The Center for New Revenue

Wherever marijuana is legal, it will be taxed.  Federal Code section 280E is broad, but it has the salutary effect of denying tax deductions for advertising.  (Whatever your view of legalization, public policy ought to discourage advertising for marijuana as it does for lotteries, alcohol, and tobacco.)  Colorado income tax law tracks federal law, so Colorado ganjapreneurs can’t deduct advertising expenses on their state returns, either. So far.  A bill in the Colorado House would change that. Continue reading “Encouraging marijuana advertising: Colorado House Bill 13-1042”

There are two kinds of commercial marijuana:  raw, and processed.  Processed is more powerful.  We can tax the raw stuff like beer, and the processed stuff like liquor.

That is, the base of a marijuana tax would be weight for raw — smokable product; and potency for brownies, tinctures, and everything else – potency by THC content, maybe with a CBD factor – and maybe further refinements as we learn more.

A pure percentage tax like ALL MARIJUANA TAXES SO FAR makes me nervous.  The reason is that NO OTHER “SIN” TAX works off pure percentage of price so far as I know.  Continue reading “Tax marijuana: raw by weight, processed by potency?”

Executive Summary:  We override treaties all the time.

Some folks point to old U.S. commitments to ban marijuana in a series of multilateral treaties as a show-stopper for marijuana legalization.  In 1961, the United States agreed to ban it  in the Single Convention on Narcotic Drugs, https://www.unodc.org/pdf/convention_1961_en.pdf, so those folks say we shouldn’t change our rules.  They list, as an option, this:  “If UN antidrug treaties are construed as prohibiting federal legalization, they should be amended to eliminate provisions that produce such a reading.”  That’s from Steven B. Duke, “The Future of Marijuana in the United States,” http://law.uoregon.edu/org/olr/volumes/91/2/documents/Duke.pdf.

Amending a treaty with scores of signatories is impractical to the point of impossibility.  Are we stuck?

No.  We can, we repeatedly and deliberately do, and we should change our internal laws in the face of conflicting treaty obligations that have  become or have been proven nonsensical.  (We override the treaty by statute;  some prefer the terms “breach” or “violate,” but “override” is the  tax term.) Continue reading “Treaties, Tax, and Marijuana”

This just came out:  http://law.uoregon.edu/org/olr/volumes/91/2/documents/Caulkins.pdf.  It looks thoughtful and thorough.  UPDATE:  Better link: https://scholarsbank.uoregon.edu/xmlui/bitstream/handle/1794/13603/Caulkins.pdf;sequence=1

The most fertile ground for sensible legalization is in the handful of states that don’t have medical marijuana, voter initiative, or private liquor stores.

1.  No legal medical marijuana.  Ongoing, permanent special rules for medical use make no sense under full legalization.  But medical use is a box canyon, as they say out West – you can get in, but you can’t get out.  Even now, Continue reading “Eight States, three criteria: The best chance to control marijuana”

Internal Revenue Code section 280E, denying deductions for marijuana businesses other than cost of goods sold, is working.  Not only does it pinch businesses, it does so in a fortuitous way.

Section 280E is arguably working better than a flat, untargeted excise tax like our taxes on alcohol and tobacco:  The public has an interest in not promoting marijuana consumption, and section 280E it makes all advertising and marketing expenses Continue reading “280E Is Working: Brookings”

To control and derive revenue from recreational substances, the public faces a choice.  For liquor, some 17 states choose monopoly over taxed, regulated private sales.  It’s awfully hard to switch from private sales to monopoly, but a House Bill 782 in North Carolina would do just that for fortified malt beverages and fortified wine Continue reading “Sin Tax-and-Regulate or State Monopoly? NC bill would tighten.”

I have often deplored the failure to index weight- and potency-based excise taxes on alcohol, tobacco, and marijuana, so it’s heartening to see the Obama budget call for indexing of tobacco tax rates (as well as an increase).  There’s more of the same in the budget’s call for indexing of tax penalties.  I have high hopes.

