The Center for New Revenue

[UPDATE:  That 8 percent rate never took effect — not for a day.  Colorado reversed course  entirely, pushing the rate up to 15 percent instead.  Here’s the new rule: (ephemeral state site: https://www.colorado.gov/pacific/tax/marijuana-taxes-file; saved version: Copy of Regs on unaffiliated sales in CO 2017 SB192):   “Effective August 9, 2017, . . . unaffiliated retail marijuana business will calculate their excise tax at 15% of the contract rate.”  See also Fact Sheet saved at CO unaffiliated tax Aug 2017.]

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The decision of the Colorado Legislature in 2015 to decrease the state’s marijuana retail tax from 10 percent to 8 percent, effective mid-2017, was inexplicable. The industry needs low rates in the early days, not later.

So Gov. Hickenlooper’s call to let the effective date expire meaninglessly, and for an increase to 12 percent, is sensible, and not surprising.  Here’s that story: Continue reading “Unforced tax error in Colorado”

This is Fake History: “The original sponsor of 280E, former Rep. Pete Stark (D-CA) . . . .” I see that statement that Mr. Stark sponsored 280E, for example, in Brett Stone’s newsgroup, https://groups.yahoo.com/neo/groups/mmjnews/conversations/topics/37712.

Mr. Stark now opposes 280E, which well he might, but that doesn’t make him the, or an, “original sponsor.” 280E originated in the Senate Finance Committee in 1982, when Bob Dole chaired it, as the legislative history, from the Joint Committee on Taxation Blue Book indicates: https://newrevenue.org/wp-content/uploads/2013/03/1982-blue-book.pdf.  For a balanced view of 280E, see https://www.brookings.edu/blog/fixgov/2015/12/18/how-bob-dole-got-america-addicted-to-marijuana-taxes/.  For a middle ground compromise, suggested by NORML, between current law and repeal, see https://newrevenue.org/2017/02/16/5139/.  And it’s 280E, not 280e, not 280(e).  It comes right before 280F. Continue reading “Fake History of 280E”

Colorado’s nominal tax rate of 15 percent now yields DE FACTO a historically low tax of 49 cents a gram on flowers or bud, and a steady rate of 17 cents a gram for trim or leaves.   Continue reading “Colorado marijuana tax rates hit all-time low”

Cliffs, Discontinuities, Thresholds:

Don Marron illustrates that cliffs make  little sense for soda taxes here or at http://www.taxpolicycenter.org/taxvox/building-better-soda-tax.

Cliffs create problems for the income tax here —http://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=9520&context=penn_law_review

For marijuana grows, cliffs’ problems are discussed here or at https://newrevenue.org/2015/10/07/humboldts-principled-cannabis-tax/ Continue reading “Do you want your taxes smooth or spiky?”

Transfer pricing explained, by the Nicholas Confessore of the New York Times:

What Oesterlund [a wealthy individual hiding assets during a divorce] had done is known as “transfer pricing,” a practice that has come under growing criticism in recent years. Multinational corporations use it to shift their costs to high-tax countries and their profits to low-tax countries. Often, there is little or no economic reality to these transactions. Continue reading “Transfer pricing explained”

If you believe numbers from the marijuana industry, repeal of federal tax Code section 280E might cost some $1.3 billion in 2020 alone, and then rise steadily after that.

Right now, section 280E says sellers of federally illegal drugs can’t deduct advertising, marketing, or selling expenses. They can deduct only cost of goods sold. They deduct product cost – what they pay to grow marijuana, or to buy it from a grower or reseller.

Once marijuana is no longer a federally illegal drug, 280E ceases to apply, and its revenue disappears.

How much revenue would 280E’s disappearance lose?  That’s a tough question, and I don’t know.  According to some industry numbers, though, repeal could cost over $1 billion a year in federal tax revenue by 2020. Continue reading “280E revenue cost”

The field of marijuana taxation turned into the field of cannabis revenue, and now it’s getting down to the level of Technical Corrections. Keith Humphreys explains a Prop 64 drafting blunder. (https://www.washingtonpost.com/news/wonk/wp/2016/11/16/the-marijuana-initiative-blunder-that-could-cost-california-millions/).

No one’s perfect. I do some proofreading and editing for hire,  Continue reading “Avoiding drafting blunders”

Recreational marijuana taxes were on the ballot in 110 Oregon localities on November 8. Every single tax measure won voter approval (http://gov.oregonlive.com/election/2016/general/marijuana-results/). Continue reading “Marijuana taxes on Oregon ballots: 110 wins, 0 losses”

A friend who is a tax policy expert writes, after I sent him my 280E article, https://www.brookings.edu/blog/fixgov/2015/12/18/how-bob-dole-got-america-addicted-to-marijuana-taxes/:

“Thanks for your article;  it’s really interesting and thought-provoking.  You make a better case for 280E than Continue reading “Pushback on 280E”

California Board of Equalization elected Member Jerome Horton, an opponent of Proposition 64, came up with an October surprise to illustrate a weakness in the proposal. That weakness didn’t prevent its passage, but it lingers.

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).

That makes no sense to me. It’s a roller coaster ride, with no discernable rationale.  A “blunder.” Continue reading “$50 million “blunder” in Prop 64?”

Drug Policy Forum of California provides these results of local California ballot measures, where it looks like every stand-alone marijuana tax increase passed.  CORRECTION:   The town of Colfax voted 63% for a tax measure that required a 2/3 majority.  That’s the only loser.  http://www.drugsense.org/dpfca/votersguide1116.html#LOCALS

Beyond percentage of price, tax bases include:
Canopy, with different rates for indoor, outdoor, and sometimes mixed light.
Weight, with different rates for bud and trim.

Some remembered indexing. One phases out canopy taxes when the State sets up a weighing program.

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Here’s the story, quoted from the Drug Policy Forum of California:

LOCAL BALLOT MEASURES

Adelanto – Measure R would impose an excise tax of up to 5% on all types of commercial marijuana activities. PASSED 67-33% Continue reading “Groundswell for local marijuana taxes in California”

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?”