How much revenue might governments get from legal marijuana commerce?
In early 2013, I took a stab and said 80 percent of at $30 billion market, or $24 billion.
Now I don’t think we can tax marijuana at the 80 percent level Europe uses for cigarettes. But the market should be bigger than $30 billion. So I’m rethinking, and working on a more thoughtful estimate of what the market can bear, based on the theory of Part II of my supplement to the RAND report for Vermont. I don’t know if the number I suggest will be more or less than $24 billion.
In that process, I’m looking at Tax Foundation study with a number in that ballpark -– $28 billion. It breaks down federal and local taxes, but it counts things I haven’t counted (like income tax receipts), overlooks (for instance) Colorado’s de facto weight tax, and suggests a chump change federal weight tax of under $1.50 per ounce (on a product that now often sells for $200 per ounce and more).
And that study is often opaque. For instance, I’ve written the lead author, attorney Joseph Henchman, asking what the Foundation’s $28 billion number assumes about federal tax code section 280E, the anti-advertising denial of tax deductions.
Does it assume the continuation of 280E in looking at overall revenue effects? Or does it assume repeal? Or some modification? And does it quantify the 280E issue?
I’m waiting to hear since early this week. Maybe attorney Henchman is on vacation.
I’ll mention 280E explicitly, in whatever number I come up with. And the number should grow over time. The market can bear more tax as it matures, and it should pay more.