Keeping my mind off the election, I’m giving a guest lecture at my friend Peter Barnes’s VAT and Sales Tax class at Duke Law and Sanford Public Policy Schools today. Readings are Sean Lowry’s excise tax study for the Congressional Research Service and RAND-Vermont chapter 5.
Slides are here: barnes-sales-and-vat-2016. The word excise can mean cut out . . .
[Update, 10 December 2016: For libertarians, government sales are anathema. For liberals, nullification of federal law by a state or locality has a history of association with racism and even slavery.]
News from The Advertiser in Louisiana:
BATON ROUGE — Louisiana State University and Southern University are set to become the state’s biggest growers of marijuana – and they are looking for private investors to underwrite the project. Continue reading “State plans to grow marijuana”
Politico.com’s Bernie Becker has this on Code section 280E’s tax disadvantage for marijuana:
THE CASE FOR 280E: As we’ve noted here previously, the five states that have a chance to legalize recreational marijuana next week could nudge Congress into rethinking some of their positions on pot. Among the potential debates: whether to end the current provision barring legal marijuana dealers from deducting many of their normal business costs.
The case for exempting legal marijuana dealers from section 280E of the tax code — which is aimed at drug traffickers — is pretty simple: The current setup is unfair to businesses that are otherwise following state and local law. (Side note: The semi-regular news conference about legislation to allow pot dealers those deductions, featuring the odd couple of Democratic Rep. Earl Blumenauer of Oregon and Grover Norquist of Americans for Tax Reform, is one of Morning Tax’s favorite Capitol Hill events.)
As for the case for keeping 280E for even legal pot sellers, Pat Oglesby, a former Capitol Hill tax hand, maintains that the tax code section could be the most effective way to limit marijuana advertising, thus reducing the exposure to teenagers. “Maybe laws can’t stop marijuana marketing, but taxes can slow it down,” Oglesby wrote at Brookings last year. Continue reading “Politico on 280E”
Whole thing is worth reading. http://www.recorder.com/marijuana-tax-5603705
Here are excerpts:
For one national marijuana tax policy expert, effective marijuana taxation is all about how it’s applied to make sure a state rakes in adequate revenue from legalization to cover administration costs, deter illegal sales, and fund other parts of the state budget. It’s a delicate balance.
Pat Oglesby is the founder of the tax policy nonprofit Center for New Revenue and former chief tax counsel of the U.S. Senate Finance Committee. He said Question 4’s price-based 10 percent sales and excise tax on marijuana and the state’s absence of a tax on medical marijuana present some specific challenges to effectively taxing the product under legalization. It’s lower than both Colorado’s and Washington’s tax rates. Continue reading “Taxes in MA marijuana initiative”
Five states have ballot initiatives to legalize recreational marijuana this November. Once fully effective, they all give a tax break to medical marijuana. Here are details:
State tax on recreational marijuana, if initiatives pass:
CA: 22.5% + $0.33/gram
NV: 21.85%
AZ: 20.6%
MA: 10%
ME: 10%
State tax on medical marijuana, if initiatives pass:
CA: 15% + $0.33/gram
NV: 6.85%
AZ: 5.6%
ME: 5.5%
MA: 0% Continue reading “Medical marijuana tax breaks in 5 ballot measures”
Ordinarily, I stick to tax policy, but I was in Denver last week, where Measure 300, is on the ballot next week. It allows consumption of marijuana in private businesses.
So does Holland, people might say, but Holland doesn’t allow pot in bars. Measure 300 does. Continue reading “Pot in bars?”
Quoted accurately by Bernie Becker:
THE PERILS OF TAXING POT: Recreational marijuana vendors — the legal ones at least — have some pretty well-documented issues with taxes. They have trouble finding banks willing to do business with them, for instance, and they can’t take normal business tax deductions.
But Pat Oglesby, a former lawyer for the Joint Committee on Taxation, writes that there could be a broader issue with how states where recreational marijuana is or might become legal are taxing the product. (Recreational marijuana is legal in four states, and on the ballot next month in five others.) Writing at The Huffington Post, Oglesby says it’s a trap to tie tax collections solely to price, which he argues will plummet as more states decide to legalize it. All five states with ballot measures have a tax on price, but Oglesby gives California credit for also tacking on a weight tax. “If federal legalization is the ultimate goal, it makes sense to try different taxes, especially the quantity-based kind the federal government uses for tobacco and alcohol. Seeing what taxes work well will give Congress comfort,” he wrote. Continue reading “Politico article on marijuana taxes”
Here are tables looking at the 5 adult-use cannabis initiatives on November ballots:
Can Legislature amend November marijuana initiatives?
CA: for taxes, only with 2/3 of each House; some amendments need only simple majority
NV: only after 3 years
AZ: only with 3/4 of each House
ME: Yes
MA: Yes
If recreational marijuana legalization passes, state tax on it will be:
CA: 22.5% + $9.25/oz. Continue reading “5 marijuana intiatives this year”
Here is an SEC filing from a company that wants to be a tax-advantaged REIT, renting to marijuana companies:
“We are a newly-formed, self-advised Maryland corporation focused on the acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for their regulated medical-use cannabis facilities. Initially, we intend to acquire our properties through sale-leaseback transactions and third-party purchases. We expect to lease our properties on a triple-net lease basis, where the tenant is responsible for all aspects of and costs related to the property and its operation during the lease term, including maintenance, taxes and insurance.”
