Mechanics of stated THC tax on marijuana

UPDATE 8 February 2018:  Thanks to my friend Keith Humphreys for linking to this post here.  THC in cannabis bud is very hard to measure reliably — and even if measurement were reliable, sampling can be gamed.  (Concentrates test more reliably.)  There’s a lot to this problem:  An analysis of taxing cannabis by THC content appears in RAND’s report for Vermont, starting on page 80 (free download). An analysis of taxing it by claimed THC content starts on page 84.

While a tax on claimed or stated THC might stand alone, the rest of this document looks at how a tax on THC might serve as an alternative minimum tax.

UPDATE 27 November 2017:  A stated THC tax can also serve as an alternative to a percentage of price (ad valorem) tax.  Such price-based taxes are typically the first cannabis taxes to appear — though they are primitive and weaker than weight-based taxes.

To start with a stated THC tax as an alternative minimum to a weight-based tax:  A cannabis flower tax could be imposed as the greater of a weight tax or a stated THC tax (using the THC figure the seller claims on packaging or in selling). The tax could be the greater of (1) $x per gram of product weight or (2) $Y per gram of stated THC weight.

Here are very rough notes on how such a tax might work (supplemented by comments from my friend Jon Caulkins at the end).

Example 1: Continue reading “Mechanics of stated THC tax on marijuana”


Why minimum unit pricing for cannabis leaves me cold

Minimum unit pricing – charging a minimum price for temptation goods – appeals to some students of cannabis legalization.

To me, government monopoly or high taxes can work better to serve policy goals. I’m just starting to think about this, and looking for pushback.

  1. The successes claimed for minimum unit pricing often involve loss leaders – where temptation goods are sold at a low price so as to bring customers in to buy goods that produce more profit for the seller. To the extent that cannabis commerce is isolated, that problem goes away. Most cannabis retailers in the United States sell little other than cannabis. They may sell pipes, papers, and T-shirts, but none sell alcohol. I don’t know of any that sell food (other than cannabis-infused food) or household goods. So any price-cutting that cannabis sellers do today goes pretty much straight to the bottom line. Sellers are hardly making up for the loss by selling non-cannabis products..  A well-regulated cannabis market lets cannabis seller sell nothing or almost nothing but cannabis, I think.

Continue reading “Why minimum unit pricing for cannabis leaves me cold”

Panel for NORML: “Legalization as an Economic Stimulus for All”

UPDATE:  Just tweeted (5 November 2017) that Oakland’s set-aside project is slowing legalization to a halt.  This link is illustrative:  “New hitch in Oakland pot permit pipeline.”


The NORML Conference in DC on September 11 has me on a panel that with the proposed title, “Legalization as an Economic Stimulus for All.” And we may get into this question: “How is it that we can create a market that is inclusive to those who have been most disproportionately affected by prohibition?”

My take is: Let the government own the means of production, and hire people who were disproportionately affected. The government monopoly model is happening in North Bonneville, Washington, and in the State of Louisiana. Or take tax revenue to help those folks, or, in a less targeted way suggested by Arwa Mahdawi, to help African-Americans who have suffered especially from the War on Drugs. Continue reading “Panel for NORML: “Legalization as an Economic Stimulus for All””