If you believe numbers from the marijuana industry, repeal of federal tax Code section 280E might cost some $1.3 billion in 2020 alone, and then rise steadily after that.
Right now, section 280E says sellers of federally illegal drugs can’t deduct advertising, marketing, or selling expenses. They can deduct only cost of goods sold. They deduct product cost – what they pay to grow marijuana, or to buy it from a grower or reseller.
Once marijuana is no longer a federally illegal drug, 280E ceases to apply, and its revenue disappears.
How much revenue would 280E’s disappearance lose? That’s a tough question, and I don’t know. According to some industry numbers, though, repeal could cost over $1 billion a year in federal tax revenue by 2020. Continue reading “280E revenue cost”
The field of marijuana taxation turned into the field of cannabis revenue, and now it’s getting down to the level of Technical Corrections. Keith Humphreys explains a Prop 64 drafting blunder. (https://www.washingtonpost.com/news/wonk/wp/2016/11/16/the-marijuana-initiative-blunder-that-could-cost-california-millions/).
No one’s perfect. I do some proofreading and editing for hire, Continue reading “Avoiding drafting blunders”
A friend who is a tax policy expert writes, after I sent him my 280E article, https://www.brookings.edu/blog/fixgov/2015/12/18/how-bob-dole-got-america-addicted-to-marijuana-taxes/:
“Thanks for your article; it’s really interesting and thought-provoking. You make a better case for 280E than Continue reading “Pushback on 280E”
California Board of Equalization elected Member Jerome Horton, an opponent of Proposition 64, came up with an October surprise to illustrate a weakness in the proposal. That weakness didn’t prevent its passage, but it lingers.
Member Horton alleged that a tiny, technical, last-minute drafting change in the California 2016 marijuana initiative could cost the state $50 million, starting in November. Indeed, the Board of Equalization has adopted his view and officially confirmed that the current sales tax on medical marijuana just disappears – for a while.
I don’t know how anyone would have standing to sue to reverse that ruling. So, apparently, unless the Legislature acts, the total tax on medical cannabis, over time, will be:
— 7.5%, (through the November 8 Election) then
— 0% (from certification of ballot results through 12-31-17), then
— 15% plus weight tax (starting 1-1-18).
That makes no sense to me. It’s a roller coaster ride, with no discernable rationale. A “blunder.” Continue reading “$50 million “blunder” in Prop 64?”
Drug Policy Forum of California provides these results of local California ballot measures, where it looks like every stand-alone marijuana tax increase passed. CORRECTION: The town of Colfax voted 63% for a tax measure that required a 2/3 majority. That’s the only loser. http://www.drugsense.org/dpfca/votersguide1116.html#LOCALS
Beyond percentage of price, tax bases include:
Canopy, with different rates for indoor, outdoor, and sometimes mixed light.
Weight, with different rates for bud and trim.
Some remembered indexing. One phases out canopy taxes when the State sets up a weighing program.
Here’s the story, quoted from the Drug Policy Forum of California:
LOCAL BALLOT MEASURES
Adelanto – Measure R would impose an excise tax of up to 5% on all types of commercial marijuana activities. PASSED 67-33% Continue reading “Groundswell for local marijuana taxes in California”
Keeping my mind off the election, I’m giving a guest lecture at my friend Peter Barnes’s VAT and Sales Tax class at Duke Law and Sanford Public Policy Schools today. Readings are Sean Lowry’s excise tax study for the Congressional Research Service and RAND-Vermont chapter 5.
Slides are here: barnes-sales-and-vat-2016. The word excise can mean cut out . . .
[Update, 10 December 2016: For libertarians, government sales are anathema. For liberals, nullification of federal law by a state or locality has a history of association with racism and even slavery.]
News from The Advertiser in Louisiana:
BATON ROUGE — Louisiana State University and Southern University are set to become the state’s biggest growers of marijuana – and they are looking for private investors to underwrite the project. Continue reading “State plans to grow marijuana”
Politico.com’s Bernie Becker has this on Code section 280E’s tax disadvantage for marijuana:
THE CASE FOR 280E: As we’ve noted here previously, the five states that have a chance to legalize recreational marijuana next week could nudge Congress into rethinking some of their positions on pot. Among the potential debates: whether to end the current provision barring legal marijuana dealers from deducting many of their normal business costs.
The case for exempting legal marijuana dealers from section 280E of the tax code — which is aimed at drug traffickers — is pretty simple: The current setup is unfair to businesses that are otherwise following state and local law. (Side note: The semi-regular news conference about legislation to allow pot dealers those deductions, featuring the odd couple of Democratic Rep. Earl Blumenauer of Oregon and Grover Norquist of Americans for Tax Reform, is one of Morning Tax’s favorite Capitol Hill events.)
As for the case for keeping 280E for even legal pot sellers, Pat Oglesby, a former Capitol Hill tax hand, maintains that the tax code section could be the most effective way to limit marijuana advertising, thus reducing the exposure to teenagers. “Maybe laws can’t stop marijuana marketing, but taxes can slow it down,” Oglesby wrote at Brookings last year. Continue reading “Politico on 280E”