A U.K. based religious organization is weighing in on the problem of multinational corporations avoiding hundreds of billions in tax by shifting income to affiliates who don’t pay taxes.  Bravo.   Make that “Amen.”  As the French would say, “Qu’on se le dise” — Let us tell ourselves:  Spread the word.  The international tax systems is broken beyond repair, if only because very few citizens understand it.  As Bob Dole once said, “Where’s the outrage?”  Well, maybe the outrage is on its way.

[Note:  This was the April Fool’s Day entry:]  Since we use the Tax Code to encourage this (home ownership) and discourage that (tobacco), what if polygamy returns to legality in some state?  We have struggled enough with simple, two-person marriage, where we sometimes impose a marriage penalty.  Continue reading “Taxing Polygamy”

I never met a sin tax I didn’t like, and I thought the self-styled socially conservative Republicans who control North Carolina might agree with me.  But some of them are are soft on alcohol, because a prominent bill (to be fair, a bipartisan bill but with lots of Republican support) Continue reading “Alcohol tax cuts proposed in North Carolina”

As legalization of marijuana proceeds in fits and starts, the Colorado Task Force Report would impose at tax at the producer level while mandating vertical integration — combining the producer and retailer functions — so that every transaction requires determination of an arm’s-length inter-company price.  That’s a recipe for chaos, involving the wishfully named arm’s-length method of guessing at tax pricing, a tool grown so feeble that it has turned the international tax schemes of the mightiest nations into laughingstocks.

Continue reading “An Unworkable Marijuana Tax in Colorado”

My feeling about the income tax is that since we aren’t making it work after all this time (double Dutch sandwiches, tax havens, carried interest, the facially unconstitutional minister of the Gospel rule of Code section 107), I’d rather study something else.

Carbon is trivially easy to measure and remarkably easy to detect.  But a carbon tax Continue reading “Tax income or tax carbon?”

Trying to tax marijuana plant material on the basis of its potency (say, THC content) may be impractical because different labs routinely report wide variances in measured potency from a single sample.

But there’s a processed marijuana product that may be fungible enough for a potency tax: “concentrated cannabis oils, known in various states as ‘butter’, ‘shatter’, ‘wax’, and ‘BHO’.”   That product looks fungible to me – video  Continue reading “Tax marijuana by potency? In one case, maybe”

[UPDATE 4 September 2018:  I’ve challenged people over and over, including at conferences and on twitter, to name a jurisdiction that taxes tobacco by nicotine content, and no one has.]

I was considering potency as a tax base in Laws To Tax Marijuana for a variety of reasons – mainly that it correlates with intoxication, which must be why society disfavors marijuana.  (It’s more complicated than that . . .)

But marijuana is not fungible (except maybe some processed liquid products), and labs trying to measure THC, the primary intoxicant, show huge variances in results among themselves.  You need a clear number to apply tax to, and those results aren’t clear enough.

Similar variances turn up for cigarettes, Continue reading “Tax marijuana by potency? Probably not”

My friend Joe Andrus (from my years in international tax policy) looks like the hero in this story:  Multinational corporations stashing cash in tax havens (and avoiding tax in other ways, too) had bankrolled and influenced the Organization for Economic Cooperation and Development to the point that it was “in the pocket” of bad tax policy.  Now Joe and others Continue reading “Regulatory Capture of the OECD”

A retail-level tax on a commodity presents lot of problems, like this one, suggested by the authors of Marijuana Legalization: What Everyone Needs to Know:  A marijuana ‘”bar” could set low per-joint prices and derive most of its revenue from a cover or entertainment charge.

A response to that maneuver shows up in today’s WSJ:  “In 1944, a new wartime ‘cabaret tax’ went into effect, imposing a ruinous 30% Continue reading “The cover charge shift maneuver for retail-level excise taxes on consumables”