The Center for New Revenue

What’s wrong with taxing marketing expenses of opioid sellers?  The article suggesting that tax in the hill.com is posted below (exclusive license has expired).

Here are some possible objections:

1. The horse is out of barn – the problem is that this happened in the past. Most of the damage is done.

Response: Still, this works for the future.

2. My tax policy friends will almost all insist, in the name of theoretical purity, on taxing all income the same. They will say these are real expenses, and should be deductible.

Continue reading “Answering objections to a tax on opioid marketing”

UPDATED Below:

I’m to be on a marijuana revenue panel in Connecticut on Monday, April 30. The folks in Connecticut, like everyone else, want to know the bottom line. Whew. That leaves aside the preliminary and necessary questions of what to tax (weight or stated THC, I would say) and tax rates.

OK, jumping the preliminary issues, here’s a wild guess: $155 million a year after the market matures in several years. That’s $43 per inhabitant times 3.588 million population.

The $43 number comes from Colorado and Washington, which legalized two years before any other state. Both those maturing markets are collecting just about that much cannabis tax revenue now. Continue reading “Marijuana revenue — can any state get $43 per capita, like CO and WA?”

New York just started imposing an opioid “fee”; text of the law is here. That’s the fee or tax part of New York’s Opioid Stewardship Act, part of an omnibus health and mental hygiene Act, which is here. There is a lot of non-tax stuff in there

New York will collect  from opioid sellers every year $100 million (unindexed for inflation). Here’s how. After the year ends, all opioid manufacturers and distributors will report how many morphine milligram equivalents (MMEs) they sold or distributed. Each seller’s fraction of the total amount of MMEs sold will be its fraction of the $100 million due.   Retailers ordinarily don’t pay tax, and cascading sales (where one product changes hands several times) are taxed only once.

There are three carve-outs.
Continue reading “New York State takes $100 million in tax or fee revenue from opioid sellers”

I’ve learned a lot from my friend Jon Caulkins, a drug policy expert and professor at Carnegie-Mellon (we were among eight co-authors on the RAND report for Vermont, and he’s helped and encouraged me over the years).  Jon worries about for-profit marijuana businesses, and prefers non-profit businesses. Fair enough, but let’s think about practicalities.

In an article in the National Review, “Against a Weed Industry,” Jon suggests, for the eight states where recreational cannabis is legal, “The Justice Department can simply send a letter warning that if the company does not shut down within a reasonable time, its owners will be arrested and its assets seized. . . . The Trump administration could phase out those for-profit businesses in favor of nonprofit organizations by issuing a new memo. . . . Shutting down state-licensed businesses could feed the black market, but not if nonprofit organizations are allowed to take their place.”

But I can’t see that happening. It would be very hard, politically and practically, to replace for-profit cannabis sellers “in favor of” non-profit sellers. Getting from here to there is not easy. Continue reading “Forced conversion of marijuana businesses to non-profit? I doubt it.”

OK, they call it a fee, but it looks like a tax to me.  New York is collecting $100 million from opioid sellers -- with a few exemptions, like for Hospice use.

Here's the law:  http://nyassembly.gov/leg/?default_fld=&leg_video=&bn=S07507&term=2017&Summary=Y&Actions=Y&Text=Y, mentioned to me by Katherine "KT" Kramer of ASTHO.
 Continue reading "New York State’s $100 Million Opioid . . . Tax"

My new article in The Hill has this:  “Make expenses of selling opioids non-deductible on income tax returns. That is, sellers could not deduct the costs of those gifts, junkets, dinners, and salespeople’s salaries on their income tax returns. Making drug companies’ marketing efforts non-tax-deductible is a move, even if a small one, in the right direction. And legitimate users shouldn’t bear any of the tax burden. What’s not to like?”  The federal government can do this, and each state can, too, for its state income tax returns.

http://thehill.com/opinion/healthcare/382984-instead-of-taxing-opioids-we-can-it-put-the-tax-burden-directly-on-opioid

The Sacramento Bee says California marijuana sales in the early days of legalization are under state projections, but I don’t buy the analysis. Continue reading “California marijuana sales are on track, at least”

Pat Oglesby, founder and director of the North Carolina-based Center for New Revenue, announced plans to disband the non-profit, which has focused on revenue from cannabis, and to invest in hemp farming.

“It’s federally legal,” said Oglesby, “and there’s a lot of money to be made — without tax shenanigans.  I have lots of friends in the cannabis community. Most of them are in the recreational space, but some of them know plenty about hemp, and they are helping me navigate this transition.”

“Maybe someone else will take up the causes of thoughtful marijuana taxation, of government cannabis sales, and of reform rather than repeal of Tax Code section 280E,” he said. “It’s been a good run, but at age 70, I’ve had my say.” Continue reading “Center for New Revenue disbands; founder to invest in hemp farming”

Here is a quick look at local cannabis taxes in the eight states with legal recreational cannabis commerce.

A starting point is a State of Connecticut document that’s close to right:  https://www.cga.ct.gov/2018/rpt/pdf/2018-R-0034.pdf

“Additional local taxes apply in all of the states except Maine. Local marijuana excise taxes may apply in municipalities in Alaska, Colorado, Massachusetts, and Oregon. Additional local sales taxes may apply in Alaska, California, Colorado, Nevada, and Washington in jurisdictions imposing such taxes.”

