Friday, November 21, 2014
The question in the title of this post is prompted by this new Huffington Post article headlined "Veterans May Gain Easier Access To Medical Marijuana." Here are excerpts:
A bill introduced in Congress would allow Department of Veterans Affairs doctors to recommend medical marijuana for their patients. The Veterans Equal Access Act, introduced Thursday by Reps. Earl Blumenauer (D-Ore.) and Dana Rohrabacher (R-Calif.) with 10 bipartisan cosponsors, would lift a ban on VA doctors giving opinions or recommendations about medical marijuana to veterans who live in states where medical marijuana is permitted.
“Post traumatic stress and traumatic brain injury are just as damaging and harmful as any injuries that are visible from the outside,” Blumenauer said. “Sometimes even more so because of the devastating effect they can have on a veteran’s family. We should be allowing these wounded warriors access to the medicine that will help them survive and thrive, including medical marijuana, not treating them like criminals and forcing them into the shadows. It’s shameful.”
Nearly 30 percent of veterans who served in the Iraq and Afghanistan wars suffer from PTSD and depression, according to a 2012 report from the Department of Veterans Affairs. Some scientists have suggested that marijuana may help PTSD symptoms, which can include anxiety, flashbacks and depression. In a recent study, patients who smoked cannabis saw an average 75 percent reduction in PTSD symptoms. "A clinical trial needs to be done to see what proportion and what kind of PTSD patients benefit, with either cannabis or the main active ingredients of cannabis," said Dr. George Greer, who was involved in the study.
This year, federal health officials signed off on a study that would have examined the effects of five potencies of smoked or vaporized cannabis on 50 veterans suffering from PTSD. The study's future still remains unclear because the federal government's sole provider of medical-grade cannabis didn't have the proper strains for the research to begin. Then the study's lead scientist was fired from the University of Arizona, where the research would have taken place.
I have long thought that anyone who claims to support our troops and veterans ought to be active and vocally supporting more serious exploration of the potential benefits of allowing veterans to use marijuana as one way to deal with the difficult problems of PTSD and brain injuries. And because everyone in Congress claims to be a supporter of our troops and veterans, one might believe that the Veterans Equal Access Act should be the rare proposal that garners bipartisan support in Congress. But because the politics of drug policy rarely is free of divisiveness, I fear passage of this bill in either the current or new Congress may be an uphill battle given that the House of Representatives earlier this year rejected a similar measure.
A few prior related posts:
- Congress rejects proposal to let VA doctors recommend medical marijuana
- Supporting the troops with cannabis in Colorado
- "More and More US Veterans are Smoking Weed to Treat Their PTSD"
- Vets making a push for VA to consider allowing marijuana use for PTSD
Thursday, November 20, 2014
A helpful reader helpfully alerted me to this notable new Congressional Research Service report titled "Federal Proposals to Tax Marijuana: An Economic Analysis." Here is the detailed report's summary:
The combination of state policy and general public opinion favoring the legalizing of marijuana has led some in Congress to advocate for legalization and taxation of marijuana at the federal level. The Marijuana Tax Equity Act of 2013 (H.R. 501) would impose a federal excise tax of 50% on the producer and importer price of marijuana. The National Commission on Federal Marijuana Policy Act of 2013 (H.R. 1635) proposes establishing a National Commission on Federal Marijuana Policy that would review the potential revenue generated by taxing marijuana, among other things.
This report focuses solely on issues surrounding a potential federal marijuana tax. First, it provides a brief overview of marijuana production. Second, it presents possible justifications for taxes and, in some cases, estimates the level of tax suggested by that rationale. Third, it analyzes possible marijuana tax designs. The report also discusses various tax administration and enforcement issues, such as labeling and tracking.
Economic theory suggests the efficient level of taxation is equal to marijuana’s external cost to society. Studies conducted in the United Kingdom (UK) and Canada suggest that the costs of individual marijuana consumption to society are between 12% and 28% of the costs of an individual alcohol user, and total social costs are even lower after accounting for the smaller number of marijuana users in society. Based on an economic estimate of $30 billion of net external costs for alcohol, the result is an external cost of $0.5 billion to $1.6 billion annually for marijuana. These calculations imply that an upper limit to the economically efficient tax rate could be $0.30 per marijuana cigarette (containing an average of one half of a gram of marijuana) or $16.80 per ounce. An increased number of users in a legal market would raise total costs, but not necessarily costs per unit.
