The Center for New Revenue

I’m on the record saying the tax structure of the marijuana initiative in Oregon is a step forward.

Kopilak said the initiative reflects the work of not only advocates but also national tax experts, including Pat Oglesby, chief tax counsel on the U.S. Senate Finance Committee from 1988 and 1990.

On Oglesby’s advice, New Approach Oregon opted to tax marijuana by weight early in the production process instead of at the retail end. Washington, by comparison, taxes marijuana at three levels, from producer to processor, processor to retailer and retailer to consumer.

I’m not endorsing the rate or level of tax.  I suspect this tax rate, like others, will prove too high at first, too low later.

 

 

 

Sales of both recreational and medical marijuana inched up from April to May in Colorado, I THOUGHT.

Colorado marijuana sales	Recreational	Medical
April	$22,059,586	$31,718,207
May	$22,142,207	$31,976,897

Those figures come simply from dividing the sales tax rate (2.9 percent) into officially reported (on highlighted links below) sales taxes received: Continue reading “Colorado recreational and medical marijuana sales rise slowly? UPDATE”

In “Tax Justice: A Christian Response to a New Gilded Age,” the Presbyterian General Assembly recently adopted some recommendations for international tax reform.  Here are two key points:

F.            International Corporate Tax Avoidance

1.    With respect to laws, including “transfer pricing” laws (described more fully in the background section), which today facilitate the movement of income by businesses to tax havens, the church should support work that has been begun to cause nations to change laws so that tax avoidance through income-shifting to tax havens is no longer permitted. This is to affirm the direction of charitable and religious organizations and research institutes seeking tax justice, as well as intergovernmental bodies including the OECD (Organization for Economic Co-Operation and Development) and G-20 governments working for greater tax policy coordination. The toleration of today’s porous tax laws by countries around the world reflects a dangerous “race to the bottom” by which countries compete to offer tax favoritism to businesses; the result is to deprive governments, particularly of poor countries that depend especially heavily on revenues from international businesses, of funds needed for urgent social needs. Continue reading “Presbyterians blast tax havens and check the box”

The Tax Code rule giving special treatment to “ministers of the gospel” (Those words are really in the Tax Code) – exempting their housing from income – has found an opponent in the Presbyterian Church.  Looking at taxation in the context of social justice, the Church calls for a phase-out:

“6. Particular taxes or exclusions from taxes should treat religious organizations equally with charitable and nonprofit organizations; religious organizations should not be singled out for either penalty or privilege except for the exemption of property essential to the core functions of religion.

“7.  Special tax exemptions or burdens for the property and income of ministers or other church employees are inappropriate.  They should be phased out over a period long enough to accommodate the reliance of many churches on existing exemptions.”

Revenue from the 15 percent “wholesale” excise tax on recreational marijuana was supposed to run about $2 million every month ($13 million for the first six months, January through June 2014).  Instead, for the first four months, under $2 million was collected overall.

I don’t know the underlying assumptions behind that $2 million per month estimate, but four factors – beyond just the error inherent in any estimate – may contribute to the early shortfall: Continue reading “Shortfall in Colorado’s 15 percent marijuana tax”

Sin may be in the eye of the beholder, but I generally favor sumptuary taxes on alcohol, tobacco, marijuana, gambling, what have you — call them sin taxes.  Still, I have to recognize that opponents have a point when they argue that government may need revenue so much that it promotes “sin.”  Here’s what’s happening with the North Carolina lottery in the Republican controlled N.C. House of Representatives:  “The House plan relies on turbocharging lottery sales by more than 20 percent through increased advertising statewide.”

States May Be Stuck with Second-Best Marijuana Taxes is an adaptation, published by State Tax Notes for U.S. readers, of ” The Ace in the Game,” which was aimed at non-U.S. readers:

It says (1) taxes are second-best to monopoly, and (2) the ideal tax, based on THC potency, is out of reach.

 

 

Governor Hickenlooper of Colorado says

“his office has been in contact with a professor from Stanford, who is experimenting with water that works as an atomic signature for marijuana, allowing law enforcement to tell if it’s legal or not.

“The goal, he said, is to make it possible that ‘if you pick up marijuana, you can tell if someone paid taxes or if it was contraband.’”

Any consumable marker to would have to be nontoxic, hard to counterfeit, inexpensive to apply, and easy to detect in the field.

This reminds me of the way we tax virtually the same substance if used in vehicles (diesel fuel) and exempt it if used for heating buildings (heating oil).  The exempt stuff is marked with a red dye.  Can marking work for marijuana concentrates?  And how about green plant material?

Jacob Sullum of Reason says black market prices should be higher than legal prices.  I disagree.

He notes that black market prices in Colorado are lower than legal prices:  “legal pot was selling for about 50 percent more than black-market pot.”

He then says, “That situation seemed to contradict basic economic principles. Because of the “risk premium” associated with prohibition, black-market prices should be higher than legal prices, not lower.”

No!  That analysis looks only at the supply side – what producers face.  On the demand side – what consumers face – why would anyone pay extra for black market product? Continue reading “Legal prices should and do exceed black market prices”

France now imposes a tax of 1.019 euros per liter of energizing drinks – those with over .22 grams of caffeine per liter.  That’s about 35 U.S. cents tax per can of 25 centiliters (wine commonly comes in 75 cl. containers; Red Bull in the USA is typically sold in cans of 8.4 ounces, or 24.8 cl.; that 25 cent figure assumes 1.4 euros to the U.S. dollar).

The official French government site actually uses the term “taxe Red Bull” and says the tax aims to reduce excessive consumption of this kind of drink.  Coffee and tea are not taxed.

This kind of cliff — where staying below a threshold makes a big tax difference — reflects the idea that products above the threshold are different in kind from those below.

