To maximize marijuana revenue, a state might do what a Concord (NH) Monitor editorial – and Gubernatorial candidate Steve Marchand – suggest: “Legalize marijuana use and move its sale into state stores.”
New Hampshire’s government-monopoly liquor stores do now what the Monitor suggests for marijuana: “Locate outlets on its borders and structure pricing to maximize sales to nonresidents.” Continue reading “Maximizing marijuana revenue”
How much revenue might governments get from legal marijuana commerce?
In early 2013, I took a stab and said 80 percent of at $30 billion market, or $24 billion.
Now I don’t think we can tax marijuana at the 80 percent level Europe uses for cigarettes. But the market should be bigger than $30 billion. So I’m rethinking, and working on a more thoughtful estimate of what the market can bear, Continue reading “Marijuana revenue estimate”
Primitive marijuana taxes start out “ad valorem,” that is, as a percentage of price. Many of my friends who are non-tax drug policy people gravitate toward these price-based taxes, because prices tend to increase with potency, and roughly with intoxication. I agree: Price-based taxes are a good first step in what the RAND report for Vermont calls the “tax-base march of progress.”
But price-based taxes are easy to manipulate. For instance, North Carolina’s new 7.5 percent sales tax on tickets (“admission charges”) is getting eroded by an affiliate of the state, the UNC-Chapel Hill repertory theater. For tickets, or medical devices, there is no analog to the useful weight base for marijuana taxes. But a ticket tax illustrates the flimsiness of taxes based on price, as explained below. Continue reading “Ad valorem taxes are flimsy — not just for marijuana”
Price-based taxes are easy to manipulate. For instance, North Carolina’s new 7.5 percent sales tax on tickets (“admission charges”) is getting eroded by an affiliate of the state, the UNC-Chapel Hill repertory theater.
When you order tickets, the theater separately states a ‘Web Handling Fee” that is not taxed. Here’s what an order looks like:
Colorado’s nominal tax rate of 15 percent now yields DE FACTO a historically low tax of 60 cents a gram on flowers or bud, and a historically high rate of 17 cents a gram for trim or leaves. Continue reading “Colorado tax rates set high and low records”
When I went to Humboldt County in 2015 to find facts for the California Blue Ribbon Commission, I heard informally that a marijuana grow of 10,000 square feet was enough to make a decent living. So that figure was bandied about as a hard cap – as a way to share the wealth that was about to open up. https://newrevenue.org/2015/08/23/sharing-the-wealth-from-legalization/. Being friends with a lot of Democratic Socialists, I’ve been interested in sharing the wealth, and thinking smaller farms would be an experiment in that direction.
Ten thousand square feet, about a quarter of an acre, was the smallest area I heard, but one acre is the hard cap in Proposition 64, the recreational legalization initiative to be voted on in November, (That acre limit sunsets after a handful of years.) [UPDATE: A friend in California indicates that the initiative allows one person to own several grow licenses. So the only remaining hope for spreading wealth is that regulations will cut back on the ability to have multiple licenses.]
Here’s what the Blue Ribbon Commission said about capping production: Continue reading “Humboldt OKs 7-acre grow”
We came from different directions. Allen St. Pierre, who is stepping down as head of NORML, the cannabis consumer lobby, wanted to legalize marijuana for consumers; I wanted to raise revenue from something whose externalities were less positive than, say, wages paid to workers, which we tax so widely now — while we say America’s most important issue is jobs.
Allen figured that when marijuana got legalized, the public would get a cut. I figured the public would get nothing from cannabis unless the government tolerated it. Continue reading “St. Pierre steps down”
Use government cash or tax cuts to subsidize clean energy? No wonder we’re going broke.
With Exxon supporting a carbon tax, the topic is getting serious. Lots has been written already; here’s a sample from UNC Library.
“Louisiana State University and [HBCU] Southern University want to begin growing marijuana for medical use. The boards of both schools approved plans Friday to pursue licensing, making them the sole growers and researchers for the state, The Associated Press reported.” The source is here.
LSU’s vice president for Agriculture “said university officials believe they can meet security requirements and retain federal funding. He said LSU could become a leader in research on the medicinal properties and cultivation of marijuana.”