Some could also view excise taxes as a means to curtail demand, particularly as the price of marijuana can be expected to drop from current retail prices of up $200-$300 per ounce to prices closer to the cost of production at $5-$18 per ounce, if broadly legalized. The demand for marijuana is estimated to be relatively price inelastic, meaning that consumer demand is relatively insensitive to price changes. Although previous studies of marijuana demand largely examine consumers willing to engage in illegal activities, it appears that higher tax rates would have a minor effect on reducing demand. With this said, tax policy, coupled with adequate law enforcement, could be an effective tool to limit marijuana consumption among youth, as empirical studies indicate that their demand is more sensitive to price than non-youth.
Excise taxes on marijuana could also be levied primarily to raise revenue, as has been historically the case with tobacco and alcohol. As an illustration, assuming a total market size of $40 billion, a federal tax of $50 per ounce is estimated to raise about $6.8 billion annually, after accounting for behavioral effects associated with price decreases following legalization.
The choices in administrative design could affect consumer behavior, production methods, evasion rates, or the tax base of a federal marijuana excise tax. Some of the more significant choices include whether to exempt medicinal uses or homegrown marijuana from tax.
November 20, 2014 in Federal Marijuana Laws, Policies and Practices, Medical Marijuana Data and Research, Recreational Marijuana Data and Research, Taxation information and issues , Who decides | Permalink | Comments (0)
Wednesday, November 19, 2014
CNN has this notable new commentary authored by Jeffrey Miron urging Congress to follow the lead of states on modern marijuana reform. (Miron is senior lecturer and director of undergraduate studies in the economics department at Harvard University as well as a senior fellow at the Cato Institute.) Here are excerpts:
Marijuana legalization is a policy no-brainer. Any society that professes to value liberty should leave adults free to consume marijuana.
Moreover, the evidence from states and countries that have decriminalized or medicalized marijuana suggests that policy plays a modest role in limiting use. And while marijuana can harm the user or others when consumed inappropriately, the same applies to many legal goods such as alcohol, tobacco, excessive eating or driving a car.
Recent evidence from Colorado confirms that marijuana's legal status has minimal impact on marijuana use or the harms allegedly caused by use. Since commercialization of medical marijuana in 2009, and since legalization in 2012, marijuana use, crime, traffic accidents, education and health outcomes have all followed their pre-existing trends rather than increasing or decreasing after policy liberalized.
The strong claims made by legalization critics are not borne out in the data. Likewise, some strong claims by legalization advocates -- e.g., that marijuana tourism would be a major boom to the economy -- have also not materialized. The main impact of Colorado's legalization has been that marijuana users can now purchase and use with less worry about harsh legal ramifications.
Yet despite the compelling case for legalization, and progress toward legalization at the state level, ultimate success is not assured. Federal law still prohibits marijuana, and existing jurisprudence (Gonzales v. Raich 2005) holds that federal law trumps state law when it comes to marijuana prohibition. So far, the federal government has mostly taken a hands-off approach to state medicalizations and legalizations, but in January 2017, the country will have a new president. That person could order the attorney general to enforce federal prohibition regardless of state law.
Whether that will happen is hard to forecast. If more states legalize marijuana and public opinion continues its support, Washington may hesitate to push back. But federal prohibition creates problems even if enforcement is nominal: Marijuana business cannot easily use standard financial institutions and transactions technologies such as credit cards; physicians may still hesitate to prescribe marijuana; and medical researchers will still face difficulty in studying marijuana.
To realize the full potential of legalization, therefore, federal law must change. The best approach is to remove marijuana from the list of drugs regulated by the Controlled Substances Act (CSA), the federal law that governs prohibition.
Standard regulatory and tax policies would still apply to legalized marijuana, and states would probably adopt marijuana-specific regulations similar to those for alcohol (e.g., minimum purchase ages). State and federal governments might also impose "sin taxes," as for alcohol. But otherwise marijuana would be just another commodity, as it was before the Marijuana Tax Act of 1937.
