Quoted in Harper’s

“It’s too hard to adjust taxes quickly enough,” said Pat Oglesby, a North Carolina tax lawyer who was chief tax counsel for the Senate Finance Committee from 1988 to 1990 and who now researches marijuana taxes. “Legislatures love lowering taxes. Getting them to raise taxes is like pulling teeth.” What’s more, if legislators overdo it and set taxes too high, they’ll risk reawakening a black market in untaxed drugs. — Dan Baum, in Harper’s:

Here’s some context, from the article: Continue reading Quoted in Harper’s

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More government sales of cannabis

The municipally owned cannabis store in North Bonneville, Washington, celebrated its one-year anniversary of operation on March 7. Meanwhile, the municipality of Hancock, Maryland, has agreed to become an equity partner in a medical cannabis business, agreeing to take five-percent ownership of a company that plans a big growing operation there.

A cynical look at WA’s tax policy on tips

Taxing cannabis based on price, instead of, say, weight, creates a host of problems, like the free-pot-with-pipe deal, and others discussed in this HuffPo piece. But there are more problems.

Ever give the bartender a big tip hoping for a big second drink?  Call me cynical, but now that Washington allows excise-tax-free tipping in cannabis stores (see below), I see tricks coming. Take the case of an owner who is a budtender. It wouldn’t surprise me if an owner-budtender generously reduced a taxed prices — with a hope for a return favor. This sale or next.  Not in a negotiation — just in a friendly gesture.  One good turn might bring about another.

When you tax a percentage of price, you run into trouble. Washington state authorities now don’t worry about this. Having dealt with folks, some of them my good friends, who have shifted $2 trillion of untaxed US profits offshore, I’m nervous. Prices depend on relationships.

The troublesome case is not where tipping is “required or a condition of sale, [or]. . . linked to the price of the product to avoid tax obligations.” [The quid pro quo case is illegal – as it should be. If you can catch it. Good luck with that.]

The troublesome case is where the lower price kind of just happens. And then tipping kind of just happens. Continue reading A cynical look at WA’s tax policy on tips

Quantifying the effects of tax enforcement?

In a paper contained in the London School of Economics document “After the Drug Wars,” three distinguished drug policy men raise this possibility that enforcement doesn’t raise the price of illegal drugs.

I wonder if raising the price of tax-evading black market drugs that compete against legalized drugs is a different case totally. I keep thinking that post-legalization, the black market is a function of two variables, (relative) value and enforcement. After repeal of Prohibition, Roosevelt was big on enforcement, and it reportedly helped.

After looking at four attempts to quantify the effects of tax enforcement, I argue that tax enforcement is quite different from enforcing prohibition. Continue reading Quantifying the effects of tax enforcement?

Tax targets

We have to tax something. Here are some things where taxation would do little harm:

Carbon
Tobacco
Alcohol
Cannabis
Legacies
Tax haven income stashed offshore (all of it now).  Much of this income is not really foreign anyway, and comes from U.S. intangibles.  A mandatory deemed repatriation — saying “tax is due now” — would bring in hundreds of billions.  Taxing it at some reduced rate, as many suggest as a compromised, is a pure give-away.  At worst, spread the deemed repatriation over a couple of years.

Here’s our actual list:

Income
Payrolls
Tobacco
Alcohol
Gambling — via state monopoly:  states are getting what they think the market will bear.
Legacies – inheritances – are taxed only marginally today, thanks to a $5 million threshold ($10 million for couples) and gaping loopholes.

The income tax has been regulatorily captured.  A keen observer speculates that Donald Trump won’t release his income tax returns because he hasn’t paid any.  Taxing payrolls is justified by history, and practicality, but it nudges in an unfortunate direction.