Marijuana tax chart and slides

Slides are at Generic weed ALCOHOL FIRST tax slides 4 December 2019-4

Here is chart:

Center for New Revenue

Pat Oglesby, Www.newrevenue.org, 4 December 2019

 

Recreational FLOWER Excise Taxes STATUTORY Pre-Retail ACTUAL Pre-Retail % OR /gram Retail
Canada (ex Manitoba) Greater of 10% or $1/gram Greater of 10% or $1 Provinces vary
Alaska $50/oz. $1.76 0
California $9.25/oz. indexed; now $9.65/oz. $0.34 15% X (Wholesale price + 80%)
Colorado 15% $0.33 15%
Illinois 7% 7% 10% target
Maine $335/pound $0.74 10%
Massachusetts 0 13.75%
Michigan 0 10%
Oregon 0 20%
Nevada 15% $0.76 10%
Washington 0 37%

 

All states taxing weight have categories taxed lower than flower (bud) — like trim (leaves, shake).  Most recreational states impose standard retail sales (non-excise) taxes, too, if they have them; e.g., Massachusetts’s total retail tax goes from 13.75% to 20%.  Colorado and Nevada adjust weight taxes periodically to tax 15% of recent market prices.  California indexes its weight tax for inflation.  California and Colorado use actual price in certain non-related party sales.  Canada taxes some products by THC content.

 

Taxes on medical range from zero to 100% of the recreational rate.

 

More at https://newrevenue.org/2018/06/06/cnr-recommends-cannabis-tax-chart/; https://itep.org/taxing-cannabis/.  Corrections: po@newrevenue.orgor 919 619 8838.  Updates and more info at www.newrevenue.org.  More background on cannabis revenue at https://www.rand.org/pubs/research_reports/RR864.html (Chapters 4 and 5 and Appendix B).

 

 

 

 

Taxes on Recreational Marijuana Flower, 2 December 2019

Recreational FLOWER Excise Taxes STATUTORY  Pre-Retail ACTUAL Pre-Retail % OR /gram Retail
       
Canada (ex Manitoba) Greater of 10% or $1/gram Greater of 10% or $1 Provinces vary
       
Alaska $50/oz. $1.76 0
California $9.25/oz. indexed; now $9.65 $0.34 15% X (Wholesale price + 80%)
Colorado 15% $0.33 15%
Illinois 7% 7% 10%-20%-25%
Maine $335/pound $0.74 10%
Massachusetts 0   13.75%
Michigan 0   10%
Oregon 0   20%
Nevada 15% $0.76 10%
Washington 0   37%

 

As of 2 December 2019.  Please send corrections:  po@newrevenue.org.

Colorado and Nevada adjust weight taxes periodically to tax 15% of recent market prices.  California indexes its weight tax for inflation.  All states taxing weight have categories taxed lower than flower (bud) — like trim (leaves, shake).  Most recreational states impose standard retail sales taxes, too, if they have them.

Taxes on medical range from zero to 100% of the recreational rate.

More at https://newrevenue.org/2018/06/06/cnr-recommends-cannabis-tax-chart/; https://itep.org/taxing-cannabis/

 

Taxing weed and wealth

At the National Tax Association conference in Tampa earlier this month, my panel on marijuana tax policy was a sideshow.  The hot and trendy topic was taxation of wealth.

It has always been better to tax wealth than to tax income.  As the old adage says:  Money is like manure.  When it’s piled up, it stinks; when it’s spread around, it makes things grow.  Discouraging income is kind of weird.  But we can observe income much more readily than we can observe wealth.  Income moves, so it should be visible; wealth stands still, so it can be invisible.  This is the distinction between flow and stock.  An income tax is a weak proxy for a wealth tax, but it may be the best we can do, so that’s what we’ve got.

So an income tax is like a tax on weed by weight.  Taxing marijuana flower or any raw plant material by THC appeals to drug policy purists, but it’s not practical, for reasons easily findable on this website.  Taxing raw plant material is much easier to do.  Like the income tax, it’s not theoretically great, but it kind of works.  A more perfect tax may not.

