The Center for New Revenue

Having looked at deliberately low Post-Prohibition federal alcohol taxes as a model for low early cannabis taxes (with the RAND Vermont report alluding to a “tax holiday”), I was glad to see some state history pointing in the same direction.  The following is from “The Failed Promise of Legal Pot,” By Tom James, in the Atlantic:

“Rear Admiral Luther E. Gregory . . . held the solution to a much earlier black market in Washington state. Continue reading “Ultra-low marijuana taxes — but only at first”

Updating a post from 2013, which reported that 280E was “Not Strictly Enforced.” First, the old post; then, some current reactions. Continue reading “280E Enforcement”

Notes for talks to local California elected officials and staff about local taxes on cannabis, to be given in Riverside April 21 and Irvine April 22. Continue reading “Local cannabis taxes in California”

Here’s news about local marijuana revenue in Southern California, from the Press Enterprise, http://www.pe.com/articles/marijuana-800455-city-desert.html?page=2.  All that follows is an excerpt:

Desert Hot Springs is preparing to become what one grower called “the Silicon Valley of marijuana” by granting permits to cultivate. At least one project is expected to start construction in about a month. Continue reading “Desert Hot Springs looks at huge revenue from cannabis”

This is included in a April 21 post on newrevenue.org.

I’m giving panel talks on this topic April 21 and 22 in Riverside and Irvine, California. California gives localities a free hand, legally, to impose taxes and fees on cannabis commerce, but economically, their hand is less free.

7 reasons localities have limited economic power to collect taxes or fees on cannabis: Continue reading “Limited local economic power to tax cannabis”

Oglesby 830am April 18 Tax panel has slides from my panel appearance at http://cannabis-summit.org.

Here is the conclusion, listing taxes that a jurisdiction might add over time, one by one, in creating a tax regime:

• Start low and go slow.
• 280E ad deduction rule — Retain or tweak
• Tiny canopy license fee
• Modest tax on percentage of retail price
• Later, tax on cannabis by weight; Tax stated THC (backup – AMT)
• Later, tax on concentrates by weight of THC

 

The cannabis industry, or some of it, wants taxes as low as possible. Consumers, at least some of them, display different interests.

I asked my friend Allen St. Pierre, head of NORML, the lobby for cannabis consumers, about his view of taxation. (Congratulations to new parents Allen and his wife on the birth of their daughter.) Here’s what Allen authorized me to publish:

“Consumers will pay whatever vice tax society wants so long as the taxes are sufficiently low enough so as not to foster an untaxed and unregulated black market in cannabis production and sales.” Continue reading “Whatever vice tax society wants”

“Regulating Marijuana in California,” a Report by the Public Policy Institute of California, does a good job of explaining some of the tax issues involved with legalization.

But rather than dwell on what the PPIC got right, I’ll write about two problems. Unlike my friends who study drug policy broadly, I look just at the tax part.  Mostly, I’ll quote from the RAND Report, Considering Marijuana Legalization: Insights for Vermont and Other Jurisdictions, http://www.rand.org/pubs/research_reports/RR864.html, which is in the public domain, and which I helped write.  The quotes are in bold.

1. Colorado’s weight-based tax

The PPIC Report overlooks the way Colorado actually taxes product at the producer level, which is by weight. The rate of the weight-based tax has changed to approximate 15 percent of the latest market value, but the RAND Report explains it this way: Continue reading “PPIC on taxes”

Reading in the NYT today, about Intel’s Andy Grove: “There was room for improvement, he argued, for what he called ‘job-centric’ economics and politics. In a job-centric system, job creation would be the nation’s No. 1 objective, with the government setting priorities and arraying the forces necessary to achieve the goal, and with businesses operating not only in their immediate profit interest but also in the interests of ‘employees, and employees yet to be hired.’”

Tax rules can nudge toward job creation: In 2013, I suggested some loosening of the 280E tax on marijuana selling expenses:

“And what about salaries of retail clerks? Effective, motivated sales people can stoke demand. But legislators may be more concerned about creating jobs than about dampening demand for marijuana. So they could cap the tax deduction for pay to for sales people, say at the level of the minimum wage. That approach would tend to favor jobs — and spread them around. Continue reading “Job-centric 280E Reform”

Latest on RICO by Joel Warner of IBTimes is here. I’m quoted:

But if RICO lawsuits are so powerful, why haven’t there been more of them since Cooper & Kirk filed the first two in Colorado early last year? It could be that there just aren’t that many folks in the anti-marijuana contingent who have the interest and resources to mount such expensive and complicated legal attacks, even if they’re likely to pay political and financial dividends down the line. “One possibility is the war is over and there is nobody left on the field defending the territory of ‘Just say no,’ ” said Pat Oglesby, a tax attorney who studies marijuana at the Center for New Revenue in North Carolina.

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But another plausible explanation is that there is no money in these suits for plaintiffs.  Warner’s article elaborates on that possibility.  The court that dismissed the most recent suit noted that the plaintiffs had not furnished proof.  Plaintiffs had not even submitted appraisals showing loss of value of property — to try to blame on neighboring marijuana business.  My friend Sam Kamin points out that property values next to marijuana operations in Colorado have typically risen – not declined.   In any event, whatever opponents of legalization are out there, they don’t see RICO as such a formidable weapon that they use it frequently.

