Why not tax nicotine in e-cigs?

The usually reliable Tax Policy Center says tax all e-cig liquid.

Why don’t they want to tax just nicotine?

Many drug policy scholars are enamored of taxing cannabis by THC – the active ingredient, the best nicotine analogue.  Those folks would tax it even for flower (bud, raw plant material).  Now THC can’t be easily sampled in flower.  Raw plant material is not homogeneous enough.  (And no one taxes solid tobacco by nicotine content.)

But in cannabis concentrates, THC can be more readily sampled.  Canada is taxing THC in concentrates already.

Nicotine in vaping products can be readily sampled, too.

TPC says, “Michigan could take the lead and levy an extremely high excise tax on all vaping products—one not based on a percentage of the product’s relatively low price, and not based on the presence of nicotine. . . .  How about a tax of a $1 per milliliter of vaping liquid? At least then a 15 milliliter cartridge would no longer be a relative bargain compared to cigarettes.”

I don’ get it.  When Congressional staff used to draft tax laws, House Legislative Counsel Ward Hussey would ask, “What are you mad at?”  Well, isn’t it nicotine?

[This replaces an earlier post.]

Here’s the cite:  https://www.taxpolicycenter.org/taxvox/michigan-lets-tax-not-ban-vape-products?cm_ven=ExactTarget&cm_cat=DD+10212019&cm_pla=All+Subscribers&cm_ite=https%3a%2f%2fwww.taxpolicycenter.org%2ftaxvox%2fmichigan-lets-tax-not-ban-vape-products&cm_lm=po@newrevenue.org&cm_ainfo=&&utm_source=%20urban_newsletters&&utm_medium=news-DD&&utm_term=TPC&&


Numbers for Marijuana’s Externalities

A private group in Canada estimated $79 per cannabis consumer per year in societal costs for 2014.  https://www.ccsa.ca/sites/default/files/2019-04/CSUCH-Canadian-Substance-Use-Costs-Harms-Report-2018-en.pdf.

That may be less than a lot of states are taxing.  But are that private group’s numbers to be trusted?  And there’s the list of reasons to tax cannabis posted earlier and below. (The Canadian numbers too presumably count DUI.)  But trying  to tax measurable externalities seems like something even the tomato model folks might understand and even go along with.

Quotes: Continue reading “Numbers for Marijuana’s Externalities”

Why tax marijuana?

Seven reasons to tax cannabis:

  1. To Legalize.  That’s the deal – voters and elected officials insist on taxation. https://www.leafly.com/news/industry/opinion-theres-a-better-way-to-tax-legal-cannabis
  2. For revenue.  But that argument would apply equally well to an excise tax on socks or bicycles.  That argument is purely pragmatic; it’s not theory-based.
  3. To keep it away from Kids, who are notoriously price-sensitive (“pocket change” won’t be enough).
  4. SUD — To keep it away from Cannaholics (people with “Substance Use Disorder”).
  5. Driving (at least a perception problem).
  6. Jerry Brown’s argument: “I don’t know if everybody’s going to pot that that’s going to be a positive path forward.” https://www.washingtonpost.com/blogs/govbeat/wp/2014/01/11/jerry-brown-no-fan-of-legalized-marijuana/.  This “Nation of Stoners” argument needs more analysis.  It seems like an opportunity cost for society, and seems extremely difficult to measure or estimate.  In some sense, though, maybe it’s like the quasi-quantifiable cost of alcohol-caused absenteeism.
  7. To reduce the risk of SUD for those who don’t have it yet.  That’s hardly quantifiable.

What else?



Left and Right warn about price-based marijuana taxes

The Left-leaning Institute for Taxation and Economic Policy warned, in a detailed report, that 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/

Now 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/ Continue reading “Left and Right warn about price-based marijuana taxes”

Cannabis tax “Ranges” won’t solve the “I want the most THC” problem

Work in progress. Comments welcomed.  This is a draft of slivers of a bigger work on the discontinuous THC ad valorem tax in Illinois and its implication.

Last Update 11:04 a.m. 5 October 2019

A tax on THC may serve two goals. First, it may be an acceptable way to tax cannabis intoxication.  Public health scholars tend to view a nudge against high-THC products as good policy. In that view, some marijuana are consumers too THC-centric for their own good.  You hear that some consumers routinely want the most THC they can get.  Taxing THC might lead them to consume less.

Second, cannabis growers and sellers deplore the arms race among growers to distort plant genetics to get the highest possible THC readings.  Natural genetics are said to contribute to an entourage effect.  (See Ethan Russo’s work on the Entourage Effect.)

. . .

So a direct tax on THC – generally one cent per milligram — is already in place in Canada for cannabis oil.  Canada will extend its penny-per-milligram tax to edibles when they become legal.  Meanwhile, for raw plant material, which is harder to sample for THC, Canada taxes by the gram (or by 10% of wholesale price if that’s greater).  Flower is generally taxed at $1 per gram, while trim is taxed at $0.25 per gram. https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/excise-duties-levies/collecting-cannabis.html

. . .

