The Center for New Revenue

For a couple of years, I labored (literally) under the impression that proposals to legalize marijuana might need high revenue to pass.[1]  I got that impression from the repeal of alcohol Prohibition, where “revenue considerations, when joined to the desire to eradicate the evils that grew out of prohibition, . . . gave the repeal movement its powerful motive force, leading finally, on December 5, 1933, to the abandonment of the dry law.”[2]

Well, in November balloting on marijuana legalization, voters in Washington faced a relatively strong tax scheme; voters in Colorado, a relatively weak one.[3]  Both proposals passed with strong majorities; Continue reading “Marijuana Legalization and Tax: I Was Wrong”

http://www.youtube.com/watch?v=If81SYmhNGo.  I’m the bald man, coming in just after the 13 minute mark. Continue reading “Video of NORML Panel: Cannabis Legalization and Taxation”

Beyond the incentive to bifurcate businesses, http://www.forbes.com/sites/anthonynitti/2012/10/25/the-top-ten-tax-cases-of-2012-10-the-irs-wages-war-with-the-medicinal-marijuana-industry/,  tax Code section 280E creates an incentive to shift expenses into cost of goods sold, the only deduction it allows to state-legal marijuana business. This tax distortion is something its authors Continue reading “The Federal 280E Marijuana Tax: Distorting Business Decisions”

A humorous look at revenue from taxing marijuana is “Dude, Should Marijuana Be Legalized and Taxed?,” by Howard Gleckman, http://taxvox.taxpolicycenter.org/2012/12/06/dude-should-marijuana-be-legalized-and-taxed/

But the $9 billion it reports sounds a little low.  A strong revenue regime – after-tax prices unchanged, with government taking Continue reading “Revenue from marijuana gets a look”

The United States did not tax alcohol between the end of the War of 1812 and July 1, 1862, when it started on a path of taxing the heck out of alcohol.  “[T]he importation of opium specially prepared for smoking purposes, which did not exist in 1865, has in latter years increased enormously; rising from 12,554 lbs. in 871 to 77,196 lbs. in 1880, and 298,153 lbs. in 1883; Continue reading “An unintended consequence of alcohol taxes?”

Two independent sources tell me that Republicans, who now control the North Carolina Legislature and will soon gain the Governorship, plan to tax all sales and services at a uniform rate.  Nine percent might allow them to repeal the personal and corporate income taxes.  Local taxes could push the total take past 10 percent.

To keep the rate at 9 percent, they would have to tax everything:  hospital bills, prescription drugs, business services like lawyers’, you name it.  Once they make exceptions, the rate has to go up to stay revenue neutral.

Simplicity only, fairness not at all.  We’ll see what happens.  The history of taxation leads me to think fairness won’t be shut out for long.

Update at Huffington Post.  And there’s a caveat about my numbers being gross (not net of a 280E repeal).

America would probaly not see $25 billion in marijuana taxes, but that’s a straight line extrapolation from the most official estimate around.  According to an official state Fiscal Note,[1] Washington State’s enacted I-502 will raise some $564 million in taxes in fiscal 2015.  Extrapolating that per capita estimate, the revenue figure for the nation would be over $25.7 billion.[2]   That number is too high, probably, but not by an order of magnitude. Continue reading “National Marijuana Tax Revenue — $25 Billion?”

Britain taxed glass by weight from 1746 to 1845.  http://en.wikipedia.org/wiki/Glass_tax.  With what we know today about Seasonal Affective Disorder, Continue reading “Taxing Medical Devices: Not The Worst Tax Ever”

On Sunday’s MSNBC’s Up with Chris Hayes, Tony Dokoupil said, “Canada had to repeal a tax that was $5 an ounce in the nineties – because of evasion.”  So he reasons that marijuana selling at retail for $100 an ounce pre-tax cannot bear a $25 retail tax.  I think that’s way wrong.

Sure, people may not pay $5 per ounce extra a for tax-paid cigarettes when a reliable competing product comes hermetically sealed in a recognizable branded package, designed by a deep-pocketed manufacturer to prevent counterfeiting and having borne tax payment somewhere.  Virtually all the evasion of tobacco taxes in the developed world involves tax-paid product crossing jurisdictional borders.

For marijuana, there is no analogy to the pack of Lucky Strikes Continue reading “How Marijuana Taxes Are Not Like Cigarette Taxes — Yet”

During alcohol Prohibition, we had Wets & Drys.  As marijuana Prohibition becomes debatable, it might be nice to speed up the discussion.