Objections to states getting in the marijuana business are looking weaker. Continue reading “State Universities to grow marijuana”
Humboldt County, California, Board of Supervisors unanimously approved a cannabis cultivation canopy excise tax Tuesday. “Outdoor, mixed light, and indoor farms would all be taxed differently. An example is smaller outdoor grows would be taxed $1 per square foot while the large outdoor grows would be taxed $6 per square foot.” So small growers get a tax break.
The details have not been drafted. The press report, from KRCR, does not say whether outdoor grows would be taxed more than indoor.
In particular, one thing to watch for is whether the tax contains absurd marginal rates, or cliffs, at break points between categories. Continue reading “Canopy tax in Humboldt”
Concentration of economic power makes me nervous, and I’m unpersuaded by the assertion that “”Top researchers just demolished a huge fear about legal pot” in a Brookings study saying, “Worry about bad marijuana—not Big Marijuana.” Big companies selling marijuana will have economies of scale to push prices way down, and political power to oppose tax increases.
Now well organized small businesses, acting in concert, can have plenty of political power, adequate to prevent taxes from going up. Here are a couple of anecdotes, based on my recollections from working for Congress three decades ago, before Citizens United:
The major, multinational oil companies were pretty good at lobbying, but the small, independent producers Continue reading “Big = Powerful?”
Having the strong view that alcohol taxes are kept too low in the United States by a combination of industry power and anti-tax sentiment, I was startled to see this ambivalence (at best) from my friend John Hudak and his colleague Jonathan Rauch at Brookings:
“Public health advocates would like to see less advertising reaching minors, and they argue that alcohol taxes are too low to cover social externalities and deter use. The industry argues that taxes are already punitively high.15 Because regulatory practices and taxes differ across states and change over time, generalizing is complicated. On the whole, however, the regulatory regime for alcohol does a credible job of restraining antisocial and irresponsible practices, has proved to be broadly acceptable to the public and the industry, and has also proved to be stable and sustainable. In those important respects, modern regulation of Big Alcohol is a success story.” Continue reading “Alcohol taxes — Brookings”
Transfer pricing at Duke for private sector and government people, with Professor Peter Barnes. Half the class in this one-week international tax program was female. I was delighted to sit in and to speak a little. I don’t remember much from 20+ years ago, but transfer pricing still leaves a lot of money in tax havens — stateless income.
Program site: http://dcid.sanford.duke.edu/academics/exed/transfer-pricing
This week, a Transfer Pricing Exec Ed Program at Duke is being taught by my old friend from government service, Peter Barnes. I’ve been sitting in some, and am to speak tomorrow (against the separate entity and for formulas, as much as possible).
International is the hardest part of tax.
Transfer pricing is the hardest part of international.
Intangibles are the hardest part of transfer pricing.
A lot is new. For the first time in years, I’ve heard people talk about a “real country” – one that’s not a tax haven, or phony country.
Appearing on the Russ Belville show today, 6:30 EDT, 3:30 PDT. http://RadicalRuss.com, to talk about revenue from cannabis.
Audio of an earlier interview is here: https://www.youtube.com/watch?v=-w-icz6v8Wc
We in North Carolina vote for Supreme Court June 7 (early voting has started). I have two friends, Sabra Faires, an Independent, and Bob Edmunds, a Republican, on the ballot. Meanwhile, the state Democratic apparatus is behind a third candidate,
I’m a Democrat, but this election is officially nonpartisan. I’m for Sabra, not just because, like me, she’s a tax lawyer and former legislative staffer. I’d add some of the reasons listed by the Charlotte Observer and the AFL-CIO. The Republicans in the Legislature tried to make this a retention election — an up or down vote on my friend Bob. Sabra challenged this unconstitutional shenanigan in court, and won. More power to her.
A report from the ACLU of New Jersey calls for phasing in marijuana tax rates, stepping rates up from 5 percent in the first year to 25 percent eventually. It follows phase-in proposals by Congressman Earl Blumenauer and others, and a law on the books in Pueblo, Colorado, described here.
This phase-in makes sense. The legal market can bear more tax as time goes on. Startup costs and uncertainties put the nascent legal market at a disadvantage that will fade over time, especially as enforcement of the new legal set-up takes effect.
