The Center for New Revenue is in the early stages of thinking about a conference on marijuana revenue that would assemble folks from the entire spectrum of views on legalization. Here is a draft list of issues:
Monopoly vs. Taxation
Whatever the advantages of the monopoly model, most states are choosing tax and regulate instead. But Oregon’s ill-conceived Continue reading “Conference on marijuana revenue: List of issues”
Three Democrats in Congress are asking for answers to easy questions about a carbon tax (like what should the rate be and what should we do with the money). But they aren’t facing up to this problem: If I pay tax because my manufacturing plant uses carbon to make stuff and my foreign competitor pays no tax, how does America level the playing field?
At least they don’t overlook indexing – they go beyond it (Bravo!) with the second of their three questions:
“How much should the price per ton increase on an annual basis? Continue reading “Carbon tax: Asking the easy questions”
Some marijuana businesses face a tax trap in Tax Code section 280E. Continue reading “Some Secrets of 280E”
First, here is the text of 26 U.S.C. § 280E, Expenditures in connection with the illegal sale of drugs:
No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.
(Text is from http://codes.lp.findlaw.com/uscode/26/A/1/B/IX/280E. Added by Pub. L. 97-248, title III, Sec. 351(a), Sept. 3, 1982, 96 Stat. 640. Public Law reference is from http://codes.lp.findlaw.com/uscode/26/A/1/B/IX/280E/notes.)
Second, here is legislative history, from the Senate Finance Committee Report, S. Rep. 97-494, downloadable from the huge file at http://www.finance.senate.gov/library/reports/committee/index.cfm?PageNum_rs=16 (volume 1), page 309 [oops! bad link as of 8 February 2018; try this: https://www.finance.senate.gov/imo/media/doc/srpt97-494.pdf].
That language is picked up with no meaningful change in the Joint Committee on Taxation’s 1982 Blue Book General Explanation of TEFRA: 1982 blue book.
UPDATE: 280E has its critics, but there are two sides to the story. Parents and others worry about advertising and marketing of cannabis, and 280E discourages marketing expenses, by making them nondeductible. More here (link to http://www.brookings.edu/blogs/fixgov/posts/2015/12/18-marijuana-adverstisement-tax-280e-oglesby.)
I interpret the so-called constitutional challenge as a red herring, intended to prevent overtaxation when vertical integration is not present – the cascading problem. https://newrevenue.org/2013/03/13/the-secrets-of-280e/#more-1735. Taxing gross receipts without a deduction for cost of goods sold wouldn’t be an income tax, which the Constitution explicitly authorizes, but it doesn’t need to be. A national sales tax would be constitutional.
When faced with two models for legalization, state monopoly and taxed private sales, 58 percent of voters here in North Carolina (where the only retail seller of liquor is the state ABC monopoly) chose monopoly, 19 percent chose private sales, and 23 percent were undecided. The detailed results, from Public Policy Polling, are at NC Marijuana Polling March 2013.
The cross-tabs are interesting, too. In particular, monopoly prevailed overwhelmingly among all age groups other than the 18-29 group, where 36 percent chose monopoly, 36 percent chose private sales, and 28 percent were undecided. Monopoly doesn’t look like the wave of the future.
I’ve written that federal and state revenue from taxing marijuana could be as much as $25 billion a year. http://www.huffingtonpost.com/pat-oglesby/a-way-marijuana-dilemma_b_2490720.html. But a revenue estimate for a new marijuana tax would presumably involve revenue loss from repeal of unpopular section 280E, which disallows deductions for all expenses other than cost of goods sold. Repeal of section 280E could be costly.
Premise: A fragmented industry is harder to supervise and regulate.
Here’s what may be a counterproductive incentive of 280E. Say Mom and Pop operate a marijuana business: Continue reading “Marijuana Tax: An Unintended Consequence of 280E – Fragmenting the Industry?”
