The Center for New Revenue

Taxing “sin,” or something the state disapproves of, gives the state a financial incentive to increase it. This article or opinion piece from Alabama lists tobacco, alcohol, gambling, marijuana — and expands the list to include abortion. It contains this quote from Dave Barry:

“The only danger I see looming ahead is that the tobacco industry will get tired of serving as the bag person for the anti-smoking effort and actually quit selling cigarettes. In that case, the only way to keep the anti-tobacco money flowing in would be for the various governments to join forces with the legal community and sell cigarettes directly to the public out of post offices.” Continue reading “Sin tax theory”

Colorado’s current producer tax rates on marijuana – replacing the 15-percent tax in the Constitution – are the subject at https://www.colorado.gov/pacific/sites/default/files/AverageMarketRate.pdf.

Bud is taxed at 66 cents a gram, trim at 12 cents a gram. Here’s how we get there:  The “average market rate” — which substitutes for real prices — for bud is now $2,007 a pound; for trim, $364 a pound. Multiply those by 15 percent to get the tax per pound, divide by 453.592 to get the tax per gram.  That’s a little higher than in 2014.

One way to approach tax design is  like bridge building.  Anyone can do it.  Throw a plank over a creek and you’ve got yourself a bridge. Say marijuana consumers pay an extra X percent at the retail counter and you’ve got yourself a tax.

At a primitive level, that all works.  For a while.  But the plank won’t handle much traffic.  And with the marijuana tax, what happens when market forces drive prices (and taxes) down?  What about a free pot with pipe purchase?  And employee discounts?  And pilfered product — or product that’s “lost” in transit?  The way we tax alcohol and tobacco is not vulnerable to these problems.  More here:  https://newrevenue.org/2015/04/28/weight-base-arbitrary/.

I got a call from 202 769 5226 (a DC number) from a woman who said her name was Shirley Carter of the IRS. Her accent was foreign. She furnished me Badge number 1090885.

There was a problem with my returns between 2008 and 2013, she said. (Note: The statute of limitations has run on some of those years.)  “Why haven’t I seen anything in the mail?” I asked. You must have misplaced it, she told me.

I asked her to remail the material. She hung up.  And hasn’t called back.

A call to that number yields only hold music.

The IRS does not call out of the blue.

Googling that number, I see this:  http://www.whocalledme.com/PhoneNumber/202-769-5226 Continue reading “IRS impostor “Shirley Carter” calls on the phone”

Here’s an excerpt from a January 7, 1934 NYT article reporting advice that the head of the Finnish alcohol monopoly gave the United States about returning to legal alcohol — which had happened December 5, 1933:

A friend objects to a weight base (X cents per gram) for taxing marijuana. “Crop quality varies enormously,” he says, “so it would be arbitrary to assess the same tax per weight for all of it.”

(For a look at an alternative — taxing by seller’s claims of THC — here is a link: https://newrevenue.org/2015/07/14/swifts-sex-tax-and-stated-thc/.)

But I still like a weight base (except if we can tax concentrates by potency).  Any tax will distort the market, one way or another.  A weight base is not perfect, but a price base is worse.

Take the beer tax. It’s based on volume only – barrels, or gallons.  Volume for a liquid is like weight for a solid.

The federal beer tax is $18 per 31-gallon barrel. State beer taxes are based on gallons, too. All these taxes apply regardless of price, or alcohol content – or quality.

Folks worry that a cannabis tax based on weight will create an incentive to make each gram as potent as possible.

But that same incentive is present with beer.   Continue reading “How a weight base for marijuana taxes is less arbitrary than beer taxes”

Here from vox.com are two objections to marijuana retail monopoly that don’t hold up, in my opinion:

“For states to establish a monopoly on marijuana production and sales, voters or elected officials would have to approve laws that essentially give state governments control over the marijuana industry. Even if a majority of Americans support legalizing marijuana, it’s unclear whether they would support turning their state into a pot dealer — and even if they did, state governments might be reluctant to do this, since it would mean forcing state employees to violate federal law . . . ” That’s from http://www.vox.com/2015/4/27/8500531/marijuana-legalization-commercialization-prohibition.

First, voters in some states might like monopoly: A poll I did among North Carolina voters in 2013 showed a clear preference for state stores (58 percent), our model for liquor, over private stores (19 percent), with 23 percent undecided. https://newrevenue.org/wp-content/uploads/2013/03/nc-marijuana-polling-march-2013.pdf, page 2.

Second, in the face of federal law, North Bonneville, Washington, is already selling marijuana via a quasi-monopoly, a Public Authority of the kind described in Chapter 4 of the RAND Report. See  http://www.washingtonpost.com/business/economy/a-local-government-in-wash-state-tries-to-corner-the-market-on-marijuana/2015/03/16/fccb8216-c9b7-11e4-b2a1-bed1aaea2816_story.html.  No arrests yet.

Not only a retail monopoly, of the kind that 17 states have for liquor, seems plausible.  Production monopoly offers a lot of control;  Louisiana is considering having LSU do the growing, as mentioned in a later post.

 

UPDATE May 8, 2015:  A volunteer has come forward.  Details as time goes on.

