Tax Notes and State Tax Notes published this article today. It’s behind a paywall for 28 days, but temporary subscriptions are free, and I’m authorized to post the first page and some snippets here. https://www.taxnotes.com/tax-notes-state/excise-taxes/federal-shake-americas-marijuana-taxes/2022/04/04/7d9gs
Here’s what I emailed my editors at Tax Analysts at 12:01 this morning, with the title, “Possible article — marijuana taxes — Last minute change?”:
I greatly appreciate your working with me, but upon reflection and consultation, I must ask you to change my piece slated for the April 4 issue.
Your otherwise impeccable editing somehow co-existed with the elimination of a controversial word, Bastard, which the editing process expurgated, leaving footnote 10 to start this way.
Oglesby, “280E Is a [Expletive]. So What?” Center for New Revenue, Apr. 15, 2021.
This is censorship! See details below.Continue reading “Tax Analysts can take a joke”
Rubbing shoulders with national and world experts Gillian Schauer and Beau Kilmer, I manage to unmute myself at about the 34’19 mark, but I left some things out: https://www.youtube.com/watch?v=N8yisL9cQtoContinue reading “￼North Carolina Department of Justice Marijuana Webinar”
I get to speak at a program starting at 1 EDT this Friday that features noted drug policy people Gillian Schauer of the Cannabis Regulators’ Association and Beau Kilmer of RAND.
Free; registration required.
The North Carolina Department of Justice is producing marijuana webinars, the first one March 18 at 1 p.m., featuring Keith Humphreys of Stanford, one of the world’s top drug policy experts. Thanks to Attorney General Josh Stein for leading the charge as we try to figure out what to do.
I get to appear for 15 minutes on the second one on Friday, March 25, at 1 p.m.
Open to the public; registration required. There are two more sessions the next two Fridays.
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:Continue reading “Supporting Marijuana Tax Cut”
The Ohio State University’s Drug Education and Policy Center and and the Center for New Revenue sponsored a webinar January 26 on marijuana tax policy.
My co-panelists were Ulrik Boesen of the D.C. think tank Tax Foundation, Tax Professor Ben Leff of American University Law School, and prominent California cannabis lawyer Hilary Bricken. Shaleen Title of the Parabola Center moderated.
A video link to youtube is
Here’s a searchable transcript, uncorrected and without slides or polling, from
Solving the Cannabis Tax Puzzle: Approaches for anContinue reading “Cannabis Tax Policy Webinar Video and Transcript”
My friend, Center for New Revenue board member, and law professor Doug Berman of the Ohio State University heads up the Drug Education and Policy Center there. That Center and the Center for New Revenue are sponsoring a webinar Wednesday, January 26 at noon Eastern time – on marijuana tax policy.
My co-panelists are Ulrik Boesen of the D.C. think tank Tax Foundation, Tax Professor Ben Leff of American University Law School, and prominent California cannabis lawyer Hilary Bricken. Shaleen Title of the Parabola Center will moderate.
More info is here https://moritzlaw.osu.edu/solving-cannabis-tax-puzzle-approaches-emergent-industry?utm_campaign=law_marketing-activity_fy22&utm_content=1638540324&utm_medium=social&utm_source=twitter
Registration is required, and to the right of that page.
Having given money to Democratic candidates in the past, I’ve been getting calls from candidates asking for my support.
I’m working up a questionnaire to see whom to support; here’s a draft. There will be more questions; suggestions welcomed.
Do you support taking away the carried interest tax advantage for hedge fund operators?
Do you support increasing the federal estate tax?
Do you support eliminating planning opportunities that allow avoidance of the federal estate tax?
Do you propose to let marijuana companies start deducting their advertising and marketing expenses on either federal and North Carolina tax returns? That is, would you take away the 280E Selling Expense Tax on the books now?
Do you support government rather than for-profit private marijuana retailing in North Carolina?
My own answers would be yes to all questions except the fourth one about 280E.
I was a big fan of Bob Dole when I worked for Congressional tax-writing committees in the 1980s. He chaired the Senate Finance Committee until he became Majority Leader, and he stayed on the committee. He was a statesman in his own way, and funny. After Dole died, Al Franken started claiming to be the funniest living ex-Senator.
Here’s some marijuana tax trivia. Bob Dole inserted the 280E Selling Expense Tax into the tax law in 1982 when he was Senate Finance Committee chair. I was on the staff of the Joint Committee on Taxation then, and must have known about 280E back then, because the staff had proofed the technical explanation of the entire bill during Congressional downtime for staff, but I didn’t work on it.
Dole got the idea from Senator Bill Armstrong (R-CO) who was on the Finance Committee. Armstrong was a pretty shrewd operator. He was described by Dole as the “the father of tax indexing” – a change called the most dramatic tax law development in a generation by Ken Kies on the right and Jim Wetzler on the left. So that makes Armstrong a key figure in tax policy. 280E is hated by the marijuana industry, but by making advertising and marketing non-deductible, 280E keeps the noise down.
A new marijuana legalization bill by freshman Republican U.S. House Member Nancy Mace of South Carolina imposes a tiny three- percent ad valorem tax on the drug, which is not enough to offset the disappearance of the current 280E Selling Expense Tax (which applies only to federally illegal drugs).
