Among Bill Gates’ ten favorite books, https://www.nytimes.com/2016/05/20/t-magazine/my-10-favorite-books-bill-gates.html, along with The Great Gatsby and Sapiens and Parenting with Love and Logic, is How Not to Be Wrong: The Power of Mathematical Thinking, by Jordan Ellenberg. Any dense math is skimmable. It’s in the public domain, but the site where I got it said “Not Secure,” so I’m posting it here.
Having worked on a study for the State of Washington of the feasibility of taxing cannabis by THC content, I was nervous about the idea. The report I helped write had this:
“[R]etailers . . . had little confidence that the POS [Point of Sale] systems could provide the information that they would need to process sales efficiently. Unless potency readings are reliable and readily available at the point of sale, or unless the state uses a simpler model such as a product-based potency estimate to determine a product’s tax, retailers fear that their staff would have to manually calculate tax liability for each item at the point of sale. This would create impossible bottlenecks for stores, many of which move tens of thousands of dollars of product each day. The system of attributing potency to a product would need to be streamlined and automated so as to avoid bud tenders inadvertently collecting the wrong amount, or worse, gaming the system to create a commercial advantage.” https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3481584
But maybe a retail THC tax is more feasible than we gave it credit for.
I wrote Jim Morgan, CFO of the Washington State Liquor and Cannabis Board (WSLCB) and a tax policy and finance expert, whom I had the good fortune to meet in Olympia while working on the study.
From: Pat Oglesby [mailto:po@newrevenue.org]
Sent: Tuesday, September 29, 2020 3:07 PM
To: Morgan, James E (Jim) (LCB)
Subject: POS
Dear Jim,
After all this time, do you suppose that POS technology has advanced to the point where a stated THC tax would be about as administrable as an ad valorem tax?
With highest regards,
Pat
He wrote back, with a useful take:
Tue, Sep 29, 2020 at 6:54 PM
Pat,
I am quite sure that POS vendors are skilled enough to build this functionality into their systems. I believe that THC content is captured in many cases as an attribute of the inventory items in the POS system. There is not much business value to the cannabis businesses beyond that, though. Specific functionality that could use this information for tax purposes would only be developed in response to specific regulatory requirements.
Regards,
Jim
++++
I’ve been skeptical of retail ad valorem taxes, so I’m starting to think a retail THC tax is better on policy grounds (for reasons listed in Chapter Five of the RAND Vermont report, https://www.rand.org/pubs/research_reports/RR864.html) — and maybe feasible after all, if a state wants one. It would take some work, but so does every change.
The earliest marijuana taxes were imposed by weight, at the rate of one Rupee (11.66 grams of .917 silver) per seer (just less than a kilogram). They were supplemented by fees for retail licenses, sold annually by auction.
A draft article I’m working on goes into selling of marijuana illegally, whether in violation of prohibition or of tax laws. Under legalization, bootleggers, adept at violating prohibition, commit a new and different crime: tax evasion. But the cat-and-mouse game of enforcement against bootlegging is pretty much the same, whether the crime is violating prohibition or cheating on taxes..
Several readers object to the term “black market,” on the theory that it has racist origins. Maybe that’s accurate. Either way, some say it disparages Black people. So I’m steering clear of the term. Words are here to serve people; people aren’t here to serve words. Cf. Mark 2:27. (I’ll keep using the derivative term “gray market,” or grey market, referring to transactions like a patient’s selling legally bought medical marijuana to a recreational user.)
Illegal market, unauthorized market, illicit market – they all take more space and syllables than their predecessor. What’s the opposite of punchy? So I struggled for a substitute.
Bootlegging (origins obscure) is it. Three syllables. The permutations — bootlegger, bootlegged — are as short as the old terms or shorter. And they’re punchy.
The Center for New Revenue 