Critics of the 280E marijuana Selling Expense Tax point out that it was conceived by advocates of the discredited War on Drugs: “Section 280E was born of politics – at the height of the war on drugs, in 1982.” Yeah, well, in some way, 280E is illegitimate. But a child born out of wedlock might turn out to be Alexander Hamilton.
The 280E Selling Expense Tax is overbroad, for sure, but it has two big things going for it – from the perspective of much of the marijuana community.
1. Advertising and glitzy marketing appeal to kids – and irritate their parents, to the detriment of legalization efforts. “Marijuana sells itself,” the saying goes. The commercial free speech doctrine says we can’t ban ads, but sophisticated consumers don’t need the ads or glitz – or the celebrity endorsements. The 280E Selling Expense Tax makes those kinds of thing non-tax-deductible.
2. Big Business advertises more than small business. Mom & Pop – and social equity licensees – can’t afford the billboards, or deploy the marketing know-how that corporate giants specialize in. Think Budweiser ads. And recently, “$1 out of every $6 spent on restaurant advertising in America [was] done by McDonald’s.” That doesn’t count Burger King, or KFC. Mom & Pop rely on word of mouth. Big Marijuana wants to start deducting ad expenses — and Big Alcohol and Big Tobacco want to get in on the game.
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The marijuana community, and especially small businesses and growers (whom the 280E Selling Expense Tax barely grazes), might consider not so much the parentage of 280E, but its qualities and defects (yes, it’s overbroad in denying deductions for wages of retail clerks – a selling expense). But some tax is going to replace 280E — with a more direct hit on consumers if not growers.
Not all bastards deserve condemnation. For a longer though primitive look at 280E, see this Brookings piece, https://www.brookings.edu/blog/fixgov/2015/12/18/how-bob-dole-got-america-addicted-to-marijuana-taxes/#disqus_thread.
The Center for New Revenue 