Critique of NC medical marijuana bill, SB 711

I sent this message to the sponsors of North Carolina Senate Bill 711, which would legalize medical cannabis, and which I think needs work.

Dear Senators Rabon, Lee, Lowe, deViere, Harrington, Nickel, and Woodard:

Thank you for your leadership on medical cannabis.  I support the goal of your effort in general.  

I’m originally from Grifton in Pitt County, and am now a lawyer in Chapel Hill.  I served as a tax policy lawyer on the staffs of the Joint Committee on Taxation and the U.S. Senate Finance Committee in Washington many years ago, and have worked for Vermont and Washington as a paid marijuana revenue consultant, and for many other jurisdictions pro bono.  I’m the founder of the Center for New Revenue, a tax policy non-profit.  I have spoken and written widely on cannabis policy.  I have not worked for marijuana sellers.  (CV attached.)

Marijuana is a powerful drug that heals and helps people, but it intoxicates others, and a lot of money from medical marijuana sales will be on the table, so there’s controversy.

There are no easy answers.  But here are a few technical comments.

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State residency requirements for cannabis sellers aren’t working

Washington State is trying to let only Washington residents sell cannabis.  That’s not holding up.

My friend Crystal Oliver of the Washington Sungrowers Industry Association writes:

We have our own case winding it’s way through the courts: 

They’ve not been able to actually enforce this in WA practically speaking. These [out-of-state] interests just own all the real estate, equipment, and intellectual property of the marijuana business and get paid that way. 

Right now the WA ban on out of state ownership & investment just creates a situation where only those with well-paid, slick attorneys get out of state investment. 

The trickle-down hope for cannabis social equity licenses — Dan Riffle

My friend Dan Riffle, former staffer for the Marijuana Policy Project and for Alexandria Ocasio-Cortez and who now works for the District of Columbia, says this:

“And you know if your view of wealth inequality, if your view of you know fortune 500 company CEOs and the problems that they pose is that there’s too many white men, which is definitely a problem, if that’s your only view of the problem, then maybe that’s a good solution to you to have you know four or five more millionaire billionaire minority applicants.” 

Trickle-down economics are not the only problem that social equity license plans face.  Other problems include phony licensees pretending to be deserving, and the competition that actual deserving licensees face from well-funded licensees. 

Here’s the transcription. 

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Social Equity in Cannabis — Dan Riffle

My friend Dan Riffle, former staffer for the Marijuana Policy Project and for Alexandria Ocasio-Cortez and who now works for the District of Columbia, says this:

“And you know if your view of wealth inequality, if your view of you know fortune 500 company CEOs and the problems that they pose is that there’s too many white men, which is definitely a problem, if that’s your only view of the problem, then maybe that’s a good solution to you to have you know four or five more millionaire billionaire minority applicants.” or

Trickle-down economics are not the only problem that social equity license plans face.  Other problems include phony licensees pretending to be deserving, and the competition that actual deserving licensees face from well-funded licensees. 

Here’s are excerpts from the transcription. 

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Marijuana tax class

Preparing for another guest lecture on marijuana tax policy, for the June 30 class of my old friend from Senate Finance Committee staff days, Chief Tax Court Judge Maurice Foley, Jurist in Residence at the University of San Diego, I shrink at the task.

Nobody knows how to tax cannabis.

We don’t even know what we’re dealing with.  Cannabis consists of at least 545 distinct compounds, like THC, the main intoxicant, and CBD, innocuous enough to be sold over the counter.  But some of those other 543 compounds, other cannabinoids and terpenes and maybe more, may create an “entourage effect” more powerful or at least different from what isolated compounds give.

And then we’ve got folks taking CBD and turning it into new, engineered products, like delta-8 – milder than delta-9 THC, but still an intoxicant.

And what are we so mad at that we want to tax weed?  Some people like weed so much that they overdo it, and can’t quit.  Jerry Brown worried that a nation of stoners would not accomplish much.  Maybe there’s a puritanical “kill-joy” streak that gets nervous when people have too much fun by artifice.  Well, keeping the price high makes it harder to kids to afford with their pocket change.

But marijuana can be medicine – or at least some of its compounds can, and the whole plant, with its entourage effect, can.  How can we know when it’s medicine and when it’s recreational?  (We can’t, at the margin.)  Meanwhile, recreational users say its benefits – to them and to society – outweigh its costs.

What tax base do we use?  The main nominees are price (ad valorem), weight, and THC (potency).  

Adding to complexity, we’ve got all kinds of products.  There’s raw plant matter, with subcategories of bud (flower), trim (leaves), and more – all taxed at by different states at different rates per gram.   

And there are products that are processed or “concentrated” from raw plant matter, like edibles (brownies, gummy bears) and other products, like tinctures, suppositories, and powerful “wax” or “shatter”.  

