensaries to sell $50 t-shirts that come with a handful of free joints.” The story is here.
That’s an easy way of addressing bundling – selling taxed goods with untaxed goods for one price. This problem doesn’t show up when you tax by weight, or THC — just when you tax by price. California’s AUMA proposes another useful solution:
“(b) Except as otherwise provided by regulation, the tax levied under this section shall apply to the full price, if non-itemized, of any transaction involving both marijuana or marijuana products and any other otherwise distinct and identifiable goods or services, and the price of any goods or services, if a reduction in the price of marijuana or marijuana products is contingent on purchase of those goods or services.”
[UPDATE 18 March 2018: In hindsight, I would have beenless sympathetic to that proposed tax cut. Now, in WA, “the price of a [fully taxed] legal ounce of cannabis sells for less than a black-market ounce.” Sometimes “Half of the black-market price.” https://mjbizdaily.com/washington-state-cannabis-supply-hits-new-low-spurs-calls-change/.]
My friend Dale Gieringer sends this article (noticed by Brett Stone) about a proposal to cut Washington’s marijuana tax. The rationale is the ongoing strength of the black market.
I don’t know the facts on the ground about the black market, but I might be for this kind tax cut – IF IT’S SUNSETTED – that is, if the tax rate went back up automatically after a set period. As the sunset ends, if the legislature thinks the rate is still too high AT THAT TIME, it can keep the rate low, by extending the lower rate. (I was recently accused of being “anti-marijuana,” but I’m an analyst rather than an advocate. I do see cannabis as a revenue source, and it turns out that I’m mostly looking to get more revenue rather than less, so I can see how someone would think I’m anti-. So it’s comforting to see a tax cut I might support.)
The Economist just published this:
If, starved of sales, the black market shrinks beyond a point of no return, taxes could later go up, restoring the deterrent. There is precedent for this. When the prohibition of alcohol ended in 1933, Joseph Choate of America’s Federal Alcohol Control Administration recommended “keeping the tax burden on legal alcoholic beverages comparatively low in the earlier post-prohibition period in order to permit the legal industry to offer more severe competition to its illegal competitor.” After three years, he estimated, with the mob “driven from business, the tax burden could be gradually increased.” And so it was (see chart 3). Continue reading WA marijuana tax cut proposal
Anthony Johnson, the architect of the Oregon Initiative with the per-ounce tax, kindly agreed to let me quote him: “Oregon moving from a weight-based tax to a tax at the retail level was more about convenience for the industry and the state. Growers and retailers advocated for the switch and state regulators and policymakers were happy to oblige.”
Some background: I got into this when the Oregon Legislature asked me to testify last year on that issue. Here is my written testimony: https://newtax.files.wordpress.com/2015/02/oglesby-testimony-oregon-16-feb-2015.pdf. Here is the audio of my telephone testimony 16 February to the Oregon Joint Legislative Committee on Measure 91: http://oregon.granicus.com/MediaPlayer.php?clip_id=8165 — 1:20:40 is where I start, and I finish by 1:38:00. At about 1:36:51, Co-Chair Lininger says, “That was really a delightful phone call.”
Political opposition by growers to the hassle of paying the tax was one factor behind the retreat.
Another factor was the awkwardness of exempting medical marijuana from a production tax. It’s awkward for raw product to be designated irrevocably as medical or recreational, because the market may demand more or less of each category later on, when the consumer sale occurs. And irrevocable designation is not just a guess, it’s a bother.
Friends in Oregon reminded me of some other factors: Continue reading Why Oregon taxes marijuana by price
My friends and Jon Caulkins and Beau Kilmer (and co-authors with me of the RAND Report, Considering Marijuana Legalization: Insights for Vermont and Other Jurisdictions, http://www.rand.org/pubs/research_reports/RR864.html) fail to mention that Colorado taxes marijuana by weight. This is not an error, just an omission.
