Massachusetts Marijuana Tax Compromise

Here is an excerpt from my letter to the Editor of the Boston Globe, just published online:

In November, Massachusetts voters approved a 12 percent marijuana tax that would undercut the black market, but the House has proposed a 28 percent rate, in line with what other states collect.

Both sides are right — at different times. The marijuana market is a moving target, and needs a moving tax rate. As time goes on, pretax prices will fall, and the black market will weaken. So taxes can go up.

A solution is at hand — provided by proponents of marijuana legalization in federal bill S.776, the Marijuana Revenue and Regulation Act: Schedule rate increases to phase in year by year.

If increases come too fast, the Legislature can cut taxes. That avoids the problem of having legislators vote to raise taxes as needed, which is like cutting off a cat’s tail an inch at a time. Do it now and get it over with. Continue reading “Massachusetts Marijuana Tax Compromise”

Colorado marijuana taxes keep dropping

Colorado’s marijuana producer tax has hit an all-time historically low rate of 43 cents per gram on flowers (bud).

For vertically integrated companies, that 43-cent rate is arrived at by taking the statutory tax rate of 15 percent and multiplying it by per-gram Average Market Rates (AMRs) – market prices. So the nominal percentage-of-price tax is de facto based on weight.  Since market prices keep dropping, taxes do, too.  Which is primitive. Continue reading “Colorado marijuana taxes keep dropping”

Marijuana taxes and testing

As a tax person, I got involved in marijuana policy in 2009, since I figured that prohibition might not stand the test of time – and that whatever replaced prohibition would have revenue for the public. One of the problems with taxing marijuana is that heavy taxation can stifle the legal market, and thereby help the black market.

Well, it turns out that testing marijuana, at least at first, can create the same problem – high prices that consumers pay for legal product.

Here’s what happened in Oregon, according to an official and well-researched California report:

“Legal cannabis prices rise by 27%–39% in the two-month span after testing rules take effect. Revenue falls by $23,500 per dispensary due to supply constraints. Half of legal segment ($187.5 million) shifts back to illegal market. The illegal market grows from 50% to 75% while the legal market falls from 50% to 25%.” Continue reading “Marijuana taxes and testing”

World’s 1st marijuana taxes

The world’s first cannabis taxes were collected in 19th century India, so far as I know, and Dale Gieringer of California NORML, who is way ahead of me on this history, indicates that that is the case.  This chart, from the 1894 Report of the Indian Hemp Drugs Commission, is for Bengal, and shows rupees (currency unit, plus subunits) per ser (about a kilogram), collected at wholesale.   The Bengal model was followed generally elsewhere in British colonial India.

As in Colorado today with bud and trim, different cannabis products were taxed at different rates.   

currency unit formerly used in India and Pakistan, equal to 1/16 [1] rupee. It was subdivided into 4 paisa or 12 pies (thus there were 64 paise in a rupee and 192 pies)…

Thanks to the National Library of Scotland for posting this public domain material.

Current conversion standard, from Wikipedia:

Indian System Metric System
1 Tolä 11.664 g
1 Sèr (80 Tolä) 933.10 g
1 Maund (40 Sèr) 37.324 kg

 

Backfilling Cannabis Legalization History

The first footnote in my 2011 State Tax Notes article, Laws to Tax Marijuana, was this:   

1 An extensive list of [marijuana legalization] proposals appears at Richard Evans, ‘‘Cannabis Taxation & Regulation,’’ available at http://cantaxreg.com/, under ‘‘Legalization Proposals’’ (last visited Dec. 7, 2010). This site is probably the most comprehensive compilation of information about laws to tax marijuana.

That link has expired along with cantaxreg.com, so the history would be hard to trace, but Dick Evans graciously provided its contents (updated somewhat) for me to post for all comers in the public domain: Continue reading “Backfilling Cannabis Legalization History”

Speaking to Southeastern Association of Law Schools meeting

Boca Raton, August 6, 2017

Discussion Group: Growing Cannabis Law: When Grass Becomes Cash

Cannabis a/k/a marijuana, grass, pot, weed law-reforms are sprouting throughout the country. Many states now permit restricted medicinal or recreational use, possession, sale, cultivation, and transportation, creating a cash-crop business opportunity. Yet federal law still prohibits cannabis activities Continue reading “Speaking to Southeastern Association of Law Schools meeting”

Testing Marijuana for Pesticides, continued

Here are new proposed testing regulations in California — but now I follow up on a recent post, where I said that while detecting cheating in folks who test marijuana for THC might be tricky, detecting cheating in folks who test marijuana for pesticides would be a snap. Just see if follow-up testing detected any pesticides; if so, start worrying.

But a chemist friend lets me know that there is more to it:

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I differ in the pesticide opinion at the end of the article.

In science, there is no ‘zero’, there is only ‘less than’ or ‘not detected’. Continue reading “Testing Marijuana for Pesticides, continued”

Corva’s attack on cheating on marijuana plant testing

Testing companies gain customers if they can report falsely high THC in cannabis plants — and charge low prices. A friend says she quit the testing business because as an honest tester she was losing business to cheaters.

Thanks to Bob Young of the Seattle Times for brining Dr. Dominic Corva’s write-up to my attention.  (This blog doesn’t have enough readers to scoop him.)

My friend Dr. Corva looks at the cannabis testing problem in Washington.  His full write-up is here: http://cannabisandsocialpolicy.org/taming-thc-inflation-silver-bullet/.