Here is what passed:  Sec. 8a. TAXATION AND REGULATION OF MARIJUANA; REPORT

On or before January 15, 2015, the Secretary of Administration shall report to the General Assembly regarding the taxation and regulation of marijuana in

Vermont. The report shall analyze:

(1) the possible taxing systems for the sale of marijuana in Vermont, including sales and use taxes and excise taxes, and the potential revenue each may raise;

(2) any savings or costs to the State that would result from regulating marijuana; and

(3) the experiences of other states with regulating and taxing marijuana. Continue reading “Vermont Marijuana Study: Text”

Potency vs. Weight: Sugary Drinks

What measuring stick to tax with: weight or strength? The ideal for cannabis is potency, but as this blog often says, we can’t measure THC content accurately enough to tax – not yet, anyway.

A new study, mentioned in the NYT June 2, 2014, suggests that measuring calories of sugary drinks (as opposed to volume, the analog for liquids to weight for dry matter), is the best tax base: Continue reading “Potency vs. Weight: Sugary Drinks Tax”

Here is paper Ace in the Game Oglesby ISSDP version for the talk I’m giving to the International Society for the Study of Drug Policy in Rome.  And here are the slides, at least a rough, tentative version:  Rome Final

NC proposal:  5 cents a milliliter of juice, regardless of nicotine content;  WA: 8 cents a milligram of nicotine.  There are about 1,000 milligrams in a milliliter.

Here is source material:

North Carolina:

Tobacco Industry Proposes Tax on E-cigarettes, By Rose Hoban and Hyun Namkoong

The excise tax supported by a representative of R.J. Reynolds would place a 5 cent tax on the equivalent of a pack of cigarettes.

The scene was enough to make a reporter look twice. Even before the official start of the North Carolina General Assembly session on Wednesday, a representative from R.J. Reynolds Tobacco Company stood before a legislative committee and asked lawmakers to tax his products.

But the tax that tobacco interests were requesting from the Revenue Laws Study Commission was minuscule compared to North Carolina’s usual tobacco tax, which at 45 cents a pack is itself one of the lowest in the nation.

And the move left anti-smoking advocates scrambling Continue reading “Proposals to tax e-cigarette nicotine juice: NC (low) and WA (high)”

Question:  

Updating https://newrevenue.org/2014/05/12/can-the-bud-trim-line-hold/:  Let’s say there’s a huge tax on bud and a small tax on trim.  Would that give producers an incentive to cheat – to shift bud, at the margin, just a little, into the trim category and then use it to make concentrates?

Might not a tax-evader deliberately characterize bud as trim to boost the THC content – and thus value – of concentrates?  That evasion depends on the purchaser believing that he is getting a better, more valuable product — edible, vaporizer cartridge, or whatever.  And that belief would need to come from THC labeling (however inaccurate) or some other claim or experience or report. 

Industry expert’s response:

My first impression is, yes it could be more economical to move lesser buds over into the trim pile.  A lot of that depends on the market.  In some markets small buds are desired by the consumer, for less mold and easier utility.  Under that pressure, it might still be beneficial to sell smaller buds as is.  There is also a market for big boutique buds, the ones that look like the ‘bud porn’ you see in trade magazines.  Those larger buds will always go directly to sale as bud. Additionally, if there is some kind of hiccup in production, some plants could produce some seeds and those wouldn’t be viable for sale in the bud market. So there a number of pressures besides taxes that move the line between bud and trim. Continue reading “Expert: Bud-Trim Line”

From The Pan-American Post:

. . .  commercial growers will be subject to a “variable fee,” which would ultimately be used to vary the price of the drug in pharmacies. . . . [A]dditional taxes may be added later . . .

Ultimately, the lack of built-in tax on marijuana sales — at least initially — is one of the strengths of the law. This provides important flexibility, allowing officials to accurately set the price to keep the drug competitive with the black market without worrying about additional taxes making it prohibitibely expensive for users. It’s also worth noting that this gives the Uruguayan government an advantage over authorities in Washington and Colorado (where the drug’s price will be set by state and local taxes as well as supply and demand).

Fascinating Update at https://newrevenue.org/2014/09/22/rose-habib-on-the-bud-trim-line/ — sophisticated analysis from an industry expert, who knows far more than I.

Context:  Colorado is de facto imposing wholesale per-gram marijuana taxes:  62 cents for potent bud, or flowers, and 10 cents for less valuable trim, or leaves.  New Approach Oregon’s prominent 2014 initiative would tax bud at $1.23 a gram, trim at 35 cents.  Rhode Island Senate Bill 2379 would tax “dried flowers” at $1.76 per gram, and “all other parts” of the plant at 35 cents. Alaska’s predicted-to-pass 2014 initiative would tax at $1.76 per gram, too, but would allow a tax cut for parts of the plant that aren’t so valuable or so potent.

Problem:  “It would be impractical to try to establish legally enforceable standards of how well trimmed a bud can be before it is no longer legally a bud.”  That’s from After Legalization, by Jon Walker.  Phil Smith calls the book “in-depth, thoughtful, and insightful.” http://stopthedrugwar.org/chronicle/2014/apr/29/marijuana_past_and_future,

Update:  Here is a  40-second video of a mechanical separator of bud and trim — but we don’t see the results (url https://www.youtube.com/watch?v=DYDX_8JSygg).  Maybe that kind of thing device be calibrated with a certain size of openings and a certain duration of operation to yield bullet-proof, replicable results.  Maybe.

Revised link: Here is a long video of hand separation of bud and trim.  https://www.youtube.com/watch?v=GOtsu-BKuys. Or search youtube with trim marijuana hand.

Continue reading “Can the bud-trim line hold?”