The Center for New Revenue

Tax has been called the “Swiss Army Knife of public policy.”  In the two states where recreational marijuana is legal, medical marijuana patients don’t pay tax on what they buy.  That’s one way of providing relief to sick people.  Berkeley, California, is considering another way.  The New York Times reports:  “marijuana dispensaries will have to set aside 2 percent of their product — which must be of equivalent quality to the marijuana they’re selling at market prices — and give it free to city residents with incomes below $32,000.” Continue reading “Beyond the Swiss Army Knife for medical marijuana”

I can’t understand the figures for sales of recreational marijuana in Colorado in April, the fourth month below:  How could 10 percent of marijuana sales be greater than 2.9 percent of all sales?  I’ve asked the Department of Revenue for help in understanding what is going on.  All figures come from links on http://www.colorado.gov/cs/Satellite/Revenue-Main/XRM/1251633259746. Continue reading “Confusion over Colorado marijuana taxes”

A quick look at Craigslist for Denver,  http://denver.craigslist.org/search/sss?query=free+marijuana, searching for free marijuana, shows (along with free delivery and other non-tax-motivated offers) several deals where the purchaser who buys some non-marijuana item gets a certain amount marijuana free.  Does that avoid the 10 percent retail tax on marijuana?  I wouldn’t be surprised to see taxpayers take the position that no tax is owed.

 

In January, recreational marijuana stores in Colorado sold just north of $350,000 worth of stuff that did not bear the 10-percent marijuana tax.  The math is explained here.   By May, that figure had more than quadrupled, to over $1.4 million. Continue reading “Sales of non-marijuana items in Colorado recreational stores quadruple”

It looks to me like sales of non-marijuana items in recreational stores have risen from 2.5 percent in January to 6.5 percent in May.

Hmm.  Does that mean stores are “bundling” normally taxable marijuana with free-of-10%-tax vaporizers or something?  For instance, buy an untaxed vaporizer, get your marijuana free as part of the vaporizer price?  I have no idea, but there is an incentive to do that — if taxpayers think that works.  As an old friend from the Joint Committee staff used to put it, the job of the tax lawyer is to turn This into That.

Folks in Colorado know a lot more than I do.

Details here.

My mistake:  I thought I could figure out the ratio of recreational marijuana sales to medical marijuana sales in Colorado (and gross sales) by comparing sales tax figures.  Both bear the same 2.9 percent sales tax, so I took sales taxes reported by recreational businesses and divided by .029 to get total recreational sales.  Then I did the same for medical marijuana businesses (which report separately in Colorado).

Not so fast!  Professional journalists got this right.  It turns out that those sales taxes cover not just marijuana, but everything sold in the stores – pipes, papers, T-shirts, trinkets, you name it.  (Thanks to Natriece Bryant of the Colorado Department of Revenue for confirming that treatment.)

It’s easy to calculate sales of recreational marijuana:  take the 10-percent retail tax reported by the State, and multiply it by 10 (divide it by .10).  (I thought my 2.9 percent method was close enough, and had the advantage of comparing recreational and medical marijuana sales directly.)

Getting it right alerted me to a phenomenon:  In January, only 2.5 percent of sales of recreational marijuana stores were accounted for by non-marijuana items (pipes and so on).   By May, that figure had risen to 6.5 percent.

Here are the figures: Continue reading “Calculating Colorado marijuana sales”

When Prohibition was repealed, the federal government was deluged with applications to import liquor.  Granting quotas to all applicants seemed likely to create a situation where “nobody would have got enough to do business with.”

There are various ways of dealing with excess applicants, like holding a lottery, as Washington state is doing; selling licenses to the high bidder; or, as the Roosevelt Administration did in 1933, considering each application on its merits and deciding yes or no for each application.  Here are details, with highlights bolded, stated by the head of the Federal Alcohol Control Administration: Continue reading “Quotas for intoxicant businesses in 1933”

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.