I think Dr. Corva is a smart and conscientious advocate and thought leader, and I’m always interested in what he is thinking.

Dr. Corva’s Proposal:

“Normalize lab results by lab, and require only the percentile of each result to be listed on the package rather than a precise percentage.”

He elaborates on the problem this way: Continue reading “Corva’s attack on cheating on marijuana plant testing”

California clean-up bill does not fix tax blunder

California Board of Equalization elected Member Jerome Horton came up with an October surprise to illustrate a tax weakness in Prop 64, the California marijuana legalization initiative.  That weakness didn’t prevent its passage, but it lingers.  And a new 79-page clean-up bill does not fix it.

Member Horton alleged that a tiny, technical, last-minute drafting change in the California 2016 marijuana initiative could cost the state $50 million, starting in November. Indeed, the Board of Equalization has adopted his view and officially confirmed that the current sales tax on medical marijuana just disappears – for a while.

I don’t know how anyone would have standing to sue to reverse that ruling. So, apparently, unless the Legislature acts, the total tax on medical cannabis, over time, will be:

— 7.5%, (through the November 8 Election) then
— 0% (from certification of ballot results through 12-31-17), then
— 15% plus weight tax (starting 1-1-18).

For details, see this old post: https://newrevenue.org/2016/11/12/5032/.

Continue reading “California clean-up bill does not fix tax blunder”

Marijuana legalization grows closer with Senate tax proposal

Full article is at the link here.  Intro to new piece for thehill.com is:

Want to legalize marijuana federally? Propose sensible taxes on the drug.

That’s the tactic of a new bill from two Oregon Democrats: House Ways
and Means Committee member Earl Blumenauer and ranking Senate Finance Committee member Ron Wyden. It takes on tough questions: What should a marijuana tax measure? Should it tax medical marijuana? The Marijuana Revenue and Regulation Act (MRRA) provides thoughtful answers.

What to tax?

The 64-page bill, S. 776, and House companions H.R. 1823 and 1841, starts out problematically, taxing marijuana by price for a five-year transition period, but ends up brilliantly, with sophisticated weight-based taxes for the long run. A companion bill repeals the useful current tax on advertising. Continue reading “Marijuana legalization grows closer with Senate tax proposal”

Critique of Blumenauer-Wyden marijuana tax proposals

Superseded by this (http://thehill.com/blogs/pundits-blog/economy-budget/327694-marijuana-legalization-grows-closer-with-senate-tax).

Congressional advocates for marijuana legalization, led by Oregon’s Congressman Blumenauer and Senator Wyden, introduced three bills to advance the process. (Dividing the package allows Committees to consider parts simultaneously, rather than one after the other. That may be wishful thinking.)

Here’s an off-the-cuff preliminary reaction to the tax parts of the package.  I’ll work to refine the analysis.

For tax, the package has strengths and weaknesses. Continue reading “Critique of Blumenauer-Wyden marijuana tax proposals”

NC HB2: What Would The Founders Do?

What’s the solution to NC’s broken bathroom law? Just look to the Founders.  1200 words here. Summary below.

I.  Substance – way forward is clear:

For bathrooms, repeal birth certificate rule – HB2 is indefensibly wrong on Texas wrestler; replace with old law – Jim Martin.

For everything else, local option.

II.  Procedure is hang-up – Rs want to limit city power on local option Continue reading “NC HB2: What Would The Founders Do?”

HB2 repeal — local NDOs revived

UPDATE 31 March 2017:  Rather than delete an old post, I’m using the link to post information about the 15 local nondiscrimination ordinances that the North Carolina General Assembly brought back to life March 30. HB2 had repealed them; yesterday’s law overruled that repeal.  PDFs available on request from lawyerpo@yahoo.com. Continue reading “HB2 repeal — local NDOs revived”

“Marijuana Taxes — Present and Future Traps” from State Tax Notes

Three killer traps threaten early cannabis taxes: a feeble tax base, inflexibility, and carveouts. Essential enforcement can’t be guaranteed. And a tax that sputters along today could conk out if an interstate race to the bottom or competing federal taxes materialize.

4-week paywall has ended.  Full text (7,000 words) of “Marijuana Taxes — Present and Future Traps” from State Tax Notes of January 23 is at marijuana-tax-traps-state-tax-notes-oglesby-1-23-17.  Here are intro and conclusion:

This article will examine:
• the facts on the ground for recreational marijuana taxes;
• inherent weaknesses in early taxes;
• three problems voters may overlook when legalizing marijuana;
• the specifics of 12 state legalization initiatives; and
• three potential post-enactment problems.

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VI. Summing Up

It’s unclear that marijuana taxes will stand the test of time. Legal commerce itself could fade away with a new administration. If for-profit marijuana commerce endures, some kind of marijuana taxes will too. The tax base march of progress is likely to continue. And the tax burden can go up too. The soundness of state marijuana taxes will depend on the ability of legislatures to dodge special interests and to make midcourse corrections. But state constitutions make some initiative-passed laws inherently inflexible. Like initiatives, legislation faces threats from medical tax breaks and reliance on flimsy price-based taxes.

Post-enactment, any tax scheme faces the threat of inadequate enforcement. Interstate commerce will threaten state producer taxes, and federal tax dominance could vitiate even the soundest state tax. Voters like marijuana revenue for government. But state marijuana tax laws are likely to remain works in progress for a long time.