The Center for New Revenue

Examples of excise taxes based on percentage of price keep turning up.  Here’s a list: Continue reading “The Federal Tax on Cigars, and Other Price-Based Excises”

Price, weight, potency:  Those are the leading options for a tax base for marijuana.

Potency won’t work for taxing plant material (smokable marijuana), because it’s not fungible (homogeneous) enough to yield replicable test results.  Accuracy within 10 or 20 percent is not “close enough for government work.”  If my W-2 or 1099 IRS form is 20 percent too low, I’ll be smiling;  if it’s 20 percent too high, I’ll be trying to figure out how to appeal — or how to find a different measurer (the analog of testing lab) next time.

But “concentrated cannabis oils, known in various states as ‘butter’, ‘shatter’, ‘wax’, and ‘BHO’” – are fungible enough to yield replicable THC results – close enough for government work, indeed.

But then it turns out that concentrates have two uses:  for smoking and for edibles.  Smoking concentrates may be the most intoxicating form of consumption.  But when concentrates are incorporated into edibles, they lose potency.

There’s a dilemma.  If intoxication is the basis Continue reading “Taxing Marijuana: Dabs and Edibles”

Treaties are no more sure to be right than statutes. A democracy needs to have laws that suit the people, so being able to get out of treaties is what the Founders had in mind when they put treaties on a par with statutes. http://en.wikipedia.org/wiki/Article_Six_of_the_United_States_Constitution

But treaties are confusing — a thicket. Some countries’ internal laws do make treaties superior, so their hands are tied. But ours aren’t. This infuriates countries like the Netherlands, France, Switzerland, Japan, and Belgium, which are utterly stuck. http://www.asil.org/ajil/v86310.pdf, p.320.

[UPDATE April 2016: That was a bad link. Here is a better one:

“There is also significant variation among monist states concerning the hierarchical rank of treaties within the domestic legal order. In Austria, Egypt, Germany, and the United States, treaties are equivalent to statutes; they rank lower than the Constitution.79 In South Africa, treaties rank lower than statutes.80 In China, France, Japan, Mexico, and Poland, (at least some) treaties rank higher than statutes but lower than the Constitution.81 In the Netherlands, some treaties rank higher than the Constitution.82 In Chile, Russia and Switzerland, the hierarchical rank of treaties is contested, but it is undisputed that at least some treaties rank higher than statutes,83 and there is some authority for the proposition that some treaties have constitutional rank.84” http://digitalcommons.law.scu.edu/cgi/viewcontent.cgi?article=1620&context=facpubs.]

So it irritates them when we use the Founders’ rule. Understandably.

Here is an article looking way back to the Founders, and pointing out that in recent years, “the United States has drawn international criticism for overriding bilateral tax treaty obligations through changes to its tax laws.”

So as not to rub it in, Congress uses the word “override” when the time comes.  Not violate, not breach, not abrogate.   See  Tax Treaty Overrides: A Qualified Defense of US Practice.

They are giving the stuff away in Colorado.  Clearer proof of the inadequacy of a percentage of price tax base for marijuana would be hard to find.  If the price (the tax base) is zero, the tax rate doesn’t matter.  Of federal taxes on tobacco or alcohol, only the cigar tax uses (in part) a price base.  But all the marijuana taxes so far do.  We have a long way to go. Continue reading “Tax Base for Marijuana: Price Fails”

Activists in Colorado are lining up to oppose a referendum that would tax recently legalized marijuana there for the first time.  The DC-based head of NORML has a more realistic view: Continue reading “Marijuana Tax: Activists Think Wishfully”

The marijuana industry is lining up anti-tax leader Grover Norquist and pro-legalization Democrats to support repeal of Code section 280E, says Roll Call.  I kind of like 280E because it discourages marketing of marijuana, as I wrote for Huffington Post.  And we need a federal tax on marijuana. Continue reading “280E Marijuana tax: The center may hold”

By Marty Sullivan, in Tax Notes — both top names in tax policy writing.  He is quite sympathetic to base broadening; he analyzes the law and the politics.  Highly recommended for North Carolina readers interested in the story of House Bill 998.

Continuing to think that the best way to legalize marijuana is via state monopoly, I’m thinking that AG Holder’s eight criteria might open the door.

Only this criterion — “growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands” — might create some problem for state stores by far-fetched analogy.