Another way proposed to tax THC is to establish ranges to govern tax rates, like these (ad valorem taxes are ill-advised, but we use them for simplicity):

Low range: 0.3% to <10% THC — 10% of price;
Medium range:  ≥10% to <20 % THC — 20% of price;
High range: ≥20 % THC  — 30% of price.[1]

The higher the range, the higher the tax.  One argument for such a range-based tax it that it would make consumers less able to shop for the biggest THC amount.  They won’t know what they are getting.  That is, a tax range might “blind” consumers to actual THC content.

If anything over 20% is simply in that one category, consumers won’t say, “I’ll pay more for 27% flower than for 21% flower.”  Instead, the consumer who wants the most THC, will be limited to a less precise desire:  “Give me strongest stuff you’ve got:  something in the 20 range.”  She’ll never know.

“Ranges” with discontinuous tax rates – those with marginal rates over 100% — have long been a bête noire of the Center for New Revenue.  Search this website for “”discontinu” to see why.

Once customers they are blinded to precise THC differences they may look at CBD and terpenes.  Taxing by ranges would be great, the argument goes, because tax ranges will entail commercial blinding.

But how could they?

That “blinding” argument has several weaknesses.


First, many state regulations require point THC labeling, so consumers would not actually be blinded to point THC numbers if taxes changes but regulations didn’t.


Second, let’s say regulations that are designed to inform consumers changed so as to show only the tax range (say over 20%).  Nothing would prevent sellers from showing the point THC number to the consumer.  Most State Constitutions provide some protection for commercial free speech, and sellers might be expected to challenge in court any regulation that prevented them from labeling product with a true statement like this:  “The contents of this package were part of a batch tested on September 15, 2019, by XYZ lab that produced reported THC of 19%.”


Third, although point (precise, single-number) THC results are only so accurate, they are the best information the consumer can get about THC content.  Ranges make information less accurate.  In a grocery store, what label helps a consumer more?

  1. “This cake was baked between September 15 and September 22.”
  2. “This cake was baked between September 8 and September 15.”
  3. “This cake was baked on September 15.

The answer is 3.  To be sure, point estimates of THC content in cannabis are imprecise, but the imprecision is typically described by a bell curve.  A sample that tests at 19% is more accurately described as (for example) “between 14% and 24%” than as “between 10% and 20%.”  Pre-set ranges are arbitrary.


Fourth, one might say “ranges are inaccurate, but blinding the consumer is more important.”  Blinding seems of questionable propriety.  It may be unethical — even if data is imprecise.  That is saying, “We know this point number is not precise, and that there is a margin of error.  To emphasize our number’s imprecision, we will give you less information than we have.  And we won’t show the margin of error we know about.  That’s our way of protecting you from yourself if all you care about is  high THC numbers.”

If you blind the consumer a little, why not a lot?  Some have suggested eliminating THC content labeling altogether.  That would remove the temptation for naïve consumers to gravitate toward high THC labels, because there would be no lable.  That would mean  a total change in regulatory rules that could accompany a tax by categories, like flower, dabs, vapes, edibles, etc. Blinding medical users is an especially dubious goal. They may underdose – or take too much.

Ranges with Discontinuities are usually bad tax policy.  They create cliffs, where a tiny difference in something (like THC) makes an enormous difference in somebody’s tax bill.  And — the point here — they won’t solve the problem of the consumer who wants the most THC.

If you think THC should be taxed, and if you think you can measure it well enough to tax it, just go on andtax it directly.  Discontinuous ranges may provide an illusion of simplicity, but they make things more complex [as illustrated elsewhere in this article I’m working on].



[1] Illinois has a price-based tax that looks at THC for smoked products.  It will tax smokeable products this way:
THC under 35%:  10% of price;
THC 35%: or more:  25% of price.
The Illinois tax scheme looks like a mechanical way to try to tax raw plant material less than concentrates.




Washington State studies cannabis potency tax

Here is the outline of a report the Liquor and Cannabis Board sought bids for.  I think the outline is insightful.  It’s a public record, I’m sure.

this part is the most interesting to me:


  1. Regulatory options & challenges
    1. Tax by milligram of THC (per research)
      1. Complexity in converting % THC into milligram units in traceability/pos systems – large rule required.
    2. Tax by product type
      1. Still requires traceability changes, but not conversion
      2. Would have to establish relative potencies of product types
      3. Third major option –This should not be indented: Establish tax brackets based on potency ranges
        1. Requires traceability change
        2. Would have to establish tiers or brackets of potencies (on what basis? Health? Research not available to create multiple tiers or brackets).

K1325 – Attachment B Proposed Report Outline is more legible

Attachment B Continue reading “Washington State studies cannabis potency tax”

The 35% THC discontinuity in Illinois’s cannabis tax

Illinois draws a bright line for THC potency:  Cannabis with adjusted THC of 35% or less bears a 10% tax rate; cannabis rated over 35% bears a tax rate of 25%.  (Infused products are treated separately, and taxed at 20%.)


