UPDATE 31 March 2017: Rather than delete an old post, I’m using the link to post information about the 15 local nondiscrimination ordinances that the North Carolina General Assembly brought back to life March 30. HB2 had repealed them; yesterday’s law overruled that repeal. PDFs available on request from email@example.com. Continue reading “HB2 repeal — local NDOs revived”
Three killer traps threaten early cannabis taxes: a feeble tax base, inflexibility, and carveouts. Essential enforcement can’t be guaranteed. And a tax that sputters along today could conk out if an interstate race to the bottom or competing federal taxes materialize.
4-week paywall has ended. Full text (7,000 words) of “Marijuana Taxes — Present and Future Traps” from State Tax Notes of January 23 is at marijuana-tax-traps-state-tax-notes-oglesby-1-23-17. Here are intro and conclusion:
This article will examine:
• the facts on the ground for recreational marijuana taxes;
• inherent weaknesses in early taxes;
• three problems voters may overlook when legalizing marijuana;
• the specifics of 12 state legalization initiatives; and
• three potential post-enactment problems.
VI. Summing Up
It’s unclear that marijuana taxes will stand the test of time. Legal commerce itself could fade away with a new administration. If for-profit marijuana commerce endures, some kind of marijuana taxes will too. The tax base march of progress is likely to continue. And the tax burden can go up too. The soundness of state marijuana taxes will depend on the ability of legislatures to dodge special interests and to make midcourse corrections. But state constitutions make some initiative-passed laws inherently inflexible. Like initiatives, legislation faces threats from medical tax breaks and reliance on flimsy price-based taxes.
Post-enactment, any tax scheme faces the threat of inadequate enforcement. Interstate commerce will threaten state producer taxes, and federal tax dominance could vitiate even the soundest state tax. Voters like marijuana revenue for government. But state marijuana tax laws are likely to remain works in progress for a long time.
Internal Revenue Code section 280E is a Selling Expense Tax – denying income tax deductions for any amounts paid other than cost of goods sold. It applies only to sales of federally illegal drugs.
So marijuana sellers cannot deduct, for instance, advertising expenses.
The marijuana consumer organization NORML says this as of March 19, 2021:
“NORML supports regulatory controls that seek to limit youth exposure to adult-use cannabis-related advertising and marketing as well as efforts to not incentivize advertising cannabis products through the tax code.” https://norml.org/marijuana/fact-sheets/core-attributes-of-adult-access-regulations/
(Note: The hotlink on “efforts” in that NORML statement links back to this web page.)
An earlier NORML posting pointed out that advertising is a red flag for prohibitionists, and that maintaining non-deductibility of advertising costs can work against “well funded corporate controlled marijuana companies, which can afford extensive advertising.”
Here’s that full NORML statement, furnished by Political Director Justin Strekal, https://norml.org/about-norml/staff/, twitter @justinstrekal, about earlier legislation that had faded from view, but indicating NORML’s ongoing view of section 280E:
“The marijuana industry is an economic generator for America. Businesses in this space should be regulated by the federal tax code in a manner that is fair, that will help stimulate economic growth, and that allows the marijuana industry and those who operate in it to avoid unjustified tax penalties.
“However, this legislation could be improved.
“As part of a potential compromise package to allow these deductions, NORML supports the continuation of non-tax-deductibility of marijuana business advertising expenses. For some citizens, advertising is a distraction, or can be a red flag that can cause them to hesitate to support the sound policy of legalization.
“Allowing deductions for rent and employee costs would help the bottom line of small businesses and give incentives for further hiring, while maintaining the non-deductibility of advertising costs can act as a preemptive move against well funded corporate controlled marijuana companies, which can afford extensive advertising. This development would encourage the proliferation of a more diverse array of smaller businesses, as opposed to the consolidation by large corporate interests. A legal industry dominated by smaller businesses in turn would create more competition, thus leading to higher quality and better priced products for the consumer.”
Here is a link to article detailing some of the benefits of 280E. https://www.brookings.edu/blog/fixgov/2015/12/18/how-bob-dole-got-america-addicted-to-marijuana-taxes/#disqus_thread.
In support of the proposition that advertising helps big businesses more than Mom & Pops, $1 out of every $6 spent on restaurant advertising in America [in one recent year was] done by McDonald’s. https://www.businessinsider.com/this-one-statistic-shows-how-much-mcdonalds-tries-to-entrench-itself-in-everybodys-minds-2012-3.
Repeal HB2 in toto. For bathrooms, revert, as Governor Martin suggests, to “pre-existing law and practice.” Specifically, validate the most favorable pre-Charlotte non-discrimination ordinances (NDOs), and anything in the future that goes just that far, and no further. Continue reading “Brainstorming HB2 Repeal”
Big business is holding US jobs hostage — Trump should not pay the ransom
BY PAT OGLESBY, OPINION CONTRIBUTOR – 02/01/17 10:00 AM EST http://thehill.com/blogs/pundits-blog/economy-budget/317227-big-business-is-holding-us-jobs-hostage-trump-should-not
President Trump wants to create jobs. Global corporations want to trick him into giving them a tax cut. They are holding $2.5 trillion offshore. They’ll bring those trillions home and create jobs, they say. But first, America must give them a $500 billion tax windfall. No tax break, no jobs.
The president should have three problems with this repatriation tax amnesty:
It doesn’t work.
It sells out his base.
It rewards his enemies.
There is an easier way to “make America great again.” President Trump can make companies pay the tax without a tax cut, and then watch them bring the money home. Continue reading “TheHill.com piece on Repatriation Amnesty”
This looks at 280E marijuana tax revenue. Policy problems with 280E are discussed at the link.
There’s a lot more income tax compliance, regardless of 280E, from legal businesses than from illegal businesses.
For 280E, there’s a ton of guesswork, but a conservative answer is that 280E should be bringing in at least about $180 million this year. Less conservatively, double that.
There are two pieces of the puzzle:
- How much tax does 280E bring in on a typical sale?
- How big is the market? That is, what is the dollar value of sales?
Full text is now at https://newrevenue.org/2017/02/11/5124/.
Here’s a new piece on Repatriation Tax Amnesty Windfall: http://thehill.com/blogs/pundits-blog/economy-budget/317227-big-business-is-holding-us-jobs-hostage-trump-should-not.
The publisher wants me to induce clicks, but here are rejected titles and the intro:
How Trump Gets Jobs without Paying Tax Ransom
How Corporate America Demands $500 Billion Ransom to Create Jobs
President Trump wants to create jobs. Global corporations want to trick him into giving them a tax cut. They are holding $2.5 trillion untaxed offshore. They’ll bring those trillions home and create jobs, they say. But first, America must give them a $500 billion tax windfall. No tax break, no jobs. The President should have three problems with this Repatriation Tax Amnesty:
It doesn’t work.
It mocks his base.
It rewards his enemies.
There is an easier way to “make American great again.” President Trump can make companies pay the tax without a tax cut, and then watch them bring the money home.
After 7 years of studying taxation of cannabis, I’m repeating myself a lot. So I’m taking a sabbatical, back to my earlier field of international tax.