They have this statement: “Oregon joins Colorado and Washington in assessing taxes as a percentage of value.” (Paywall.)
That’s true, but Colorado taxes by weight, too, as well as by percentage of value. That point is often overlooked, and it’s explained more legibly on pages 79 and 80 of the RAND Report, Considering Marijuana Legalization: Insights for Vermont and Other Jurisdictions, http://www.rand.org/pubs/research_reports/RR864.html, pasted crudely here:
Colorado side-stepped its constitutional authorization of a 15-percent “excise tax to be levied upon marijuana sold or otherwise transferred by a marijuana cultivation facility to a marijuana product manufacturing facility or to a retail marijuana store” (Constitution of the State of Colorado, Art. XVIII, section 16) and ended up taxing something it could measure, so it taxed bud at $0.62 per gram, trim at $0.10 per gram, and seedlings at $1.35 each. Continue reading Colorado taxes by weight
Following the idea of H.R. 1014 by Congressman Blumenauer, which would impose a federal tax starting at 10 percent and rising to 25 percent, Pueblo County, Colorado, voted in November to phase in its marijuana excise tax, with the rate going up every year for five years.
Here are the results: 59 percent yes, 41 percent no. http://county.pueblo.org/government/county/department/clerk-recorder/official-election-results
The official text is downloadable here: http://county.pueblo.org/pueblo-county-ballot-initiatives, and pasted here:
BALLOT ISSUE NO. 1B:
SHALL PUEBLO COUNTY TAXES BE INCREASED BY $3,500,000.00 (FINAL PHASED IN FULL FISCAL YEAR DOLLAR INCREASE) ANNUALLY AND BY SUCH AMOUNTS AS ARE RAISED ANNUALLY THEREAFTER BY IMPOSING AN EXCISE TAX OF FIVE PERCENT (5%) ON THE FIRST SALE OR TRANSFER OF UNPROCESSED RETAIL MARIJUANA BY A RETAIL MARIJUANA CULTIVATION FACILITY WITH THE RATE TO BE PHASED IN BY STARTING AT ONE PERCENT (1%) IN 2016 AND INCREASING TO TWO PERCENT (2%) IN 2017, THREE PERCENT (3%) IN 2018, FOUR PERCENT (4%) IN 2019, AND FIVE PERCENT (5%) IN 2020 Continue reading Pueblo County, Colorado, phases marijuana taxes in
A document submitted to Vermont’s Senate Finance Committee misleadingly says “Colorado began with a cultivator tax, which was eliminated on September 16, 2015.” Yes, it was eliminated — but only for that one day, as part of Colorado’s strange marijuana tax holiday, mandated by the state’s Taxpayer Bill of Rights. The cultivator tax came back — on September 17. It’s working.
And that tax is in fact imposed on weight, not percentage of price.
Here’s how Colorado implements its marijuana tax based on weight. Many, many growers have to pay that tax, so it needs to be simple — and to be verifiable.
Before a license is issued, inspectors check the grower’s scale. Continue reading Don’t be misled: Colorado still taxes cultivators by weight
Criticism of my “Sharing the Wealth from Marijuana Legalization” article in www.VTDigger.org prompted this reply, which is waiting for approval at: http://vtdigger.org/2016/02/02/patrick-oglesby-sharing-the-wealth-from-marijuana-legalization/
Thanks for reading. Here are some responses. More to come, maybe.
“Poor writing and fuzzy subject.”
— Ouch! You’re standing on my sore foot.
“Oligarchy,” “disenfranchised,” and “The tax ‘wealth’ will be eaten up by enforcement, studies, testing equipment, training, additional public sector school employees and their related pay and golden benefit packages, prevention measures, counseling, medical bills, unemployment compensation and the growing of the bureaucracy. It will all be good until the full force and effect hits society.”
— Yes, lack of trust in government is a bigger problem than missing out on cannabis revenue, or bad cannabis rules. Why have sensible revenue if the government is just going to waste it? Continue reading Criticism from Vermont