A more cautious approach would have Congress reschedule marijuana under the CSA. Currently, marijuana is in Schedule I, which is reserved for drugs such as heroin and LSD that, according to the CSA, have "a high potential for abuse ... no currently accepted medical use in treatment in the United States ... [and] a lack of accepted safety for use." Hardly anyone believes these conditions apply to marijuana.
If marijuana were in Schedule II, which states it as "a high potential for abuse ... [but a] currently accepted medical use in treatment in the United States," doctors could legally prescribe it under federal law, as with other Schedule II drugs such as cocaine, methadone and morphine....
This "medicalization" approach, while perhaps politically more feasible than full legalization, has serious drawbacks. Federal authorities such as the Drug Enforcement Administration could interfere with marijuana prescribing -- as sometimes occurs with opiate prescribing. Taxing medical marijuana may be harder than taxing recreational marijuana. And the medical approach risks a charge of hypocrisy, since it is backdoor legalization. But medicalization is still better than full prohibition, since it eliminates the black market.
For 77 years, the United States has outlawed marijuana, with tragic repercussions and unintended consequences. The public and their state governments are on track to rectify this terrible policy. Here's hoping Congress catches up.
Tuesday, November 18, 2014
The title of this post is the subheading of this notable commentary by Jacob Sullum at Reason.com. Here are a few excerpts:
At a press conference last week, Eleanor Holmes Norton, the District of Columbia's congressional delegate, urged her colleagues to respect the will of the voters who overwhelmingly approved marijuana legalization in the nation's capital on November 4. She was joined by three congressmen, including Dana Rohrabacher (R-Calif.), who said trying to block legalization in D.C. or in Alaska and Oregon, where voters also said no to marijuana prohibition this month, would flout "fundamental principles" that "Republicans have always talked about," including "individual liberties," "limited government," and "states' rights and the 10th Amendment."...
Initiative 71, which passed by a margin of more than 2 to 1, allows adults 21 or older to possess two ounces or less of marijuana, grow up to six plants at home, and transfer up to an ounce at a time to other adults "without remuneration." It does not authorize commercial production or distribution, although the District of Columbia Council is considering legislation that would. "I see no reason why we wouldn't follow a regime similar to how we regulate and tax alcohol," incoming Mayor Muriel Bowser said at a press conference after the election.
In theory, there are a couple of ways that Congress could try to stop all this from happening. It could pass a joint resolution disapproving Initiative 71, or it could bar the District from spending money to implement the measure. But neither of these approaches looks very promising....
Strictly speaking, "states' rights" do not apply to the District of Columbia, which was created by Congress and is subject to much more extensive federal control than the states are. But as Obama suggests, the arguments for federalism — in particular, the idea that political decisions should be made at the lowest feasible level to facilitate citizen influence, policy experimentation, and competition among jurisdictions — apply to D.C. as well as the states. Given the president's views on the subject, it seems reasonable to assume that he would take a dim view of attempts to nullify Initiative 71.
November 18, 2014 in Federal Marijuana Laws, Policies and Practices, Recreational Marijuana Commentary and Debate, Recreational Marijuana State Laws and Reforms, Who decides | Permalink | Comments (0)
Sunday, November 16, 2014
This new lengthy Washington Post article, headlined "More veterans press VA to recognize medical marijuana as treatment option," highlights a notable constituency eager to have more support for considering use of medical marijuana. Here are excerpts:
At a time when the legalized use of marijuana is gaining greater acceptance across the country, ... a growing number of veterans are coming out of the “cannabis closet” and pressing the government to recognize pot as a legitimate treatment for the wounds of war. They say it is effective for addressing various physical and psychological conditions related to military service — from chronic back pain and neuropathic issues to panic attacks and insomnia — and often preferable to widely prescribed opioid painkillers and other drugs.
Researchers in the United States and several other countries have found evidence that cannabis can help treat post-traumatic stress disorder (PTSD) and pain, although studies — for instance, looking into the best strains and proper dosages — remain in the early stages. Veterans are lobbying for more states to legalize cannabis for medical use — 23 states and the District allow this — but the primary target is the federal government and, in particular, the Department of Veterans Affairs.
