My friend and member of the Board of Advisors of the Center for New Revenue Joe Murphy has gone the way of all flesh. I am grateful for his help. May he rest in peace.
Joseph Richard Murphy Obituary
If you knew Joe Murphy, you have stories to share, most of which are hilarious. His former students reminisce about his truly original sense of humor and irreverence, but also about his brilliance, preparation, and rigorous attention to detail. His colleagues describe an immensely creative, yet “get ‘er done” collaborative work environment, one which was summed up by one of his favorite phrases: “You can’t be afraid to put a wheel in the ditch!” His daughters speak of his generosity and support, but also describe someone who was “always down for a bit of ridiculousness and who relished the theater of the absurd.” When he left us on December 27 at age 77 after a period of declining health, we lost a true original.
At my age, now that A.I. is taking over proofreading, I feel like a good thing I can do is to set the record straight. For instance, the Tax Foundation’s tax piece of its cannabis posting, https://taxfoundation.org/blog/states-act-2-0-federal-cannabis-reform/, has incorrect information, as of August 12. (I wrote an author August 8 and haven’t heard back.)
Hemp THC is wide open in North Carolina. The public and the Legislature hardly notice; the professional prohibitionists know about it but aren’t raising a finger.
The clip is under three minutes. I come in shortly after the one minute mark.
Hemp drugs: Hearing June 12, 2024, 2 EDT in North Carolina Senate Judiciary Committee
Mr. Chairman, Thank you.
My name is Pat Oglesby. I’m a lawyer with the Center for New Revenue in Chapel Hill. I was a staffer for the nonpartisan Joint Congressional Committee on Taxation, and I’ve been a paid advisor to several states on cannabis tax policy.
As you’re discovering, hemp-derived cannabinoids create both costs and externalities. That’s why North Carolina should tax these substances – ideally by THC content – as part of a comprehensive cannabis strategy.
Louisiana, Minnesota, Tennessee, and West Virginia are four states that already collect extra excise taxes on these substances. Those taxes range from 3 percent to 11 percent of retail price.
But that’s just one approach. An alternative and more effective tax is one being used in Connecticut, Illinois, and all Canadian provinces. They tax legalized cannabis products by the volume of THC they contain. This THC tax aims straight at the target you want to hit.
Whichever taxes you choose — taxes based on price or taxes based on THC levels — there’s a risk of overdoing it. If you tax too heavily, illicit sellers will bypass the tax and you won’t get the revenue you hope for. I don’t work for industry, but I do know that other states have learned this lesson the hard way: Overtaxing backfires.
The journey you’re on won’t be easy. But please know that I will do what I can to help. You can find me at http://www.newrevenue.org.
We can expect that when the Legislature bans substances like Tianeptine or “gas station heroin,” then copycat drugs will pop up, maybe with a molecule in a complex organic compound changed here or there.
To go beyond listing dangerous drugs that are out there already, Texas and other states have enacted catch-all language that would list or cover “whack-a-mole” new drugs that people would discover or invent.
But as soon as the Legislature bans substances, copycat drugs pop up, maybe with a molecule in a complex organic compound changed here or there.
To go beyond listing dangerous drugs that are out there already, I’m trying to find catch-all language that would list or cover “whack-a-mole” new drugs that people would discover or invent.
This post has turned into an ongoing and updated long look at open and flagrant sales of delta-9 THC in North Carolina.
Here’s a telling quote: “”Marijuana has been legal [in North Carolina] for a while now — we just didn’t realize it.” https://www.wunc.org/politics/2024-04-29/nc-legislature-cbd-hemp-thc-delta-9-regulations] Yes, regular old intoxicating marijuana is being quietly sold in retail storefronts across the state. It’s the tomato model: No licenses, no taxes, no age limits, no regulations. Delta-8 THC is being sold, too, but it’s a side show to the original intoxicant, delta-9.
There are plausible claims of legality for these sales, claims that are largely and unchallenged as a practical matter. Much standard raw plant material or “flower” is said to be legal because it contains less than the federal limit of 0.3% Delta-9 THC. Gummies and other Delta-9 products, thanks to sugar and other non-intoxicants, stay under the 0.3% threshold at retail, too. Maybe this open market benefits from a loophole, or maybe law enforcement is mostly standing down.
In any event, 0.3% looks like a technical glitch in the 2018 farm bill that Mitch McConnell pushed — to create opportunities in hemp cultivation for Kentucky farmers. But he didn’t know what he was doing, or the staffers who drafted the language didn’t. (When I worked for Congress, House Ways and Means and Senate Finance Republicans’ and Democrats’ committee staffs flyspecked legislation. For tax, so did staffs from Treasury, the IRS, and Joint Tax. Might some staff weed fan have spotted this loophole or ambiguity in 2018 and kept quiet? Maybe agriculture bills don’t get anything like the technical scrutiny that tax bills do.)