 

 

Best,

Income tax purity and 280E

The anti-ad feature of 280E will be a hard sell at a marijuana tax panel for the National Tax Association in Tampa today.  The audience is mostly economists.  Many economists start with the notion that all income should be taxed alike – capital gains and ordinary income, for instance.  And many think deductions should not discriminate, either, so corporate integration fans don’t like favoring interest over dividends.  So singling out marijuana ads (I’d add ads for tobacco and alcohol) will find principled objections.  But we’re not going to tax marijuana like milk.  Excise taxes are OK, but since Free Speech means we can’t ban ads, taxation is a middle ground.

Veterinary marijuana

The hardest issue around marijuana taxation is medical.  I stipulated in my first article, in 2011, that cannabis has medical uses.  But how to decide who is using medically?  I’m speaking Friday at a conference of mostly economists, the National Tax Association, in Tampa.  I don’t expect much help in answering the medical vs. recreational question.

Here’s a story, from California activist Brett Stone, about veterinary use for his dog Walley: Continue reading “Veterinary marijuana”

Movie Review: “The Laundromat”

If there is a better “comedy-drama” film about tax havens, I’d like to see it.  The Laundromat goes into the folks behind the Panama Papers scandal, and ends with a message from Meryl Streep, as herself:

“Tax evasion cannot possibly be fixed while elected officials are pleading for money from the very elites who have the strongest incentives to avoid taxes.”

It’s just out, and maybe it’s not for everybody.  A friend said she didn’t follow it very well.  But for anyone who has been in international tax, at least on the government side, it should be fun.

From Wikipedia:

The Laundromat is a 2019 American biographical comedy-drama film directed by Steven Soderbergh, with a screenplay by Scott Z. Burns. It stars Meryl StreepGary OldmanAntonio BanderasJeffrey WrightDavid Schwimmer,  Matthias SchoenaertsJames Cromwell, and Sharon Stone.

Weeks after its limited theatrical release, but just two days before its scheduled wide streaming release, the two men at the center of the film, Jürgen Mossack and Ramón Fonseca sued Netflix on October 16, 2019, attempting to block the film’s release. They argued that the film defamed them. Netflix responded the next day, calling the suit “laughable” and saying the film was “constitutionally protected speech.”

+++

This comes 38 years after the “Gordon Report” on tax havens by my old boss Richard A. Gordon, http://www.archive.org/stream/taxhavenstheirus01gord/taxhavenstheirus01gord_djvu.txt

State stores ≠ State liquor stores

“Majority of Pennsylvania voters want legal cannabis, poll shows — just not in state stores,” says a headline in the Pennsylvania Capital-Star.

But that’s totally misleading, because that’s not what the poll asked.  Here’s the actual question: “How likely would you be to support the legalization of marijuana if it were sold by the state liquor stores instead of by private companies?”

Not state stores selling just marijuana — state liquor stores, selling both.

Is that difference a big deal?  Yes.  Public health scholars pretty much agree that liquor and cannabis should never be sold together.  Selling cannabis in state liquor stores would violate that principle.  Maybe the average voter, too, can figure out that selling two intoxicants at the same cash register is not a great idea.  The municipal cannabis store in Evergreen, Washington doesn’t sell liquor.  No cannabis store in the country does.  Mixing booze and weed is problematic – and so is the question the poll asked.

Prominent marijuana journalist and legalization proponent Ricardo Baca had this headline:   “Why Cannabis and Alcohol Sales Should Never, Ever be Co-located.”  Co-use is not the only problem Baca identifies.  He points out the danger that the liquor industry will gobble up the nascent cannabis industry – and mainly argues that deadly alcohol should be in a separate category from safer cannabis.

For what they are worth, here are the answers from Pennsylvania to the state liquor store question:
Much more likely 12%
Somewhat more likely 20%
Somewhat less likely 18%
Much less likely 40%
Do not know 11%

A better question for voters is this, from North Carolina in 2013:

“If marijuana were legal in NC, do you think it should be taxed and sold in state-owned stores the way liquor is, or in private retail stores, like beer and wine are?”

58% State-owned stores.
19% Private stores……….
23% No opinion……………

Not alongside liquor, but in like liquor, in separate, single-purpose stores.  A nuance? I don’t think so.  Now maybe state liquor stores in North Carolina are more popular than state liquor stores in Pennsylvania.  But selling cannabis alongside liquor is not the same as selling the two drugs in separate places.

 

Tax Nicotine or Vaping Liquid?

Tax Nicotine or Vaping Liquid?