The federal government classifies marijuana as a Schedule I drug, the same as heroin and LSD, deeming that it has no accepted medical use and a high potential for abuse. That means that VA, which runs the largest network of hospitals and health clinics in the country, cannot prescribe pot as a treatment, even for veterans who live in a state where medical marijuana is legal.
VA says that its physicians and chronic-pain specialists “are prohibited from recommending and prescribing medical marijuana for PTSD or other pain-related issues.” Medical staff are also prohibited from completing paperwork required to enroll in state marijuana programs because they are “federal employees who must comply with federal law,” said Gina Jackson, a VA spokeswoman.
The swelling chorus of veterans who want to take advantage of marijuana but can’t reflects the growing disconnect between more tolerant state policies and the federal government’s unwillingness to budge. Advocates ... say it is urgent that the federal government recognizes marijuana as a treatment because there are so many veterans of recent wars....
If veterans report their use of marijuana to VA, they could face criminal charges if they live in a state where it is illegal. And though few have indeed been charged, the mere possibility has spawned a culture of “don’t ask, don’t tell,” said Michael Krawitz, a former Air Force staff sergeant and the director of Veterans for Medical Cannabis Access.
VA medical staff have warned that this culture is making for a dangerous situation, especially as more states legalize medical marijuana, because doctors do not know about all of the medications their patients are using. Patients are not routinely given drug tests, but those who are prescribed large amounts of opiates and risk overdosing can be asked to undergo screenings, which can turn up marijuana use. In 2011, VA issued a directive that said patients who were participating in state marijuana programs for pain cannot lose their VA benefits. VA added that it is up to individual patients to craft their “treatment plans” in consultation with their doctors.
Some patients say their VA doctors are making them choose between their prescription drugs and marijuana. “Doctors and administrators wrongly assume that the use of marijuana along with opiates is unsafe,” Krawitz said.
A study published last month in the journal JAMA Internal Medicine reported that “people already taking opioids for pain may supplement with medical marijuana and be able to lower their painkiller dose, thus lowering their risk of overdose.” The study, written by Marcus A. Bachhuber, a researcher at the Philadelphia Veterans Affairs Medical Center, and several colleagues, found that “medical cannabis laws are associated with significantly lower state-level opioid overdose mortality rates.”
Scott Murphy, a retired Army specialist who is the head of Veterans for Safe Access and Compassionate Care, has been compiling a petition asking that marijuana no longer be classified as a Schedule I drug. “Veterans in states without medical marijuana laws feel they need to lie to their physicians for the justifiable fear of losing their earned benefits,” Murphy writes in the petition....
Several VA doctors who specialize in pain management and PTSD said in interviews that they are eager for more research on the medical benefits of marijuana. The doctors, who spoke on the condition of anonymity because they do not have permission from VA to discuss marijuana with the news media, said they feel frustrated because prescription drugs are not helping patients who are suffering. “Anecdotally we know it works, and more and more studies are saying this,” said one VA doctor, a PTSD expert who leads a large East Coast VA pain center. “But we aren’t allowed to study it.”
Researchers at New York University’s Langone Medical Center are developing the first generation of cannabis-related medications targeted for PTSD, according to Alexander Neumeister, a professor of psychology and radiology who is supervising three drug trials. He said research has found that people with PTSD have lower levels of cannabinoid receptors in the brain. These receptors, called CB1, are activated when a person uses marijuana. “We are throwing the wrong pills at the problem and keep doing it,” Neumeister said. “It’s upsetting. It’s heart-breaking and it’s just wrong.”
Thursday, November 13, 2014
The title of this post is the headline of this local Fox News report about an event on Capitol Hill today. Here are details:
D.C. voted overwhelmingly to legalize marijuana but the fate of the city's pot law remains in the hands of Congress. On Thursday, the city is getting support for legalization from some Republican and Democratic lawmakers. The bi-partisan group vowed to block any attempt to overturn the city's pot law.
Initiative 71 legalized small amounts of marijuana for personal use in D.C. -- joining Washington, Colorado, Oregon and Alaska. "The underlying issue legalization and decriminalization of marijuana has caught fire throughout the country," said Delegate Eleanor Holmes Norton (D-DC).