The Center for New Revenue seeks a volunteer researcher.   Continue reading “Volunteer researcher wanted — Found”

A Colorado bill, HB 15-1367, would cut its special retail excise tax rate on marijuana from 10 percent to 7 percent. Having come to think that early taxes have proved too high, that makes sense. But what doesn’t make sense to me is the effective date – July 1, 2017. Now is the time the industry needs relief.  Twenty-six months from now, prices may be much lower. A lower rate (7 percent) on a lower base (lower prices due to plenty of supply, etc.) just loses revenue. I would think make the rate 7 percent now, and let it bounce back to 10 percent in mid-2017.  Or at least wait and see.

Two recent bills make sense to me, with increasing rates year by year: Congressman Blumenauer’s bill, and a Massachusetts House bill.

 

UPDATE:  I negotiated the right to post this piece, and have a slightly better version here, or at https://newrevenue.org/2015/10/20/picking-winners-to-grow-marijuana/.

Original April 2015 post read this way:  “Picking Winners: Deciding Who Gets to Grow Marijuana Commercially” – an article I wrote (and waived the right to post) is here, or at http://marijuanalegalization.about.com/od/ModelsofLegalization/fl/Picking-Winners-Deciding-Who-Gets-to-Grow-Marijuana-Commercially.htm.  Comments welcomed.

 

 

Rachel Barry, a policy scholar at UC-San Francisco’s Center for Tobacco Control Research and Education and my colleague on the California Blue Ribbon Commission on marijuana legalization, has prepared this extensive chart or table comparing marijuana laws and tobacco laws.  To see it easily, click on Rachel Barry MJ policies April 17, 2015; a downloadable Word version is Rachel Barry Word MJ policies April 17, 2015.   I think it’s very useful.  The pasted version below gives you an idea, but you will probably need one of those links to see the whole thing.  (This chart is her work in progress, not that of the Commission.)

She welcomes feedback, and hopes to provide updates as laws change. Please contact her directly with suggestions, corrections, questions, and updates: email:rachel.barry@ucsf.edu,  I’ll try to keep up with her.  (Thanks, Rachel, for letting me post this.) Continue reading “Marijuana and Tobacco Laws — Rachel Barry’s Comparison Chart”

1.  Environmental — marginal pressure on carbon

2.  Progessive — wealthy and corporations are the primary stakeholders.  The housekeepers’ unions at the airline hubs may be the voices for the exception that proves the rule.

3.  I’d even be for a higher gasoline tax, and it’s regressive.  Poor folks drive farther to work than rich folks, who can afford to live in the middle of things.

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The jet fuel tax may be low hanging fruit, a sitting duck, underbrush — consensus item.  The kind of thing you put into a bill or package that a majority will sign off on.  Tax Reform, if it follows the 1986 model, would make hundreds of changes to the Tax Code.  Maybe it won’t happen.  But it won’t happen without a list.

 

In progress — comments welcomed.

UPDATED 14 May 2015:  I disparage the option of  Voucher privatization in this article more than I would now. Voucher privatization might be too unwieldy to work on a state level, but it’s conceivable on a county or sub-jurisdiction level.

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Tax folks like to work through theory.  So here’s a here is a trip to Theoryland, designed to exhaust the options for allocation of the privilege to sell marijuana commercially.

Maybe a state will say not everyone can grow marijuana commercially. If a state makes that decision (whether it should limit growing is not the subject here), how might the privilege to grow and sell marijuana be allocated? By lot, on the merits, by growing history, by charging steep fees, by annual auction, or how?  I’ll get into those options later.  Voucher privatization is a democratic model for sharing the wealth. OK, it’s not practical, certainly not in the short term.   Continue reading “Voucher privitization of growing privileges”

Fact-finding trip to growing country, Humboldt County, California, with elected state officials and staff, thanks to http://cannabisvoice.org.  Write-up at http://cannabisvoice.org/cannabis-industry-hosts-2-day-taxation-excursion/.  I’m at top right.

 

Having doubted that square footage (or canopy) fees or taxes could be deductible under 280E on the federal income tax return of a cannabis-growing business, I asked Todd Arkley, a Washington State CPA with a lot of cannabis clients. Todd knows more than I hope ever to learn about tax accounting.  Whether you call a payment based on square footage a tax or a fee, he makes the case that it is deductible.   Continue reading “280E and square feet — Arkley”

GUEST POST from a California observer of Arcata’s electricity tax. The writer, whom I thank, asked to remain anonymous. I don’t necessarily agree or disagree with opinions in the post, but find it thorough and thoughtful.  And whatever you think of an electricity tax, Arcata’s tax seems to have glitches.  Here is a better-formatted version:  Guest-post-from-a-california-observer-of-arcata_s-electricity-tax

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Guest: I’ve copied below a little essay I [the Guest Poster] wrote last year regarding what the nuts-and-bolts of this tax look like in terms of cultivation, and if it were applied to the rest of the county, what that looks like in terms of cultivation. Continue reading “Arcata Electricity Tax — Guest Post”

Indoor marijuana grows are notorious consumers of electricity.  Following the lead of Arcata, California, which collects a 45-percent tax on excess electricity consumption, Boulder County, Colorado, is taxing electricity use of marijuana grow operations by the kilowatt-hour:

“Boulder County will levy a charge of 2.16 cents per kWh on all electricity consumed by marijuana growers, which works out to about $100 extra for each kilogram of finished pot. Continue reading “Penalizing MJ electricity”