Arcata Electricity Tax — Guest Post

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”

Penalizing MJ electricity

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”

OR taxes too high?

[Oregon] State Rep. Carl Wilson . . .and other lawmakers struggle to figure out how to tax pot without driving sales underground. . . .

“It is becoming clear that the 800-pound gorilla here is taxation,” Wilson said. “Many members of the committee are deeply concerned with marijuana products being taxed out of the market, making everything we have done useless.

Continue reading “OR taxes too high?”

FDR and alcohol tax

Quotes from FDR team on re-imposing alcohol tax in late 1933, with the message of start with low taxes:

Topic (sentence fragment): “The assurance by tax adjustment and other means of an adequate supply of inexpensive legal alcoholic beverages which will be able to drive out the illegal competing production by price competition.”

Discussion: “The attempts to control this illegal industry solely by policing the production and sale of illegal alcoholic beverages have not been wholly satisfactory. The enforcement problems of the prohibition period will still remain in those States which continue to be dry after the repeal of the eighteenth amendment. It is believed that the price of legal liquor to the ultimate consumer in the post-prohibition period will be one of the important factors in determining the success or failure of the general effort to eliminate the illegal industry.” Continue reading “FDR and alcohol tax”

Sovereign Tribes?

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.

 

280E Conformity — with CA update

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”

Cigarette tax %

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 %”

Marijuana Quotas, Part 1

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”

Phasing Rates In

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.

Grower Quotas

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”

Delightful phone call

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.