There are at least three problems for state monopoly under this analysis: Continue reading “State Marijuana Monopoly under AG Holder’s Eight Criteria”

The Apple Corporation’s ad campaign is happy to associate itself with our biggest and richest state.  But when it comes to paying taxes here –or anywhere, watch out.  “Apple has been a pioneer in tactics to avoid paying taxes to Uncle Sam,” says the N.Y. Times.  This has been going on for years.  And Apple dodges taxes in the U.K., too.  And en France.   Intangible-rich companies like Apple shift income to tax havens, and the big countries haven’t mustered the will to stop them.

Here’s a summary of the debate about marijuana legalization, using the form of a 1952 speech on alcohol by Mississippi politician Noah Sweat, reprinted at the end and here, read by John Grisham here.

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If By Cannabis

My friends, I had not intended to discuss this controversial subject at this particular time. However, I want you to know that I do not shun controversy. On the contrary, I will take a stand on any issue at any time, regardless of how fraught with controversy it might be. You have asked me how I feel about cannabis. All right, here is how I feel about cannabis:

If when you say cannabis you mean the Devil’s weed, the gateway to the nightmare of hard-drug addiction, the tempter of teenagers that terrifies parents, the cause of the feeling that flesh is falling off bones, the impairer of judgment and driving (causing fatal crashes), the shrinker of brains, the origin of pointless mental excursions to the artificial nowhere of a fool’s paradise, the psychologically addictive near-narcotic that stupefies the user and saps motivation, perseverance, and determination; the converter of our precious and capable young people into idle, self-indulgent, unhelpful stoners; if you mean the powerful not-your-father’s marijuana, the slow train to nowhere, the greed-driven motivation for a New Joe Camel and the big business of addiction, the carrier of molds and carcinogens into the lungs, the risky complement to alcohol, the manifestation of a “damaging level of permissiveness” in America, the threat to American economic competitiveness, the product whose illegality would push Mexican cartels to produce deadly heroin, the psychoactive trickster that creates irresistible cravings for the unhealthiest food, the undesirable attraction for rowdy tourists and penniless drifters,the aptly named “Skunk” whose smoke irritates neighbors and passersby, the precursor to legalized cocaine, the finicky and fragile hybrid whose secret indoor cultivation guzzles energy and pollutes our imperiled planet, the wrong choice between Drugs or Jesus; if by cannabis you mean the cause of cannabinoid hyperemesis, the poison scourge that brings on panic attacks and psychotic symptoms and sends thousands to emergency rooms each year, if you mean the placebo or mere pain-reliever that diverts the suffering sick from real cure, then certainly I am against it.

But, if when you say cannabis you mean the symbol of hostility against every form of tyranny over the mind of man, the miracle drug that treats dozens of diseases, the balm to humanity for millennia, the natural healer that tames the nausea of the cancer-stricken chemotherapy patient and restores appetite to the withering invalid, the safer-than-physically-addictive-opiates reliever of intractable pain, the botanical genus containing cancer-killing compounds and hundreds of chemical components we have barely begun to study and exploit, the “’herb bearing seed’ given to humanity in Genesis 1:29”; if you mean the good habit, the mild mood-lifter, the organic expander of consciousness, the instigator of new ideas, the promoter of “serenity and insight, sensitivity and fellowship“;  if you mean the spur to laughter, the soft, safer substitute for dangerous beverage alcohol; the aromatic plant whose legal commerce can create jobs and undermine murderous mobsters; if you mean the product whose legalization will uncrowd our prisons and enfeeble The New Jim Crow, if you mean the tested-for-safety commodity whose sale could pour into our treasuries untold billions of dollars, which could be used to ease our crushing debt, to cut counterproductive taxes, or as Mississippi Legislator Noah Sweat said in a speech about whiskey in 1952, “to provide tender care for our little handicapped children, our disabled, our pitiful aged and infirm; to build highways and hospitals and schools,” then certainly I am for it.

This is my stand.  I will not retreat from it.  I will not compromise.
Continue reading “Cannabis Pros and Cons, “If By Whiskey” Style”

Will government in full-legalization states always need to keep trying to distinguish between patients and everyone else? Maybe, with full legalization, (1) economies of scale will kick in and (2) the prohibition premium will fade so much that non-medical users will pay an after-tax price lower than patients have ever paid (or maybe even hoped for). Even if the two groups (healthy folks and patients) are “served by the same system,” some costs of deciding who is a patient and who is not will continue — like doctor’s fees. Another category of costs is non-financial, like the disrespect for law that comes from healthy people beating the system and evading tax by pretending to be sick. But let me be clear: I am convinced that marijuana has real medical uses. To the extent that the public has confidence that medical recommendations do in fact separate sick people from healthy people, I backtrack.