So far, that marijuana market is thriving. North Carolina cities and counties and the state itself are mostly tolerating this market. Will Congress or our Legislature do anything about it? We’ll see.
Here are three stories:
https://abc11.com/hemp-marijuana-cannibas-stores-north-carolina/12767483/: “In its raw form, the THCa flower meets the legal qualifications of having less than 0.3% Delta-9 THC. But when heat is applied, like when the user smokes or vapes it, more of the product (the THCa) is converted to Delta-9 THC which allows its effect to mirror marijuana products sold in legalized states.”
While a handful of smaller conservative states rejected pro-cannabis ballot measures in 2022, there’s no sign of a wider national rollback. In November 2023, Republican-run Ohio voted to become the 24th state to legalize pot. “Nobody has retracted or retreated,” says Pat Oglesby, a tax lawyer who teaches a cannabis policy class at the University of Virginia. “I think the momentum is for a loosening, not a tightening, of state marijuana sales.”
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Another policy tool is taxation. New York and Connecticut levy excise taxes on cannabis that increase with potency, just as liquor is taxed at higher rates than beer. But regulators have also found that high taxes on cannabis, while healthy for state coffers, can make illegal weed more attractive. A combination of high taxes, stringent regulations, and a lack of dispensaries has hamstrung California’s legal recreational market, while illegal producers are thriving.
California faces a law enforcement challenge in shutting down its entrenched illegal industry, says Mr. Oglesby, the tax lawyer, who has advised the state’s regulators. “Cops don’t want to arrest people,” he says. “And juries might not convict them.”
Here is the public-domain 2015 study by Adam Orens and the Marijuana Policy Group for the state of Colorado reporting that THC in edibles and other products is more intoxicating than TCN raw plant material — Marijuana Equivalency in Portion and Dosage. It’s the basis for differential tax rates in Connecticut, listed at https://portal.ct.gov/drs/taxes/cannabis/cannabis-tax#calculation.
Cannabis plant materials: Six hundred twenty-five-thousandths of one cent ($0.00625) per milligram of total THC, as reflected on the product label;
Cannabis edible products: Two and seventy-five-hundredths cents ($0.0275) per milligram of total THC, as reflected on the product label; and
Cannabis, other than cannabis plant material or cannabis edible products: Nine-tenths of one cent ($0.009) per milligram of total THC, as reflected on the product label.
Here from the public record is my friend Jon Caulkins’s written submission to the Pennsylvania Legislature on cannabis legalization – about expectations for the illicit market and about social equity.
On the illicit market: “I think two-thirds legal and one-third illegal is a reasonable expectation for after the market has stabilized a few years after state-licensed supply opens and before national legalization. That ballpark estimate comes with several elaborations and two warnings.”
On social equity: Although “Most discussion focuses on” “[e]nsuring equitable access to cannabis licenses,” “[t]hat is a mistake.”
Dear Members of the New Hampshire Commission to Study with the Purpose of Proposing Legislation, State-Controlled Sale of Cannabis and Cannabis Products:
The Center for New Revenue, a North Carolina non-profit that I head up, is looking at how much revenue state sales might bring in for North Carolina – over and above taxes. As a cannabis policy researcher interested in government retailing, I wonder if you can correct any mistakes I am making in thinking about revenue from that “public option.”
Sometimes, assets and privileges are up for grabs.
The University of Virginia Law School has an office for me as I co-teach a class on Cannabis Legalization with a focus on who gets the money. Well, for now, I don’t have any use for the office. I teach only three more Fridays.
Until I think of something, this office makes for a thought experiment. It’s in line with Virginia’s marijuana situation that our class is considering: Who gets the privilege of using the room (the asset)? Who gets the privilege of selling marijuana (the money asset)?
British Indian colonizers used “hemp drugs” generally, ganja and bhang and more for different products, cannabis rarely, and only for the plant (marijuana not at all):
Here’s a list of cannabis supply architecture models that say what private sellers can get licenses. Maybe others have been used. (Jurisdictions listed are just examples, not exhaustive.)
All comers at the state level with local license needed (Colorado, California)
First-come first-served (Los Angeles for retail; no state starts with this, but moratoria in Oklahoma and Oregon transmute “All comers” into FCFS when licensing stops)
Grandfather existing medical marijuana sellers (lots of states)
On the merits – competitive licensing (Georgia, Florida)
On the merits — social equity licensing (New York)
Auctions (British India)
Kick the can down the road: Have a commission issue licenses with few or no criteria (Virginia-passed-once Senate Bill 1406 of 2021); or elect or appoint a single individual as cannabis czar to issue licenses (no jurisdiction I know of has tried a single person)
The Center for New Revenue 