To prove how anti-tax she is, the bill adds a “Moratorium” – no increase in that tiny tax for 10 years, unless three-quarters of each House agrees to an increase. Now that moratorium can be rescinded by a simple majority Act of Congress at any time: One Congress cannot bind another. Still the filibuster (requiring 60 Senate votes) could be repealed by a simple majority Act of Congress at any time, but that time has not come. I know of no current rule tying Congress’s hands on taxes.
In any event, if you’re looking for anti-tax sentiment, the Mace bill tops the list.
Testing drivers for cannabis impairment is something I’ve been thinking about just a little with legalizers in North Carolina and California. Some of this thinking is theirs.
One argument prohibitionists use against legalization of marijuana is that stoned drivers are a menace to everyone on the streets and roads. Marijuana is much less impairing than alcohol, but stoned driving worries people.
Figuring out which cannabis-consuming drivers make the roads unsafe is hard. With alcohol, breath and blood tests produce numerical results that allow “per se” determinations of intoxication: if the amount of alcohol in a driver’s system reaches .08 percent, or some bright-line numerical threshold, they’re guilty.
Finding a bright-line threshold for marijuana seemed like a way to find stoned drivers. Colorado, for instance, started out saying that 5 nanoliters per (milliliter?) of some THC chemical in blood were per se evidence of intoxicated driving. That was a political bone thrown to folks worried about the issue so as to get legalization passed.
Impaired driving is a battle NC NORML is fighting here, so they propose a five-minute roadside test for impairment, not involving bodily fluids.
To expand on that: Maybe some jurisdiction will say, “No conviction for cannabis-impaired driving without video evidence.” No video, no probable cause, no search, no arrest, no nothing.
The discussion below aims at that result.
If setting a bright line number of minutes (say five) the police can acquire roadside behavioral evidence of intoxication is worth pursuing, how might a five-minute rule interact with blood, oral fluid, or breath tests that detect active THC? (We can test hair and urine to show use, but they don’t show intoxication. they only detect non-psychoactive metabolites which don’t affect driving. Only blood, oral fluid, or breath tests detect active THC. o one even supposes a hair test shows intoxication.)
No conviction without failing both tests? (Presumably failing video-recorded the roadside behavioral test is ultimately a jury question – does the community think this person is impaired? Jury questions usually get plea-bargained away these days.) But what if someone shows no THC or alcohol or anything in bodily fluids or breath but does terribly on the behavioral test?
Anyway, if failure on both tests is required for a conviction, what’s the order of testing?
1. Police administer blood, oral fluid, or breath test and then, if it shows (enough?) THC have a go at the roadside behavioral test? How quickly do results come back from the tests?
2. Police administer a roadside behavioral test and if police say the suspect failed, then administer a blood, oral fluid, or breath test? And when the police say the driver failed the behavioral test, who oversees the police’s determination? A magistrate eventually? A magistrate on Zoom immediately? A jury (or prosecutor evaluating the case to present to a jury)?
Not my field . . .
I wonder what free market conservatives think of the regulatory capture in North Carolina SB711: New N.C.G.S. section 90-113.122 would say the Medical Cannabis Production Commission is to have two industry representatives among its 11 members.
Is that bad, because regulatory capture is bad, or good, because regulation is bad, so weakening it is good?
Drafting a pamphlet: “What North Carolinians Need To Know About Marijuana Money.” Here’s what I’m thinking for background reading references:
For marijuana issues generally, I don’t know a better place to start than Mark Kleiman’s Marijuana Legalization: What Everyone Needs to Know (2d ed. 2016, with Caulkins and Kilmer, under $20), which inspired the title here. A more technical 2015 analysis by Kleiman and others for the State of Vermont is in the public domain at https://www.rand.org/pubs/research_reports/RR864.html.
Kleiman’s work is a little dated; a recent multi-author issue of the B.U. Law Review provides a good update in the public domain. https://www.bu.edu/bulawreview/2021/07/14/volume-101-number-3-may-2021/.
For an ideological prohibitionist view, the group Smart Approaches to Marijuana, https://learnaboutsam.org, provides online material and offers a book for sale.
An anti-prohibition view is thought through in a free online book by the U.K. Transform Drugs Foundation: https://transformdrugs.org/publications/how-to-regulate-cannabis-a-practical-guide
Ad valorem excise taxes are not the way to go for marijuana. Ideological adversaries agree on that, if on little else! The left-leaning Institute for Taxation and Economic Policy warned, in a detailed report, that ad valorem price-based “ad valorem” taxes on marijuana are a recipe for trouble when prices go down – as they do in every jurisdiction where legalization takes hold. https://itep.org/taxing-cannabis/
More recently, the right-leaning Tax Foundation has joined the warning: “states risk losing out on forecasted revenue if prices continue to go down.” https://taxfoundation.org/safe-banking-act-state-marijuana-revenues/
We needn’t use ad valorem taxes at all for marijuana. The bill phases ad valorem taxes out, but keeps them too long, then compounds the error by de facto freezing them.Continue reading “Ad valorem excise taxes are not the way to go for marijuana. “