There’s a lot to dislike about the Illinois tax plan — especially its reliance on old-fashioned ad valorem (price-based) taxation — doomed to decrease as prices do, and subject to price manipulation.

But its 35% bright line might be sensible.  Illinois apparently established its tiers as proxies:  The low taxed tier (≤ 35%) apparently corresponds to flower and other raw plant material;  the high-tax tier  (> 35%) corresponds to [sublinguals ???? and] dabs and other processed cannabis that is not infused.

This conclusion reflects the view that raw plant material with THC content over 35 percent is likely both rare enough to freakish and less than optimal in producing intoxication (like the stereotype of a muscle-bound strong man who cannot manage to bend over to lift weights). Continue reading “The 35% THC discontinuity in Illinois’s cannabis tax”

Phony tax increase in Harris-Nadler Marijuana Bill

This is PRELIMINARY look at revenue from the Marijuana Opportunity Reinvestment and Expungement Act, or MORE Act.  Comments welcomed. UPDATES will appear at the top here.

The bill calls for a token 5 percent ad valorem tax on recreational marijuana only, with medical cannabis exempted.  It then purports to spend the money that tax brings in.  But Oops.  At the same time, but by descheduling the drug, the bill repeals the current 280E rule disallowing deductions for the expenses of selling cannabis.

Here’s what Carl Davis of ITEP authorized me to post:

“This bill sure looks like a net tax cut to me. Continue reading “Phony tax increase in Harris-Nadler Marijuana Bill”

Taxing raw cannabis by THC content

Eventually, sampling error, deliberate or unavoidable, the killer problem with a THC tax on unprocessed marijuana, could fade as science and technology advance. Sampling could yield to full disclosure if science can reveal the precise chemical make-up of every gram we want to tax.  That precision may seem far-fetched, but perhaps no more than X-rays, MRIs, and astronomical spectroscopy — figuring out what is in stars — might have seemed to our ancestors, not so long ago.  One day, if a device can scan a flower and reveal all, THC taxation may seem unobjectionable.

THC taxation is unobjectionable now, or soon, for homogeneous concentrates.


Cannabis Revenue Slides from Paris

Here are slides from my panel presentation at the Ecole d’économie de Paris (Paris School of Economics) May 24 2019:  Paris 24 mai 2019 for the International Society for the Study of Drug Policy, http://www.issdp.org.

They include this song, to the tune of “Dear Abby” by John Prine:

Dear Public Officials who legalize weed:
Don’t miss out on revenue your people need.
A price-based percentage tax won’t be secure
‘Cause prices will tumble as markets mature.
The “liberty movement” wants taxes to fall.
But vanishing “price” taxes undermine y’all.

Price taxes vanish.

To the relief of the audience, I did not sing.

And here’s the wrap-up:
Law enforcement is critical.
Taxing only by price is weak.
Don’t try to tax flower by THC.
Big Business is coming (vs. Social Equity).
Government sales are better than taxes.

The State of Lousiana sells marijuana

Federal illegality is not preventing the State of Louisiana from possessing and selling marijuana.  Maybe Berkeley and Oakland are too politically blue to get away with it, but that little municipal cannabis store in Washington State has been selling openly since March 2015.  Louisiana is about to start sales.

Here’s a long quote about how flagship Louisiana State University is “touching the plant,” from an official LSU website.

In 2015, the Louisiana Legislature passed the Alison Neustrom Act, which paved the way for the production, recommendation, and use of therapeutic cannabis.

The LSU AgCenter is operating its Therapeutic Cannabis Program under one of the two licenses in Louisiana. Continue reading “The State of Lousiana sells marijuana”


A friend in Vermont tells me the Legislature there insists on taxing cannabis solely by price.  Many people think Vermonters are so shrewd and some Southerners just might be a little slow, but price-only taxation is sillier than anything North Carolina has done since turning down 90 percent matching funds for Medicaid expansion.

Leafly article on Cannabis Tax — en français

I’m not sure this is authorized:  https://thc.legal/opinion-il-existe-un-meilleur-moyen-de-taxer-le-cannabis-legal/

But I can’t quarrel with the end note: “Le point de vue exprimé dans cet article n’engage que son auteur trop cool.”  Hahaha.

Une traduction robotique? Continue reading “Leafly article on Cannabis Tax — en français”

Sam Kamin joins CNR Board

I’m delighted to announce that my dear friend Sam Kamin, J.D., Ph.D., is joining the Board of Advisers of the Center for New Revenue.  Sam is an old friend in marijuana policy years; we were on a panel for the Drug Policy Alliance in Denver in 2013, not long after my first article came out in 2011.

Sam is a Law Professor at the University of Denver. Continue reading “Sam Kamin joins CNR Board”