Legalizers would tax the plant; prohibitionists, armed like Carrie Nation, would chop it to the ground.  Taxers and Axers.  A better term than Tillers and Killers.

I have the habit of thinking alcohol for the tax system is like low hanging fruit – easy to find and measure, and popular to tax.  Two arguments for taxing alcohol don’t exist for most commodities:  that alcohol consumption damages innocent parties and creates a price for society to pay, and more controversial, that we need to protect people from themselves and their longings.

But the Economist of November 24 page 72 says Korea goes in a quite different direction.

Punitive tariffs prevent brewing experimentation. The Korean taxman treats malt, hops and yeast as beer ingredients, which are subject to low import duties. Continue reading “A Surprising Tax Preference for Beverage Alcohol”

So several Members of the House introduced a bill, reproduced below, to keep the Federal Government out of states that have legalized marijuana.  They neglected to fix a huge tax problem for any state-legal marijuana business, Code section 280E, described by a source in the medical marijuana business this way:  “#1. The federal tax situation is the biggest threat to MMJ businesses and could push the entire industry underground.”  http://mmjbusinessdaily.com/marijuana-business-conference-wrapup-36-tips-lessons-take-aways-for-the-cannabis-industry/

Maybe the sponsors didn’t want the bill referred to the Committee Ways and Means.  Not that Continue reading “280E Tax Ignored in Federal Marijuana Bill”

Allen St. Pierre of the National Organization for the Reform of Marijuana Laws, speaking of successful initiatives to legalize marijuana, says, “We found both a liberal approach, in Colorado, and a conservative approach, in Washington.  We found two paths that work.” http://www.theatlantic.com/politics/archive/2012/11/the-secret-ingredients-for-marijuana-legalization-moms-and-hispanics/265369/.

Colorado’s approach is less restrictive on driving and home growing than Washington’s, but Colorado’s tax burden is much lower.  https://newrevenue.org/2012/10/23/gangs-ganjapreneurs-or-government-marijuana-revenue-up-for-grabs/.  So is the high-tax approach conservative, and the low-tax approach liberal?  Continue reading “Are high sumptuary and sin taxes liberal or conservative — or both?”

 

Update at http://www.huffingtonpost.com/pat-oglesby/a-way-marijuana-dilemma_b_2490720.html

Legalization of marijuana in Colorado and Washington is bringing speculation about what the Administration will do in response.  No obvious answer appears, because the Executive Branch’s options are limited – the kind of situation the Founders intended when they split up power and gave so much to the Legislative Branch.

 

Congress could address the problem of state-legal marijuana.  (But what Congress is likely to do is  Continue reading “A Federal Marijuana Tax”

Two educated, informed liberals in my hearing recently advocated having NC tax all services, even medical services, at a low, say 2.5 percent rate, which would be the new, low sales tax rate for everything, even food and prescription drugs.

That is sacrificing fairness for simplicity.  Utterly.  Wow.  Maybe the Republicans would go for that if the Democrats took the heat on regressivity; Republicans will have the Governor and a supermajority in each legislative house.  But it’s unpopular to tax medicine, and once you start making exceptions, the slope gets slippery fast.

Folks who hoped marijuana legalization would go away have had a rude awakening. The victories in Washington and Colorado make the headlines, but the 46 percent yes vote in Oregon for a ridiculous legalization plan is the big shock.  Voters are desperate for change.

Oregon’s Measure 80 had no taxes.  It would have set up a state monopoly, Continue reading “Marijuana Is Not Going Away”

In 1798, the Fifth Congress enacted a progressive wealth tax. Then, for instance, a house worth $300 bore tax of 60 cents; a house worth $30,000 bore tax of $300 — that’s 500 times more tax on property worth 100 times more. Direct Tax Act, 1 Stat. 597, 599, http://constitution.org/uslaw/sal/001_statutes_at_large.pdf (a huge file also linked here).

But that experiment that didn’t last, maybe in part because it involved a cumbersome direct tax that had to be apportioned among states according to population. North Carolina, for instance, had to pay $193,697.96 – “and five mills.” Tennessee had to pay only $18,806.38 – “and three mills.”  There  was also a tax on slaves – 50 cents each. Folks in the North thought they were paying too much, and started Fries’ Rebellion.

If the tax brought in too much to bring in a state’s apportioned share, rates on houses were to be reduced. If too little, undeveloped land was to be taxed.

Here’s an excerpt: Continue reading “Progressivity in America: 1798”