Marijuana Taxes on 2016 Ballots
A non-California-centric condensation of Best Marijuana Taxes Yet: California’s Proposition 64, by Pat Oglesby
Marijuana legalization is reaching new heights of public approval, and voters will see new ballot proposals in five states this November. Weak taxes taint four of the initiatives — Arizona’s Proposition 205, Maine’s Question 1, Massachusetts’s Question, and 4 Nevada’s Question 2.
But California’s Proposition 64 contains the strongest marijuana tax structure voters have ever seen. Only California avoids the trap of tying tax collections directly to sure-to-fall prices, and the trap of collecting next to nothing from reportedly-medical users. But is it flexible enough?
The dangers of price taxes Continue reading “Marijuana Taxes on 2016 Ballots”
Excerpts from Joel Warner’s eye-opening article, EMBRACING POT: Weedtown, USA: Home to America’s First City-Owned Pot Shop:
Inside the Cannabis Corner’s . . . facility is a one-of-a-kind experiment. The shop, which opened its doors in 2015, is run by the city, making it the only government-operated cannabis store in the country. By September 2016, it had generated $2.2 million in revenue, Continue reading ““America’s First City-Owned Pot Shop””
Summary: I give California’s Proposition 64 very high marks for tax structure, avoiding two deadly tax traps “better than any marijuana initiative voters have ever seen..” I asked Rachel Barry, a public health expert and my good friend and conscientious colleague on the Newsom-ACLU California Blue Ribbon Commission on marijuana legalization, what she thinks of Proposition 64 from a public health perspective – does she oppose Proposition 64, or just severely criticize it? I asked because I wanted to quote her in my document.
That resulted in the following back and forth. I do not express an opinion on her views, but want to put them on the record:
RB:
I’ve been thinking a lot about this lately. I’m more of the severe critic. Continue reading “Rachel Barry on Proposition 64”
Best Marijuana Taxes Yet: California’s Proposition 64
Two devastating traps threaten taxes on newly legalized marijuana. One is the quicksand of inflexibility, leading to impotence during a whirlwind of market change. The other is playing favorites, opening an abyss of tax evasion. California’s Proposition 64, on the ballot in November, avoids those traps better than any marijuana initiative voters have ever seen.
The test of time
Taxing the embryonic legal marijuana industry is like buying clothes for an expected baby. Prepare for changes. The marijuana industry will evolve in ways we can’t predict. We don’t know the best way to tax marijuana, and even if we knew, that way will prove wrong as the market evolves, with free market entrepreneurs pursuing wild ideas, surprising everyone but themselves.
But we can foresee one trend. The early legal market will face a price war from the incumbent black market, but then pre-tax prices will drop, as the legal market is liberated from the “prohibition premium” — the extra costs and risks of operating illegally. That is, eventually, the legal industry will grow and become efficient, pushing pre-tax prices down – way down. Why should cannabis cost so much more than tea? Pre-tax, after federal legalization, it won’t.
Taxes calculated as a percentage of price are child’s play to create. A price-based tax will start strong. Then, as pre-tax prices collapse, so will price-based tax collections. Continue reading “Best Marijuana Taxes Yet: California’s Proposition 64”
IRS recomienda a los contribuyentes prepararse para huracanes, inundaciones, y otros desastres naturales Continue reading “IRS warning about hurricanes: Copy tax documents before you evacuate. “
Here’s how to start low and go slow: Not just phase-ins of rates, but staged effective dates for each new excise tax or tax base, one by one—that’s the insight from the Hoover Institution’s Alvin Rabushka’s enormous Taxation in Colonial America, now discounted to under $30 in paperback.
RAND-Vermont put it this way:
“The simplest, least evadable revenue sources come first. Flat annual license fees are easy to collect: Authorities have to find the enterprise just once and do not have to measure anything. Import duties are easier to collect than excises: Continue reading “Staging Marijuana Taxes”
Do municipalities in Washington State and Maryland have more freedom to experiment with marijuana legalization than those in California?
Here’s the context:
A cautious way of legalizing marijuana is to have government stores do the selling. That may sound like socialism, or Democratic Socialism. But it’s the plan that teetotaling Baptist businessman John D. Rockefeller, Jr., urged for alcohol at the end of Prohibition. He put habit-forming intoxication in a separate category of commerce, separate from commerce where the free market works best. Government stores not only allow more control of commerce, they can allow the government a revenue advantage.
And since March 2015, for marijuana, North Bonneville, Washington, has been using just that method.
Now Oakland, California, home of America’s first marijuana tax, approved by voters by a 4-to-1 majority in 2009, is considering municipal ownership of all new marijuana businesses. Continue reading “Does California Law Limit Localities’ Legalization Options?”
It sounds like taxing jurisdictions are waking up to the shrewdness of keep marijuana taxes low at first, but not forever, as the industry matures. Monterey County, California, has been considering a plan to phase marijuana tax rates up:
“Developed with the help of consultant HdL and Associates, the tax would be phased in over a five-year period. For sales, the tax would start at 5 percent of gross receipts per fiscal year effective Jan. 1, and increasing 2.5 percent every fiscal year beginning July 1, 2020, to a maximum rate of 10 percent. For general cultivation, the tax rate would start at $15 per square foot of canopy, or growing area effective Jan. 1, and increase by $5 every fiscal year beginning July 1, 2020, to a maximum rate of $25 per square foot. Continue reading “Phasing in marijuana taxes — Monterey County”
The Center for New Revenue 