Discussion is proceeding at the Samefacts blog.

Folks in favor of the legalizing marijuana could, until today, point to a plausible tax-free scenario:  A state could just repeal its Prohibition laws, as New York did for alcohol in the early 1920s.  In that case, the state would collect no tax, but would leave enforcement of non-tax laws to the federal government.  A variation on that scenario would have happened if the federal government had shut down the regulatory schemes in Washington or Colorado, leaving possession legal.

But Eric Holder’s announcement, that the Administration will let state legality operate, takes away the possibility of tax-free marijuana, as a practical matter.  Marijuana, where legal, is no more likely to be tax-free than wine, taxed in every state, even California.

Huffington Post blog entry they just posted for me here: http://www.huffingtonpost.com/pat-oglesby/marijuana-advertising-the_b_3810341.html

How Denver City Council voted 13-0 to ban outdoor marijuana advertising:  http://bigstory.ap.org/article/medical-marijuana-ads-under-attack-denver

Here’s the text of the HuffPo piece:

Marijuana Advertising: The Federal Tax Stalemate

“Marijuana Industry Eager to Pay Taxes — and Cash in on Deductions” says a recent McClatchy headline. There’s a conundrum: The state-legal marijuana industry (1) understands that a new federal excise tax would give it legitimacy, but (2) seeks repeal of the discriminatory Reagan-era statute saying that taxpayers “trafficking” in “narcotics” cannot deduct ordinary business expenses on their Federal income tax returns.

But that current no-tax-deduction rule makes marijuana advertising nondeductible – and that probably makes sense. For most proponents of marijuana legalization, advertising is a frill, not an essential. But for opponents of legalization, marijuana advertising is anathema. Continue reading “Marijuana Advertising: The Federal Tax Stalemate”

Excerpts from his Foreword to the book by Fosdick and Scott:

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In 2013, living in a liquor monopoly state and having lived elsewhere half my life before 40, I can’t find a more appealing and unifying issue than liquor control.  I can’t understand why Washington State abandoned it, so I’m figuring some economic extremists will take a run at it here in North Carolina.  With all the disharmony here, I’m looking for an issue where I can agree with Brother Rockefeller’s fellow Baptist believers, and liquor control looks like a start.

The most sensible and cautious approach to marijuana legalization, it seems to me, is state monopoly.  Monopoly short-circuits the great motivating force of capitalism, the profit motive, and can operate without advertising.  And monopoly allows for instantaneous price adjustments to combat bootlegging.

But in the USA, states are scared that the Federal Government would shut down a marijuana monopoly, for reasons that Rob Mikos of Vanderbilt articulates.  I wonder if the Federal Government might not turn a blind eye to a scheme that’s demonstrably more cautious than the private enterprise ganjapreneur models that are taking hold, but most folks think Mikos is right, and that the safe approach to state legalization is private .

So the usual advantage of our Federalist system, where the states can be laboratories of experimentation, does not come into play.  The first marijuana monopoly is happening in an entire country, Uruguay.  It’s not strange that the first country to try it is a small one, because the chances of  the first experiment succeeding are slim.   A small country should be more nimble than a big one:  A battleship is harder to turn around than a PT boat.

“While prostitution is legal in Switzerland, sex workers have to pay a tax of five Swiss francs (£3.50) each night that they work.” – Report from the UK Telegraph.

That’s a tax base that’s easy to measure:  no tracing payment, no counting customers.  In exchange for about $5, the prostitutes get a measure of safety.

A lengthy proposal from the Comptroller of New York City to tax marijuana proposes a 20 percent marijuana excise.  The proposal assumes “that, as a matter of public policy, a goal of legalization would not be to lower the retail price.”  That language could be read as being indifferent to price (legalization has several goals, but lowering the price is not one of them; maybe reducing alcohol abuse is not a stated goal either).  That reading falls short of the  cautious approach of saying that a goal would be to maintain at least the current retail price, which would be clear if the proposal had said, ” a goal of legalization would be not to lower the retail price.”  But it’s a step Continue reading “NYC Comptroller Proposes Marijuana Tax”