I support a lot of marijuana taxes, even the wildly unpopular 280E Selling Expense Tax, because it favors small business over Big Marijuana, and it keeps the noise down some so as not to irritate fence-sitters on legalization, as explained here: https://newrevenue.org/2021/04/15/280e-is-a-bastard-so-what/.
But pre-consumer taxes in subordinate jurisdictions don’t make sense to me, so when I read that Humboldt County was reconsidering that kind of tax, I puffed myself up and intruded with this email:
Dear Members of the Humboldt County Board of Supervisors:
While I do not belong to your community, I had a delightful visit to Humboldt County in 2015 when I was on then-Lieutenant Governor Newsom’s Blue Ribbon Commission on Marijuana Legalization, and enjoyed meeting lots of people there then. I was co-chair of the Regulatory and Tax Structure Working Group of the Commission, and have consulted on tax policy for various governments.
I don’t envy you your task. I write to you from Theoryland, without a sense of the facts on the ground, but with some analogies to provide.
It’s natural to want to put a local tax on marijuana growers, but conditions conspire against that tax, and against amy tax imposed by a “subordinate jurisdiction” on production of a good that faces competition from producers in other jurisdictions. Examples of a subordinate jurisdiction are a state in a nation with legalized tobacco and a county in a state with legalized marijuana.
So my state of North Carolina has tobacco farmers and tobacco manufacturing, but we don’t put any special tax on them. We understand, for instance, that our farmers have competition in Kentucky, and our manufacturers have competitors in Virginia, and those states don’t tax our people’s competitors. We can deplore this race to the bottom, but there is. Now a state-wide California tax on square footage of cannabis grow area could be as workable as any other state tax, but a county tax on square footage of cannabis grow area is hard to sustain. Here is a more detailed explanation: http://thehill.com/opinion/finance/372396-how-tax-competition-can-threaten-marijuana-revenue
Allegations of problems with cannabis aim at its consumption, which some say causes negative externalities. Production is not a big source of negative externalities. There may be perceived negative externalities from growing rather than consumption beyond odor, but odor is the one externality where taxes rather than regulations might need to be relied on. (Environmental impacts seem easier to handle with regulations rather than with taxation.) And the negative externality of odor seems trivial, if it’s a problem at all.
How you make your budget work in light of these conditions, I don’t know, but I wish you the best. I see only one piece of the puzzle. Please take this for what it’s worth. And please contact me if I may be of any help.
Patrick Oglesby, MBA, JD
Attorney at Law
+++ Photo from 2015 Humboldt trip, not included in email: