Here is a comment emailed from a North Carolina tax lawyer:

One analysis puts the [required sales tax] rate between 10-11%.  The more seepage they have in the base, the higher the rate would have to go. Services are easier to obtain for cash (house cleaning, yard work, house painting, etc.) and some can be more easily acquired in cross border activities or electronically where compliance is sketchy. Continue reading “North Carolina sales and services tax — a reaction”

“[A] swap from income to sales taxation . . . in North Carolina . . . would require sales tax revenue to increase from 1.8 percent to 4.9 percent of state personal income. With the same sales tax base, North Carolina would have to raise its sales tax rate from 5.75 percent to 15.9 percent. With base broadening that would increase the implicit sales tax base to 50 percent of personal income, the rate would have to rise to 12 percent.” Martin A. Sullivan, http://taxprof.typepad.com/files/138tn0789.pdf.

I can’t vouch for those numbers, but I have no reason to doubt them.  It remains hard to imagine the Legislature will adopt such a radical proposal.

North Carolina’s HB 84 may have some of the highest taxes ever proposed for medical marijuana.  It has two layers of 10 percent tax: Continue reading “NC Medical Marijuana Bill has taxes higher than CO’s adult use law”

Click here: Alcohol tax Festival 2013 final laptop Feb 9.  Material past the first 66 slides was held in reserve — and I didn’t cover all the first 66.

Any marijuana tax needs to be low enough to drive trade into legal channels.  That may happen under a bill from Oregon Congressman Earl Blumenauer, which would “create a federal marijuana excise tax of 50 percent on the ‘first sale’ of marijuana – typically, from a grower to a processor or retailer.” Continue reading “Federal Marijuana Tax Bill from Congressman Blumenauer — Is the tax burden just right?”

Let me put a nuance on the story http://www.nwnewsnetwork.org/post/grey-market-concerns-grow-washington-legalizes-pot.  Here’s the quote:  “Oglesby doesn’t worry too much about unscrupulous medical marijuana providers entering the true black market – and selling pot to recreational users without a medical card. Why? Because of something he calls, ‘The prohibition premium. You gotta charge more if you are engaged in illegal activity to compensate you for the risk of getting caught and going to jail.'”

Well, the prohibition premium does raise costs for illegal actors, but medical marijuana providers selling to recreational users might have an easy time getting away with violation — it all depends on enforcement.  That’s something to worry about when trying to maintain a tax base.  The illegal market will always be trying to find the path of least resistance.

Now the Republicans in North Carolina are backing away from radical sales tax base-broadening that would tax all goods and nearly all services.   But they want some change.

Soon it will be time for them to list which services get taxed for the first time.  So service businesses from tattoo parlors to CPAs will have incentives to (1) hire lobbyists and (2) make campaign contributions to incumbents.

Source list for my talk at the UNC Law School on February 9 is at Bibliography Oglesby Alcohol Jan 2013 updated 2014.  Here are the most interesting items:

Rabushka, Alvin, Taxation in Colonial America Continue reading “History of Alcohol Taxation in America”

There’s a 58-percent majority for medical marijuana;  39 percent yes for full legalization.  Here’s the full report from PPP:  Jan2013PPPMarijuanaPollResults.

Posted here: http://www.huffingtonpost.com/pat-oglesby/a-way-marijuana-dilemma_b_2490720.html:

“A gallon of whiskey [bore] … $11 tax.  You could make it for 75 cents to a dollar and sell it for $3 or $4. . . .  It’s the same way today if you beat the government out of taxes.  It’s what everyone was trying to do back then.”  Junior Johnson, quoted in Peter Golenbock, American Zoom (MacMillan, New York, 1993), page 22.

The federal liquor tax from 1951 to 1985 was $10.50 per proof gallon.  It’s $13.50 today, but with inflation, the tax burden is much less now.

Tax protesting is nothing new, as seen here:  Petition-and-remonstrance.  To complain about the whisky excise tax in the early 1790s, an anonymous North Carolina planter wrote hundreds of lines in verse.  Here’s a sample transcription from Scottish dialect:

Some chaps whom freedom’s spirit warms

Are threatening to take up arms,

And headstrong in rebellion rise

‘Fore they’ll submit to that excise. Continue reading “Whisky Rebellion of the 1790s — Petition and Remonstrance”

Dear Members of the Amendment 64 Implementation Task Force:

My best wishes to all of you as you undertake a task no one has tried before.

“Tiny packages”:  that summarizes this submission.  As you work on marijuana rules, you may want to consider a maximum package size less than the one ounce adults may possess legally.  (Maybe this suggestion suits the circumstances, maybe not.  Continue reading “Colorado’s Marijuana Regulations — Comments Submitted: Tiny Packages”

The VAT has two kinds of complexity:  who is exempt, and what?  Microbusinesses (who?), and medicine (what?), for instance?  Lots of countries have handled these issues, with less furor than with the income tax. (Rates are just a variation on exemption — “what” should bear a low rate instead of no tax?)

The New York Times is up for it:  “Mr. Obama would be wise Continue reading “NYT calls for VAT. Is that new?”

Congress’s failure to meet a deadline may meet the hopes of the Founders, whose wish for Government above all was that it not have too much power.  Maybe paralysis is preferable to Continue reading “The Fiscal Cliff: The Opposite of North Korea”

The first limitation that I know of on the size of packages for American alcohol happened in 1935 or so, with the gallon bottle rule for spirits.  Tun Yuan Hu, The Liquor Tax in the United States, 1791-1947: A History of the Internal Revenue Taxes Imposed on Distilled Spirits by the Federal Government (New York: Columbia University, Graduate School of Business 1950), page 98.

As WA and CO work on marijuana rules, they may consider a maximum package size less than the one ounce that adults may possess legally. That rule would track the liquor rule; it would work against tax evaders; it would add value, money, and work to the local economy — in a way that would be tax-deductible even under the harsh rule of Section 280E, because packaging is part of cost of goods sold.

When I moved from private law practice into government work in 1982, I knew almost nothing about tax policy.  Luck landed me on a staff with two of the giants of international tax, David Brockway and Richard A. Gordon.  Slowly, they got me to understand that tax policy is like religion:  I can’t prove that mine is right or that someone else’s is wrong.  Maybe I suspected that, and certainly I should have known, but my values – the rich should pay more than the poor; business should have no incentive to move out of the taxing jurisdiction; activities society disapproves of might be targets for taxation – are just values, not truths.

Compromise has a bad name in some circles, but in taxation, results sometimes are not binary — black or white — but are instead a matter of how much.

A clash of unprovable values is playing out in the fiscal cliff debate, which will produce no permanent solution.