Taxing by price is simple, or it can be.  Most states that tax by price use one rate for everything.  Illinois complicates things, with a 20% rate for edibles, but a split rate for everything else:  a 10% rate for everything else with less than 35% THC, and a 25% rate for everything else with 35% or more THC.  In practice, that complication aims to tax flower at 10% and “wax” or “shatter” at 25%.  

Some states tax raw plant matter by weight, early in the supply change, whether it’s sold as raw plant matter or processed, with different categories – bud or flower being taxed at a higher rate per gram than less powerful and less valuable trim or leaves.  Many states create intermediate categories, like small bud and immature bud, with tax rates between the rate for flower and the rate for trim.

Canada taxes flower and trim (that is, raw plant matter) by weight, and everything else by THC content.  

New York and Connecticut tax by THC across the board – with different rates for different products.  Here are New York’s tax rates per milligram of THC:

(1) Flower 0.5 cents;

(2) Concentrated cannabis 0.8 cents; and

(3) Edibles 3 cents

Connecticut has different rates, but similar categories and ratios.

These ratios come, apparently, from a single study out of Colorado in 2015.

Maybe all this uncertainty, and these experiments, will show how marijuana needs to be taxed.  Don’t think it won’t happen just because it hasn’t happened yet.

Government monopoly cannabis retail sales in Canada — preliminary

How are government monopoly cannabis retail sales working in Canada? Pretty well, maybe.  There’s a lot to learn.

Most provinces allow private retailing.  Two of those that don’t, Quebec and Prince Edward Island, have reportedly done the best at capturing market share from bootleggers.

Brock University Business School Professor Michael J. Armstrong presents this data:

 Michael J. Armstrong, “Legal cannabis market shares during Canada’s first year of recreational legalisation”, International Journal of Drug Policy, Volume 88, February 2021, 103028,

I don’t know how much to make of that data, which is now old.  Ontario was having trouble then, and at one point switched from government to private retailing.  But government monopoly retailing in two provinces was reportedly doing well at defeating the illegal market.

Beyond market share, “[i]n 2019, Quebec’s monopoly marijuana retailer – Société québécoise du cannabis (SQDC) – said it would not carry cannabis vaporizers ‘in the light of many health problems.’  Quebec also bans ‘sweet or savory edible products,’ including marijuana-infused chocolates, as well as all topical cannabis products.”

Maybe that’s a bug, driving consumers to bootleggers, or to neighboring provinces.  Or maybe it’s a feature, keeping consumers away from vaping (when was that vaping scare, anyway?) and keeping kids away from cannabis candy.

Lots to think about.

Marijuana mega-millions

Legislatures that legalize marijuana are creating fortunes for friends, so how great the temptation must be to help campaign donors who want to get rich quick by getting licenses to sell marijuana.

Here are case studies from two states where recreational marijuana is not legal.  But medical marijuana alone brings in mega-millions.

Here’s what happened in Florida:

“Less than 24 hours before the Florida Legislature passed the state’s first medical marijuana law in May 2014, Matt Gaetz and other members of the state House of Representatives rewrote the bill to limit who would be able to get in on the ground floor of what has since become a billion-dollar business.

“A number of Gaetz’s friends and allies managed to squeeze through that narrow door. Among them:

“— The brother of Gaetz’s friend and fellow state Rep. Halsey Beshears, who co-founded one of Florida’s first licensed marijuana companies and amassed a fortune currently valued at about $600 million — and became a major Republican Party donor.”

And in Pennsylvania:

“Cultivation and processing operations are fetching $100 million and more. And dispensary licenses are commanding prices of $20 million-$35 million for each storefront as the state’s retail sector consolidates.”

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Why the federal government won’t legalize marijuana soon

A friend who advocates for social equity in handling cannabis profits said on a webinar yesterday that federal legalization needs more time – so don’t rush it.  We don’t know how to protect social equity licensees, for one thing.

And Ulrik Boesen of the Tax Foundation has a bunch of questions, like these:

“How does the federal government design an excise tax for this complex market without disrupting state markets? How can federal and state testing and product safety requirements be aligned, considering how much these differ state by state?”

We do indeed need more time.  

To figure out how to reinstitute alcohol taxes after a lapse during Prohibition, Congress devoted four fill days of joint hearings to liquor taxes alone in December 1933.  Unlike with hemp drugs, we had already had lots of experience taxing liquor.  But Congress studied it thoroughly anyway.

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Pennsylvania Marijuana Monopoly + Taxes = Belt + Suspenders

An article quotes me praising state marijuana retailing over the for-profit alternative — in light of a bill in Pennsylvania to allow just that. The article, at, is throrough, but paywalled. It gives no prediction for the bill’s prospects.

