The Center for New Revenue

I had the good fortune to be co-chair of the Regulatory and Tax Structure Working Group of the California Blue Ribbon Commission on marijuana legalization – a project of the Lieutenant Governor and the ACLU of Northern California.  In connection with that work, I spend two nights and parts of three days in Humboldt County, the heart of the cannabis-growing Emerald Triangle.  During a drive between San Francisco and Humboldt, I asked Terrance Alan, a long-time prominent member of the California cannabis community, what would be a fair after-tax price after legalization.  I got a quick answer: “$35 an eighth.”  That’s $35 for an eighth of an ounce.  With standard quantity discounts, that results in a full ounce selling for under $250.

Maybe my friend Terrance would like to keep the price high by providing income to growers; maybe I would just as soon see the government get a lot of the money.  But public health folks like high after-tax prices, too.

After-tax prices in California are still high, as the market gears up — in the range of $40 to $70 an eighth.  But in Oregon, where prices have collapsed, and with a low, price-based tax, grams are selling after tax for $4 – or $14 an eighth.

When I circled back to Terrance to confirm using that quote, he wrote:

“I do still stand behind my statement.  If prices drop as you see them in Oregon, the only growers California will have will be a couple of large corporate farms that did not exist 2 years ago.  No equity growers in SF, the entire culture, families, lives and a 40 year culture of medical cannabis wiped out in pursuit of profit and redistribution of wealth to the government in the form of taxes.  There is a balance, shouldn’t government temper a policy which effectively wipes out the life blood of thousands of families tied to smaller footprint growing.  I believe that we should have policy, with teeth,  to keep the best grower producing the most curious strains, which are really a host of brands, not just the different names on stickers propped up by marketing .  Oregon did not have a vibrant cannabis production chain to lose, they got the cannabis from California.  They lost in different ways, but not at the expense of a generation of growers.  California has the growers and a lot to lose in pursuit lower prices to the consumers who will receive the just passable quality.”

California is considering letting individuals deduct marijuana advertising expenses on California state income tax returns – for the first time. The bill isA.B. 1863, and is pretty far along. The text is at https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180AB1863 and far below.

I’ve long thought 280E was partly justified, and partly overbroad.  A compromise could treat individuals like corporations, allow deductions for non-problematic expenses, and not lose revenue. Continue reading “CNR opposes California tax cut for marijuana ads”

Policy makes strange bedfellows.  The local paper is stirring up doubts about the state liquor monopoly, and it should look for problems, but I’m still for government sale of intoxicants, as explained here:  https://www.huffingtonpost.com/pat-oglesby/marijuana-under-president_b_8207864.html, and here:  https://www.rand.org/pubs/research_reports/RR864.html (download).

Here are some emails:

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8/13/2018 10:09 AM
Dear Folks at the Christian Action League:

The Center for New Revenue opposes privatization of liquor stores. The profit motive for liquor sales (or for marijuana sales) is not the people’s friend.   [Letter to N&O, below, was attached.]

Pat

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Aug 13 (4 days ago)
Response (in part):

Thank you for this information, Pat. The Christian Action League has long held the same opinion and appreciates those who are willing to speak out clearly on both issues of privatization and marijuana use. Continue reading “Allied with Christian Action League on Government Liquor Stores”

UPDATED 4:44 PM EDT 17 August 2018:  Maryland Gubernatorial candidate Ben Jealous tweets, “When I am governor, we will finally pass universal pre-K in Maryland. How will we pay for it? By legalizing, regulating & taxing Cannabis for adult use.”

My first reaction was that that revenue scheme will happen right after Mexico builds the Wall.

But, with a lot of caveats, taxing marijuana could pay a meaningful fraction of pre-K costs Continue reading “Can Marijuana Taxes Pay for Pre-K?”

The Raleigh paper recently exposed some waste and abuse in the North Carolina state liquor monopoly.  Sure, government liquor stores create problems, but the private profit motive for alcohol sales, like the private profit motive for marijuana sales, works against public health. My public health friends have understood that tendency since the Rockefeller Report preceding repeal of alcohol Prohibition.

Here’s a letter, just a beginning of a long argument, I wrote the author of the N&O article: Continue reading “The Center for New Revenue urges keeping liquor stores”

The North Carolina Legislature stopped counties from banning plastic bags, so I wrote a Democratic Legislator I know:

“I am particularly interested in supporting candidates who will publicly support letting localities ban or tax single use plastic bags.  If you know some who will email me their support or otherwise go on the record, I will try to help them out a little.  What do you think?  Is that a helpful approach?”

He’s asking around. I have had one taker so far, and sent her $100.  A token, but still.  UPDATE 21 August:  2 takers, for $200 total.

Tax Regulators in Alaska are considering cutting the $50 an ounce tax on marijuana bud or “flower” to $25 for “immature flower” that appears “loose” or “wispy.”  Earlier post is at https://newrevenue.org/2018/08/02/tax-cut-for-wispy-buds-in-alaska/.

That seems like a nearly impossible line to draw — a huge judgment call.  But how about putting the decisions on the internet? Each low-taxed item would be photographed and uploaded.  The public could judge if government is overreaching, or yielding to taxpayer pressure.

Here’s another fallback:  Are wispy buds less appealing to smokers, and so destined for concentration? Continue reading “More on “Wispy” in Alaska”

The tax on marijuana bud or “flower” in Alaska is $50 an ounce.  Regulators there are considering cutting the tax to $25 for “immature flower” that appears “loose” or “wispy.”

My reaction is:  No!  Please don’t! Unforced error!

 

“Loose” and “wispy”?  Who’s to say? Continue reading “Tax cut for “wispy” buds in Alaska?”