They missed local excises in California and Nevada, but I agree that Washington and Maine don’t have local excises. (Local sales taxes aren’t worth looking at.)  [UPDATE 16 October 2019:  WA lets localities add a that looks just like the WA excise tax, a percentage of price.  Call it a sales tax or an excise tax: I don’t see the difference.  So my distinction between sales and excise taxes is questionable.]

California is the state where local taxes are the biggest issue. Local taxes routinely pass when voters are asked about them. https://newrevenue.org/2016/11/10/5026/. Continue reading “Most legalizing states allow local cannabis excise taxes”

UPDATE, 30 March 2018:

On Twitter, Phil Hackney (@EOTaxProf ) has this and more:
“To be clear this is only a procedural document. It says the IRS will not issue a ruling on orgs claiming exempt status in as an org advancing a line of business if that business involves marijuana. Not the same as saying such orgs do not qualify; no need for such orgs to apply.”  https://twitter.com/EOTaxProf/status/979475478452035584

I agree that the IRS “no letter” rule for marijuana non-profits is of minor direct legal consequence. But people in cannabis community might understandably see this as
(1) deliberately singling them out;
(2) evidence of Administration antipathy – evidence of more to come.

ORIGINAL POST:

A recent IRS ruling, sent to me by Professor Francine Lipman of UNLV Law School, is making waves:  The IRS says it “will not issue a determination letter [about non-profit status] when the request concerns an organization whose purpose is directed to the improvement of business conditions of one or more lines of business relating to an activity involving controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law regardless of its legality under the law of the state in which such activity is conducted.”

“Improvement of business conditions” I don’t quite get. I’m confused. This is not my field. Off the top of my head:

I’m thinking of a distinction between trying to help people break a law and trying to change a law. Continue reading “Nonprofit status for marijuana groups”

California has a ploy to prevent the federal government from cracking down on medical cannabis. I think the state’s ploy is ill-considered and far-fetched.

Here’s the ploy:

“Reporting the cultivation tax:

“. . .

“– You are required to enter adult-use ounces separately from medicinal ounces for each category.”

https://cannabis.ca.gov/2018/ 03/13/important-information- for-cannabis-distributors/

Now I think one of the possible advantages of taxing medical cannabis like adult-use is that cultivators don’t have to decide which is which so soon.  Let the market decide, based on demand as time goes on. Otherwise, shortages and gluts will develop, as identical products have been put into a category that proved wrong. Continue reading “California Scheming”

UPDATE:  As of June 26, 2018; a comprehensive chart is at https://newrevenue.org/2018/06/06/cnr-recommends-cannabis-tax-chart/.  I don’t know that it’s perfect, but it’s useful.

++++

There are 30 states that have legalized medical cannabis.   This is an attempt to collect and present the information that is available on how they tax it.   Continue reading ” How states tax medical cannabis”

Superseded by https://newrevenue.org/2018/02/26/how-states-tax-medical-cannabis/.

“Gresham’s law is a monetary principle stating that ‘bad money drives out good.’ For example, if there are two forms of commodity money in circulation, which are accepted by law as having similar face value, the more valuable commodity will disappear from circulation.” That’s from wikipedia.

The same phenomenon applies to official revenue estimates, it seems to me.

Say an industry has a friendly Member lined up to do its bidding. The ideal tactic for the industry might be to have the Member propose a number of different tax cuts, and get the official scorekeeper to produce revenue estimates for all of them. Then the industry can see which tax cut proposals get lower revenue cost estimates than they believe. Say the industry figures, based on confidential information that the scorekeeper can’t readily discover, that proposal A would benefit the industry by $3 billion, proposal B would benefit it by $6 billion, and proposal C would benefit it by $9 billion. Say the scorekeeper comes back with estimates (to make this very simple) that they all cost $6 billion. So the Member abandons A and B, and gets C enacted.  The bad estimate has driven out the good. Continue reading “Gresham’s law for revenue estimates”

Revenue from marijuana?
Not so fast.
Local retail taxes will weaken.
Local producer taxes will vanish.
State taxes will fail when federal legalization stops anti-import rules.  http://thehill.com/opinion/finance/372396-how-tax-competition-can-threaten-marijuana-revenue  Continue reading “Marijuana tax competition — in Thehill.com”

[See UPDATE from 2 Feb 2018 at the end.]
Amanda Chicago Lewis has a thought-provoking article in Rolling Stone that points out the federal government is making money from federally illegal marijuana. I appreciate her allowing me to take issue with her thought — “the feds might be making way more money by keeping weed illegal than they would by legalizing” — by letting me say, “’The federal government is not going to do this for zero,’ Oglesby says.” Continue reading “280E revenue won’t keep marijuana illegal”

My friend and Chaired Professor Emeritus at UNC Law School Bill Turnier, who taught me tax in the 1970s, authorized me to post this: “The following thought occurred to me about the difference in the taxation of earned income under Nixon and Trump, or more appropriately their administrations. Under the current rate structure it seems that the most disadvantaged income class is that of income derived from personal services. It and some other ordinary income is taxed at the maximum rate of 37%. The 1969 Act introduced a maximum tax rate of 50% on earned income leaving other ordinary income to be taxed at 70%. It is just another marker of how much more the modern GOP represents capital over labor.”

Amen.