The Center for New Revenue

Out of copyright, here is The elements of public finance, the 1899 classic by Winthrop More Daniels, thanks to Google.   Of particular interest is the difficulty of setting alcohol tax rates, beginning on page 136. Continue reading “Daniels’s 1899 Public Finance”

Native American Tribes in what the Department of Justice calls “Indian Country”  are like sovereign nations, so they can set up systems to allow the sale of marijuana, says the Federal government.  Over 100 Tribes are looking into selling it.

So can a state erect a roadblock and inspect everyone coming out, as a nation can at its international border?  I imagine there is learning on that question, but I have no idea.  Those are questions of federalism or Federal-Tribal law or something that are beyond a tax man.  I know enough to conclude that warrantless federal searches are OK at our borders with the sovereign nations of Canada and Mexico.  But can a state conduct them ever?

And can warrantless searches be effective? Tribal land reportedly is sometimes so remote as to make smuggling across international borders relatively easy.

 

States that have income taxes (not all do) and that legalize marijuana face an arcane income tax issue:   280E conformity. Simply put, should marijuana businesses, on their state income tax returns, be able to deduct all expenses? Federal section 280E, discussed a good bit at www.newrevenue.org, allows businesses in violation of federal narcotics laws to deduct only cost of goods sold – and not, for instance, selling expenses.  Many state income tax laws track — conform to — the federal tax Code.  That’s why, when you fill out a state tax return, much of the data you need to enter peels off the federal return.

In Oregon, before the 2014 marijuana initiative, state tax law conformed to 280E — it followed the federal tax Code.   Then Measure 91 repealed the state’s version of 280E across the board. Now critics are saying repeal should apply only to marijuana – not to all federally illegal drugs, such as meth and heroin.  Good catch, I suppose, so long as Oregon voters are mad at other drugs.

In California, there is 280E conformity for individuals but not for corporations.  (Huh?)   Continue reading “280E Conformity — with CA update”

In the USA, government gets 60.3 percent of the total price, while the private supply chain gets 39.7 percent. Or the total government take is 152 percent of what the private sector gets.  In Europe, the comparable numbers for government are around 80 percent, and 400 percent.

U.S. numbers are calculated from: “A cigarette pack today fetches roughly $2.50 at the factory gate, on which government collects $3.80 on average Continue reading “Cigarette tax %”

This is from an article in the Baltimore Sun of December 15, 1933, Continue reading “1933 “sin tax” holiday idea”

Demand for marijuana growing licenses or quotas will exceed supply, right?

At some point, someone will have to say who gets them.  Who will say?  And how?  If the basis is past activity, How will the decider evaluate whether claims of historic growing are exaggerated?

And once the decider decides, what appeals will be allowed?  If appeals are allowed, to whom?

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A tremendous place to start is “Prosperity Road: the New Deal, tobacco, and North Carolina,” by Anthony J. Badger.  I’m reading it for the second time, this time making notes. Continue reading “Marijuana Quotas, Part 1”

Two recent marijuana tax bills phase in tax rates – starting small and letting rates rise.

H.R. 1014 by Congressman Blumenauer would impose a federal tax starting at 10 percent and rising to 25 percent. A bill in Massachusetts by Representative Rogers and 11 others would tax bud starting at $10 and ounce and rising to $50:

(i) during the first year following the effective date of this act, the sum of $10 per ounce;

(ii) during the second year following the effective date of this act, the sum of $20 per ounce;

(iii) during the third year following the effective date of this act, the sum of $35 per ounce; and

(iv) during the fourth and following years following the effective date of this act, the sum of $50 per ounce.

A similar increasing rate applies to concentrates.

That’s one of five ways listed in the RAND Report for marijuana tax laws to react to the pre-tax price collapse that’s coming.  See pages 88-93.

Folks studying marijuana legalization are thinking that letting all growers grow all they want might lead to overproduction. So growers might get quotas. But who would decide what quotas growers get, and how? “On the merits,” on the basis of perceived strength of application? (Watch out for cronyism.) Lottery? History of production? That’s the method used in the 1930s for tobacco.

