Caulkins on marijuana taxes

My friend Jon Caulkins has a useful and thoughtful article on marijuana taxation here. Jon and I were among the co-authors of the RAND Report, “Considering Marijuana Legalization: Insights for Vermont and Other Jurisdictions.”  I don’t agree with all of Jon’s new article, but I agree with a lot.  (Some of it is line with my recent article in

Here are some excerpts from Jon’s article:

“Marijuana prohibition is tottering, and procrastinating on doing the hard work of thinking through tax principles will more or less ensure a bad replacement.”

“The states leading the legalization charge have enacted primitive taxes that will fail as marijuana prices fall because they are computed as a percentage of value.” Continue reading “Caulkins on marijuana taxes”


Massachusetts Marijuana Tax Compromise

Here is an excerpt from my letter to the Editor of the Boston Globe, just published online:

In November, Massachusetts voters approved a 12 percent marijuana tax that would undercut the black market, but the House has proposed a 28 percent rate, in line with what other states collect.

Both sides are right — at different times. The marijuana market is a moving target, and needs a moving tax rate. As time goes on, pretax prices will fall, and the black market will weaken. So taxes can go up.

A solution is at hand — provided by proponents of marijuana legalization in federal bill S.776, the Marijuana Revenue and Regulation Act: Schedule rate increases to phase in year by year.

If increases come too fast, the Legislature can cut taxes. That avoids the problem of having legislators vote to raise taxes as needed, which is like cutting off a cat’s tail an inch at a time. Do it now and get it over with. Continue reading “Massachusetts Marijuana Tax Compromise”

Colorado marijuana taxes keep dropping

Colorado’s marijuana producer tax has hit an all-time historically low rate of 43 cents per gram on flowers (bud).

For vertically integrated companies, that 43-cent rate is arrived at by taking the statutory tax rate of 15 percent and multiplying it by per-gram Average Market Rates (AMRs) – market prices. So the nominal percentage-of-price tax is de facto based on weight.  Since market prices keep dropping, taxes do, too.  Which is primitive. Continue reading “Colorado marijuana taxes keep dropping”

Marijuana taxes and testing

As a tax person, I got involved in marijuana policy in 2009, since I figured that prohibition might not stand the test of time – and that whatever replaced prohibition would have revenue for the public. One of the problems with taxing marijuana is that heavy taxation can stifle the legal market, and thereby help the black market.

Well, it turns out that testing marijuana, at least at first, can create the same problem – high prices that consumers pay for legal product.

Here’s what happened in Oregon, according to an official and well-researched California report:

“Legal cannabis prices rise by 27%–39% in the two-month span after testing rules take effect. Revenue falls by $23,500 per dispensary due to supply constraints. Half of legal segment ($187.5 million) shifts back to illegal market. The illegal market grows from 50% to 75% while the legal market falls from 50% to 25%.” Continue reading “Marijuana taxes and testing”

World’s 1st marijuana taxes

The world’s first cannabis taxes were collected in 19th century India, so far as I know, and Dale Gieringer of California NORML, who is way ahead of me on this history, indicates that that is the case.  This chart, from the 1894 Report of the Indian Hemp Drugs Commission, is for Bengal, and shows rupees (currency unit, plus subunits) per ser (about a kilogram), collected at wholesale.   The Bengal model was followed generally elsewhere in British colonial India.

As in Colorado today with bud and trim, different cannabis products were taxed at different rates.   

currency unit formerly used in India and Pakistan, equal to 1/16 [1] rupee. It was subdivided into 4 paisa or 12 pies (thus there were 64 paise in a rupee and 192 pies)…

Thanks to the National Library of Scotland for posting this public domain material.

Current conversion standard, from Wikipedia:

Indian System Metric System
1 Tolä 11.664 g
1 Sèr (80 Tolä) 933.10 g
1 Maund (40 Sèr) 37.324 kg


Backfilling Cannabis Legalization History

The first footnote in my 2011 State Tax Notes article, Laws to Tax Marijuana, was this:   

1 An extensive list of [marijuana legalization] proposals appears at Richard Evans, ‘‘Cannabis Taxation & Regulation,’’ available at, under ‘‘Legalization Proposals’’ (last visited Dec. 7, 2010). This site is probably the most comprehensive compilation of information about laws to tax marijuana.

That link has expired along with, so the history would be hard to trace, but Dick Evans graciously provided its contents (updated somewhat) for me to post for all comers in the public domain: Continue reading “Backfilling Cannabis Legalization History”