RICO and federal income taxes hit private sellers of marijuana but not government stores.  The exemption for governments from RICO is explained here, and federal income tax is explained here.  No federal income tax means no 280E.

https://newrevenue.org/2016/01/05/state-marijuana-businesses-are-immune-from-rico/; http://taxprof.typepad.com/taxprof_blog/2016/02/leff-presents-taxing-governmental-marijuana-sales-today-at-indiana.html

The public-domain 1982 Report of theNational Task Force on Cannabis Regulation on the Regulation and Taxation of Cannabis Commerce is at Report of NTFCR 1982 (55MB — SLOW DOWNLOAD after next click). My friend Dick Evans, Massachusetts lawyer and cannabis activist, was Chair.  It seems quaint to him now, but it should not be lost to history.

It proposes a federal excise tax, based on THC content. And it starts by excerpting this quote, from FDR, speaking of alcohol Prohibition:

“We threw on the table as spoils to be gambled for by the enemies of society the revenue that our Government had theretofore received, and the underworld acquired unparalleled resources thereby. Continue reading “Legalizing Cannabis, 1982-Style”

My friend Don Marron reports on a new sugar tax in the U.K.:

“Beginning in 2018, the United Kingdom will charge the equivalent of 0.75 cents per ounce for drinks that contain more than 3 teaspoons of sugar in an 8-ounce serving and a full cent per ounce for drinks with more than 5 teaspoons per serving. These tax levels are similar to the penny per ounce that Berkeley, California levies on sugary drinks.”

So the tax (0.75 cents per ounce for drinks that contain more than 3 teaspoons of sugar in an 8-ounce serving and a full cent per ounce for drinks with more than 5 teaspoons per serving) yields these results; I take “more than” to mean “at least,” for simplicity:

If there are 3/8 tsp per ounce, the tax is 0.75 cents per ounce
If there are 4/8 tsp per ounce, the tax is 0.75 cents per ounce
If there are 5/8 tsp per ounce, the tax is 1.00 cents per ounce
If there are 6/8 tsp per ounce, the tax is 1.00 cents per ounce.

That leaves a lot of incentive to come in at 4.9 tsp per eight ounces (or 4.9/8 tsp per ounce).  There’s a tax cliff — take one incremental step from 4.99 to 5.01 and . . . OOPS. Continue reading “Clunky, Cliffy U.K. Soda Tax”

Text of Court order dismissing Rye RICO case in CO.

Excerpt:  Plaintiffs insist that the allegations of their complaint regarding the noxious order emanating from the marijuana grow operation near their property permit a reasonable inference that the value of their property is negatively impacted.2 I cannot agree. Plaintiffs’ allegations in this regard – apparently premised on an assumption that “everybody just knows it’s true” – are insufficient to meet their pleading burden. Plaintiffs provide no factual support to quantify or otherwise substantiate their inchoate concerns as to the diminution in value of their property. They do not allege the land has been appraised for lesser value than before the grow operation opened. Continue reading “Rye RICO dismissal — text”

My friend Miles Light supplied this guest posting, aimed primarily at a Canadian readership;   Miles is a Ph.D. economist at the University of Colorado, and is a founding partner at the Marijuana Policy Group, a Denver-based economics consultancy.  I’m delighted to post this.  It cheers me up to see smart, hard-working, public-spirited, and young (compared to me) people like Miles studying the issues.

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Revenue Realities
Miles Light

In the unknown ether of potential marijuana sales and taxes, wild estimates abound. These days, more accurate and realistic estimates are possible. Canadians can ignore them at their peril.

When it comes to legalizing marijuana, the term “anything goes” seems appropriate. In a pattern that follows what happened in other jurisdictions, the economic and political pundits seem to be mystified regarding what would happen when marijuana is legalized in Canada. By far, the most common unknowable unknown is the estimate of tax revenues from pot. Speculation abounds now in Canada, where estimates taken “from the hip” seem to receive equal press and equal legitimacy as quarterly GDP estimates from Statistics Canada. One recent example is a January 28 report by CIBC World Markets, where the author estimates marijuana tax revenues could be “near $5.0 billion”. Unless there is a pot-infused revolution in the Northern Commonwealth, that’s not happening. Continue reading “Dr. Miles Light — Revenue Realities”

Inequality has hardly been wiped out by the income tax, which has turned into a joke as huge corporations put trillions of dollars into untaxed income — offshore. Don’t get me started.

Plus, the power to tax is the power to destroy, and if you want to create jobs, income may be the next-to-worst thing to tax (tax base) you can find. Payroll is worst.

So let’s tax pollution we can measure. Let’s tax carbon. Let’s tax alcohol more. Cannabis is at the bottom of the list, but we’ve got to start somewhere, and we haven’t even tried some of the best revenue models for that substance yet.

 

“It’s too hard to adjust taxes quickly enough,” said Pat Oglesby, a North Carolina tax lawyer who was chief tax counsel for the Senate Finance Committee from 1988 to 1990 and who now researches marijuana taxes. “Legislatures love lowering taxes. Getting them to raise taxes is like pulling teeth.” What’s more, if legislators overdo it and set taxes too high, they’ll risk reawakening a black market in untaxed drugs. — Dan Baum, in Harper’s:

Here’s some context, from the article: Continue reading “Quoted in Harper’s”

The municipally owned cannabis store in North Bonneville, Washington, celebrated its one-year anniversary of operation on March 7. Meanwhile, the municipality of Hancock, Maryland, has agreed to become an equity partner in a medical cannabis business, agreeing to take five-percent ownership of a company that plans a big growing operation there.