Folks interested in this problem might read:  Prosperity Road : the New Deal, tobacco, and North Carolina / by Anthony J. Badger, Chapel Hill : University of North Carolina Press, 1980. Continue reading “Grower Quotas”

Here is the audio of my telephone testimony 16 February to the Oregon Joint Legislative Committee on Measure 91:  http://oregon.granicus.com/MediaPlayer.php?clip_id=8165 — 1:20:40 is where I start, and I finish by 1:38:00.  At about 1:36:51, Co-Chair Lininger says, “That was really a delightful phone call.”  I appreciated the chance to testify before this Committee, which is trying to figure these issues out.

Here is my statement for the Oregon State Legislature’s Joint Committee On Implementing Measure 91 tonight: Oglesby Testimony Oregon 16 Feb 2015

In light of the suggestion in the RAND Report for Vermont of increasing tax rates on legal marijuana, it’s heartening to see Congressman Earl Blumenauer’s gasoline tax bill — https://www.congress.gov/bill/114th-congress/house-bill/680/text — taxing by the gallon, with year-by-year rate increases.  The Reports suggests taxing marijuana by weight or potency — which is like volume (gallons) for gasoline.  Here are Mr. Blumenauer’s rates for gasoline other than aviation gasoline–

“(I) for tax imposed before 2016, 18.3 cents per gallon,

“(II) for tax imposed during 2016, 26.3 cents per gallon,

“(III) for tax imposed during 2017, 30.3 cents per gallon, and

“(IV) for tax imposed after 2017 and before 2028, 33.3 cents per gallon,”.

And there is indexing for inflation: Continue reading “Climbing indexed gas tax”

Washington State collects a 25 percent tax from processors/producers and another 25 percent tax from retailers.

So far, the retail tax brings in some 64 percent of the total from all those taxes;  the ratio of the retail tax to the other taxes is 1.57 to 1. Continue reading “Washington State marijuana tax collections”

Here are three big issues that I overlooked in “Laws to Tax Marijuana,” printed in State Tax Notes on January 24, 2011. The three biggest I’ve discovered so far, anyway.  And a few small mistakes.

1. The high probability that collapsing prices will gut a percentage-of-price tax base. The 2015 RAND Report on Vermont puts it this way Continue reading “Mistakes in 2011 “Laws to Tax Marijuana””

April 15, 2015: I take this back. A more useful post is here: https://newrevenue.org/2015/04/15/280e-and-fees-arkley/

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Drafters of state marijuana revenue proposals might try to help the industry by making sure state taxes are federally income-tax-deductible under Code section 280E. That could be tricky. Lots more here.

State fees, as opposed to taxes, have a big advantage for states: A state can collect fees for licenses and applications and so on up front — to finance the operation of putting a new system in place.  The state needs to spend money to make money, Continue reading “280E and fees — Withdrawn and superseded”

This Congressional Research Service document about alcohol excises is in the public domain but it’s so hard to find that I’m saving it here:  Alcohol Excises — Lowry.  A more general document is by the same author, Sean Lowry, is here or at https://newrevenue.org/wp-content/uploads/2014/11/federal-excise-taxes-lowry.pdf,  His piece on marijuana excises, with Jane Gravelle, is here or at https://newrevenue.org/wp-content/uploads/2015/01/fed-mj-tax-r43785.pdf.

 

 

What will happen if tax laws change? Republicans, newly in control of Congress, want to change the rules. Here are the stakes: the official predictions of what will happen determine whether a tax bill is a budget-buster – so maybe if it can pass or not.

CBO and Joint Tax have been not using, for budget purposes, so-called dynamic scoring, but the new 114th Congress is working on that.  “Current rules require calculating a policy’s direct cost to the government, which includes looking at how affected individuals and firms would react to the policy.  But dynamic scoring goes further by requiring that budget estimates also take into account how policies could affect the total size of the economy.”  http://www.whitehouse.gov/blog/2015/01/06/dynamic-scoring-not-answer.  Continue reading “Dynamic scoring for sin taxes”

Beau Kilmer, beneficent captain of the RAND team that wrote the Report Considering Marijuana Legalization: Insights for Vermont and Other Jurisdictions, has come up with 9 Ps to help analyze marijuana legalization: Production, profit, promotion, prevention, penalties, potency, purity, price, and permanency. (I’d add “Patients,” to address whether tax exemption for medical marijuana makes sense, but that’s a side issue, addressed here.  And “Patience” will come in handy.)

As a corollary to those Ps, here is a way to think about marijuana’s tax base (the measuring stick to which a numerical rate is applied), discussed at pages 76-87 of that Report, using six more Ps:

Pounds Continue reading “6 Ps for marijuana tax bases”