I think most of today’s article on cannabis taxes by Renu Zaretsky of the Tax Policy Center is just right.  It’s at https://www.taxpolicycenter.org/taxvox/high-hopes-and-altered-states-choices-marijuana-and-tax-revenue-0.  Congratulations.

But as a first reaction, I have a few quibbles: Continue reading “Reaction to Tax Policy Center’s article on cannabis taxes”

The Center for New Revenue has signed a letter, begun by Americans for Tax Fairness.  The summary gives you the idea:

OPPOSE “ROUND 2” OF TRUMP-GOP TAX CUTS – STOP ANOTHER MASSIVE GIVEAWAY TO THE WEALTHY Continue reading “Center for New Revenue opposes federal tax cuts”

My usual take on cannabis taxes:  tax low at first, tax by weight or THC, be careful about exempting medical.  Government sales are better.  After one of my co-panelists enthuses about female and minority MARIJUANA MILLIONAIRES, I show nervousness — I don’t think there will be very many.  Connecticut Legislative Commission on Women, Children and Seniors Cannabis Forum, Legislative Office Building, Hartford, Cannabis Revenue Panel, April 30, 2018. Video at http://ct-n.com/ctnplayer.asp?odID=15247; my intro at 39’30”; main remarks at 2’34”.

Continue reading “Video of Connecticut Marijuana Panel”

Current state weight-based taxes on marijuana bud or flower, per gram (and retail rates):

Alaska $1.76 (No retail tax).
California 33 cents (15% retail tax).
Colorado 34 cents (15% retail tax).
Nevada 75 cents (10% retail tax).

Math and methodology are at https://newrevenue.org/2017/07/02/nevadas-70-cent-per-gram-tax-on-marijuana-flower/.

Alaska statute says $50 per ounce.
California statute says $9.25 per ounce.
CO data is from from https://www.colorado.gov/pacific/sites/default/files/AverageMarketRate.pdf; NV data is from , up from 70 cents: https://newrevenue.org/2017/07/02/nevadas-70-cent-per-gram-tax-on-marijuana-flower/.

 

Email to Erika McConnell, Director of the Alaska Alcohol and Marijuana Control Office

Dear Ms. McConnell:

The cannabis industry naturally wants to repeal the weight-based, per-pound tax you have in Alaska. http://komonews.com/news/local/alaskas-legal-pot-industry-decries-taxes-seeks-changes

The state and the people have interests that conflict with those of the industry. Continue reading “Center for New Revenue opposes repeal of per-ounce marijuana tax in Alaska”

Marijuana Revenue Competition — Look Out Below

Exclusive license with State Tax Notes expired, so here is  the article: Tax Competition FINAL STN 5.7.18 Oglesby, from State Tax Notes, Vol. 88, No. 6, 2018.

Abstract

Beyond the ever-present illegal market, a more subtle threat to marijuana revenue lurks:

Tax competitors (think: tax havens) threaten subnational jurisdictions that can’t or don’t control their borders.

This article presents a framework for looking at threats to marijuana revenue: Continue reading “Marijuana Revenue Competition — Look Out Below — in State Tax Notes”

[UPDATE January 2019:  Yes, the chart is pretty good, but there are a few errors.  To be sure, check original sources.]

This is the best comparative chart on cannabis taxes I’ve seen, from Fox Rothschild, an 800-person law firm.  [UPDATED chart is here:  https://www.foxrothschild.com/publications/cannabis-industry-state-tax-guide/.]  The big accounting firms were still steering clear of marijuana, last I heard, and this is the biggest law firm I’ve heard of that’s been publicly associated with marijuana.

UPDATE:  I don’t intend faint praise for this work.  It’s a huge undertaking, and a valuable one.  Thanks to Jennifer Benda and Jacob Millis for doing it.  I want to be an expert on marijuana taxes, but didn’t have the patience for this big job.  This kind of exhaustive scholarship illuminates the landscape, as Alvin Rabushka did with Taxation in Colonial America.

In 2011, I could fit all the world’s marijuana taxes onto page 257 of this.  But there is more work to be done.   Now, there are hundreds of local taxes in California and Oregon alone — like Arcata’s electricity tax.  Local fees could fill a book already. Continue reading “CNR recommends cannabis tax chart”

I asked California Department of Tax and Fee Administration a couple of questions about why cannabis tax collections are coming in low.   At the end are the questions and the CDTFA’s helpful answers, from Paul Cambra.

My reactions:  I.  The producer or cultivation tax collected only $1.6 million in the first quarter because retailers some how brought untaxed products into inventory before the tax was effective on January 1.  Retailers then sold that untaxed product in early 2018.  The standard excise tax procedure for taxing jurisdictions is to apply a “floor stocks tax” to product that escaped tax as it came into inventory (and sits on the shelf or the floor).  See https://www.ttb.gov/tax_audit/floor-stocks-tax-faqs-answer.shtml.  California did not have a floor stocks tax, so had a short-term loophole.  Its effect will soon disappear.

II.  The 7.25% sales tax collected a lot compared to the 15% marijuana excise tax because the sales tax
1. includes pipes and t-shirts and so on;
2. is based on a real price, while the excise tax is often based on an artificial or phony price (the “average market price”) under California regs;
3. includes the 15% tax in the base (for an extra 1.0875% every time).

Continue reading “California cannabis tax collections explained.”

California released some info about cannabis tax collections May 11, 2018. I can’t figure some of it out. Questions below.

UPDATE: Dale Gieringer of California NORML answers, pointing out that most medical cannabis is not tax exempt. The only tax exemption is for product sold to patients who have bothered to get cards. So the sales tax figure is high because it includes sales of lots of medical cannabis. Few adult use licenses have been issued.

Continue reading “Confused by California marijuana tax receipts”