The U.S. House Committee on Ways & Means, by a 24-15 vote, has approved a tax on e-cig liquid by nicotine content, “$50.33 per 1,810 mg.” or $$27.81 per gram.

Senate Democrats have introduced similar legislation.

A tax could pass veruy quickly.

That nicotine tax goes along with what drug policy scholars say about taxing marijuana.  They’d like to tax by THC content, at least where practical.

Canada is already taxing by THC, for concentrates like vaping liquids and other processed products.  (Raw material, less practical to tax by THC, is still taxed by the gram, with potent flower taxed more than weaker trim.)

But tax policy folks on the left and right suggest taxing by total vaping liquid instead of just nicotine.  None of that liquid is good for you.  But hat’s a dramatic difference in the tax base.

From the Tax Policy Center on the left, click here.

From the Tax Foundation on the right: https://taxfoundation.org/tax-nicotine-products-quantity/

I like taxing THC where practical, in liquid, but I tend to side with the tax policy folks here.  Taxing by nicotine is harder to enforce, but mainly, we don’t know exactly what we’re mad at.  Without nicotine, though, or THC or some active agent, I think kids wouldn’t vape.  So this is a hard issue. Continue reading “Tax Nicotine or Vaping Liquid?”

Let’s tax plastics first

One step at a time.  Start with plastics, tax other carbon later.

Plastic’s enormous negative externalities are more localized than burnt carbon’s.  A nation or a state could readily tax plastic, unlike all carbon.   A simple weight tax would be an easy, easy place to start.  Refinements, if any, could come later.

AND a tax on plastics would largely avoid the trickiest part of carbon tax design — the task of creating a Border Trade Adjustment.  A BTA would be essential for a carbon tax, to keep foreign manufacturers from beating tax-paying domestic competitors.  A carbon BTA would be the work of many lifetimes.

But a tax on plastics can simply omit a BTA.  Plastics used in manufacturing are trivial, so domestic producers need not fear imports beating the system.  It would cost more to figure the tax than it would yield.  You could tax manufacturers and first importers by the gram or pound.  You could start with single-use plastics.  This is even more obviously needing to happen than taxing even weed.

 

 

The other side: Arguments for NOT taxing nicotine in e-cigs

I’ve suggested taxing e-cigs by nicotine content.  Here’s another view in CAPS:  some excerpts from an interesting post from the Tax Foundation that takes the other side:

“NICOTINE CONTENT ALONE DOES NOT DETERMINE NICOTINE ABSORPTION. DIFFERENCES IN ELECTRONIC CIGARETTE DEVICE DESIGN, AS WELL AS NICOTINE PRODUCT DESIGN, HAVE BIG IMPLICATIONS FOR HOW MUCH NICOTINE IS ABSORBED BY THE CONSUMER.”  I don’t doubt that, but don’t know enough about it.

“NICOTINE IS THE ADDICTIVE SUBSTANCE IN THE PRODUCTS, BUT NOT THE MAIN HARMFUL INGREDIENT.”  I thought it was the main harmful ingredient.  But the non-drug substances in vapor can’t be good for the consumer.

“TAXING BASED ON NICOTINE CONTENT WOULD FAVOR LOW-NICOTINE LIQUIDS AND COULD ENCOURAGE INCREASED CONSUMPTION IN QUANTITY OF LIQUID. FOR INSTANCE, A 3 PERCENT NICOTINE-CONTAINING VAPOR POD WOULD BE TAXED AT $0.68 WHEREAS A 5 PERCENT VAPOR POD WOULD BE TAXED AT $1.15.”  But wouldn’t consumers be seeking nicotine directly, and thus be indifferent between low-nicotine and high-nicotine liquids?  That is, wouldn’t they titrate, vaping until they got enough?  Taxing by volume of liquid, without regard to nicotine content, would incentivize the production of high-nicotine products.  If nicotine is “not the main harmful ingredient,” such an incentive would be OK.  But is vaping itself the harm-producer?

“TAXING BASED ON NICOTINE CONTENT WOULD REQUIRE EXTENSIVE TESTING, AND ENFORCEMENT WOULD BE EXPENSIVE.”  Canada is taxing liquid cannabis by THC, but I don’t know the cost of enforcement.  I suppose nicotine testing would be similar.

Still thinking here.  It looks like a key question is whether it’s nicotine or vaping generally that should be the target of the tax.  I’m listening.

 

 

 

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”