A property tax on marijuana trademarks and patents seems almost impossible to administer. Figuring the value of those intangibles requires estimating the income they would generate, in a circumstance of total uncertainty. But Washington State House Bill 1976, just introduced, would impose a tax of $3.60 per $1,000 “of assessed value Continue reading “Marijuana tax thinking: Still in its infancy”
In Congressional Conference Committees reconciling House and Senate tax bills, in the 1980s, at least, staffs worked through spreadsheets listing conflicting provisions and the evolving state of play as the two Houses gradually came into agreement.
The typical state of play early on went something like this for a particular provision: House position: Senate recedes. Senate position: House recedes. Neither side
Back when I worked for Congress, 1982-90, tax legislation — or negotiations in Congressional Conference Committee — often started with what staff called “underbrush” — pieces of a bill that everyone could agree on. “Everyone” meant six or seven groups: majority and minority staffs of Ways and Means in the House and Finance Continue reading “Tax legislative lingo: Underbrush”
As a tax policy person, it’s heartening to see China reportedly preparing to tax carbon “proactively,” while America can’t enact the weak substitute, cap and trade. The leading Chinese paper gets into the economic effects, but doesn’t get to the heart of the matter, tax evasion. Still. That paper is “The Design on China’s Carbon Tax to Mitigate Climate Change.” “On” is not a typo:
Having worried that Colorado’s Amendment 64 probably tended to undertax marijuana in “Gangs, Ganjapreneurs, or Government: Marijuana Revenue up for Grabs,” 66 State Tax Notes 255-269 (October 22, 2012), online at http://ssrn.com/abstract=2165864, I’m glad to read about a new-starter tax, though the details remain to be seen:
(From Jacob Sullum:) The Denver Post reports that the task force wants marijuana to be heavily taxed. Continue reading “Colorado panel recommends new marijuana tax”
“Setting tax rates in the initiative [was] unwise and inflexible. We should reconsider this approach and allow the LCB [Liquor Control Board], in partnership with the state Department of Revenue, to have the flexibility to adjust tax rates in a more real-time fashion for the first few years in order to prevent under or overpricing the newly available product. Comments at various citizen meetings have loudly complained that the rates are too high and too low to prevent or respond to black markets. We don’t know yet. But we can be assured that without flexibility we are unlikely to adjust rapidly to vital market dynamics.”
That’s from the Chair of the Washington State House Finance Committee, Continue reading “Best Marijuana Tax Plan Yet From An Elected American — WA 2013”
Indexing a weight-based excise tax is a litmus test for whether tax writers are serious about revenue from marijuana. On February 6, Legislators in Rhode Island passed the test by Continue reading “Indexing: Rhode Island’s marijuana bill gets it”
A sustainable tax based on weight or volume needs to be indexed for inflation. A new marijuana legalization bill in Oregon, House Bill 3371, fails that test. http://www.leg.state.or.us/13reg/measpdf/hb3300.dir/hb3371.intro.pdf. The tax rate, $35 per ounce, can’t be proved wrong — or right. But the history of alcohol taxation in recent years, where unindexed taxes have lost over half their real value since 1992, proves the value of indexing Continue reading “Indexing: Oregon’s marijuana bill doesn’t get it.”
My part is taxation. http://www.ncbar.org/cle/programs/148mlp. Daryl Atkinson will do The New Jim Crow; Ben Scales will do Medical. James Ferguson and Burley Mitchell are to be commenters.
Delegate Curt Anderson’s Maryland House Bill 1453 to legalize marijuana imposes a $50 per ounce tax on sales to retailers, and then goes on to include as tax: “An amount that the comptroller may set that adjusts the initial $50 per ounce rate for inflation or deflation based on the consumer price index.” http://mgaleg.maryland.gov/2013RS/bills/hb/hb1453F.pdf
Indexing is essential Continue reading “Marijuana tax indexed: Maryland bill gets it”
The Center for New Revenue 