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280E MJ Tax Technicality, Lawyering, and Risks

A draft sent from me to scholarly private marijuana tax attorney Kat Allen (Tax L.L.M. from NYU) is followed by her response.

My draft:

At a webinar put on by MJbizdaily last week, two contrasting styles of tax lawyering were on display.  Some say section 471(c) lets taxpayers reduce their tax bill under the section 280E Selling Expense Tax; some say it doesn’t.  I don’t know the merits of the 471(c) issue, and hope not to study them.

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Marijuana — Friend or Foe?

Many say marijuana is only good or only evil. (I’m for careful legalization, and sharing the wealth). But this septuagenarian friend, writing in early 2021, has a different take — but not one-sided. There are lots of folks who see both sides, like my old friend:

“I quit, roughly 13 years ago, give or take a few years.  I came to a fork in the road—tennis or reefer.  I could not continue to do both.  The reefer was having too much effect on my stamina and my tennis.  I was getting clobbered by people I used to beat.  So I gave up on the reefer—easily done and done in a fell swoop—and sure enough the tennis got better, until it didn’t, like recently, because of age.  I have never looked back and don’t miss being high.  If ever or when I become decrepit, I will do it again.  It was fun, but not, one hopes, for another decade or so.” 

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280E Is a Bastard. So What?

Critics of the 280E marijuana Selling Expense Tax point out that it was conceived by advocates of the discredited War on Drugs:  “Section 280E was born of politics – at the height of the war on drugs, in 1982.”  Yeah, well, in some way, 280E is illegitimate. But a child born out of wedlock might turn out to be Alexander Hamilton.

The 280E Selling Expense Tax is overbroad, for sure, but it has two big things going for it – from the perspective of much of the marijuana community.

1.  Advertising and glitzy marketing appeal to kids – and irritate their parents, to the detriment of legalization efforts.  “Marijuana sells itself,” the saying goes.  The commercial free speech doctrine says we can’t ban ads, but sophisticated consumers don’t need the ads or glitz – or the celebrity endorsements.  The 280E Selling Expense Tax makes those kinds of thing non-tax-deductible. 

2.  Big Business advertises more than small business.  Mom & Pop – and social equity licensees – can’t afford the billboards, or deploy the marketing know-how that corporate giants specialize in.  Think Budweiser ads.  And recently, “$1 out of every $6 spent on restaurant advertising in America [was] done by McDonald’s.”  That doesn’t count Burger King, or KFC.   Mom & Pop rely on word of mouth. Big Marijuana wants to start deducting ad expenses — and Big Alcohol and Big Tobacco want to get in on the game.


The marijuana community, and especially small businesses and growers (whom the 280E Selling Expense Tax barely grazes), might consider not so much the parentage of 280E, but its qualities and defects (yes, it’s overbroad in denying deductions for wages of retail clerks – a selling expense).  But some tax is going to replace 280E — with a more direct hit on consumers if not growers.

Not all bastards deserve condemnation.

Here we go: Marijuana is coming to North Carolina

North Carolina medical marijuana just got real.

Medical marijuana legalization is the law in Georgia, and is advancing in South Carolina and Alabama.  Recreational marijuana legalization is the law in Virginia.  Here in North Carolina, nothing was happening.  Only Democrats supported even medical marijuana.

But that changed overnight as two Republican State Senators came out in support of medical marijuana.  So far as I know, they are the first GOP legislators to introduce a medical marijuana bill.

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CNR says strengthen the Privileged Heir Tax

The Center for New Revenue is honored to be listed by Americans for Tax Fairness as a supporter of the Sanders-Gomez Estate Tax Reform Bill, the “For The 99.5% Act.”  The wealthy like the term Death Tax; I like Privileged Heir Tax.  Here, I’ll stick to “estate tax” as the bill does.

I got my start in tax work at the Washington, D.C. law firm Covington and Burling in the early 1980s, splitting time between international tax and, under the estimable Doris Blazek-White, estate work.  Back then, the estate tax threshold was much lower, as it should be.  But even then, the rich were getting richer.  Not like now, but privileged heirs and heiresses were already lucking into plenty of wealth they hadn’t earned.

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NY legalizes, but keeps marijuna ads non-tax-deductible

We don’t know the best way to tax cannabis, but New York State is advancing the process.

A surprising and useful feature of the New York bill is that it leaves in place “280E conformity.”  The federal government imposes a Selling Expense Tax on cannabis in Internal Revenue Code section 280E, which allows marijuana sellers to deduct only cost of goods sold on federal income tax returns.  

For New York state income tax returns, sellers follow 280E.  So on both federal and state income taxes, they can deduct only outlays to produce or buy the product.  Growers can deduct salaries for ag workers, but no one can deduct outlays for billboards, payments to celebrity endorsers, glitzy showrooms, and much more.  Too much more, maybe – not even minimum wage salaries or health benefits for retail workers.

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