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”