She was joined by allies during a press conference on Capitol Hill, including Republican Rep. Dana Rohrbacher (R-CA) who has led the charge for marijuana reform and Democratic Rep. Earl Blumenauer (D-OR) and Rep. Jared Polis (D-CO) whose states have legalized marijuana. They urged Congress to butt out. “I think D.C. voters and their will ought to be respected just like the will of the voters of Colorado's been respected," said Polis.
Maryland Republican Congressman Andy Harris has yet to succeed, but has said he would do whatever he can to stop it. "The last thing you want to do is introduce a drug and encourage its use among youth when youth already have many issues in that jurisdiction," said Harris (R-MD) the day after the initiative passed.
D.C. voters approved the measure by more than a 2 to 1 margin. Antonio Bell voted for it. His even had marijuana leaves on his socks. "They are consenting adults,” said Bell. “I'm sure it will be regulated. It would be less back and forth to the courthouse for petty crimes and they can focus on real crime.”...
Lawmakers in support of D.C. said no one has died of a pot overdose, but they have of alcohol poisoning. "Wake up and see where the American people are," said Rohrbacher.
He says legalization goes hand in hand with GOP principals of individual liberty, states' rights and limited government. He hasn't seen any blowback in his district as a result of his support for marijuana reform and believes other Republicans won't either....
Opponents of legalization argue the drug will encourage more kids to use marijuana and that it is a gateway drug. But in Colorado Rep. Polis said the opposite has happened. "Underage marijuana use has decreased,” said Polis. “It's created additional jobs and helped driven drug dealers out of business." The regulated sale of the drug has also generated millions of dollars in state tax revenue.
Supporters of D.C.'s law believe they deserve a shot too. Holmes Norton isn't encouraging anyone to smoke pot and argues its widespread use has made it defacto legal. "We're talking about local affairs, we're talking about our local money, we're talking about nobody's business but the District's," she said.
If it comes down to a vote over D.C.'s pot law, Rep. Rohrbacher said they have the votes from Republicans and Democrats to defeat it. One prominent Republican, Sen. Rand Paul, has also gone on record saying he doesn't believe the federal government should interfere with the District's decision to legalize marijuana.
Tuesday, November 4, 2014
As reported in this Roll Call article, headlined "Rand Paul: Let D.C. Legalize Marijuana, If Voters Want," the Republican Senator currently in charge of federal oversight of Washington DC expressed a disinclination to have the feds get in the way of a local vote to legalize marijuana inside the Beltway. Here are the details:
As District of Columbia voters are seemingly poised to approve a ballot item to allow cultivation and possession of small quantities of marijuana for personal use, the Republican in charge of a subpanel with D.C. oversight says home rule should prevail.
“I think there should be a certain amount of discretion for both states and territories and the District, you know,” Sen. Rand Paul said outside his polling place at an elementary school here. “I think really that when we set up our country, we intended that most crime or not crime, things that we determined to be crime or not crimes, was really intended to be determined by localities.”
The Kentucky Republican is the ranking member of the Homeland Security and Governmental Affairs Subcommittee on Emergency Management, Intergovernmental Relations, and the District of Columbia. The unique status of the District gives Congress broad powers to negate local policies, but on the pot question, Paul is strongly on the side of federalism.
“I’m not for having the federal government get involved. I really haven’t taken a stand on … the actual legalization. I haven’t really taken a stand on that, but I’m against the federal government telling them they can’t,” Paul said.
It it isn’t clear that Paul would have the D.C. subcommittee gavel in the event Republicans claim the six seats needed to take the Senate majority. In fact, he indicated shortly before weighing in on the marijuana issue that he had his sights set on a different subcommittee.
Thursday, October 30, 2014
The title of this post is the headline of this new piece by Jacob Sullum over at Reason.com, which provides a helpful summary of the new voter guide put togethr by Drug Policy Action (DPA), the political arm of the Drug Policy Alliance. Here is how this summary gets started:
What do Reps. Dana Rohrabacher (R-Calif.), Earl Blumenauer (D-Ore.), Thomas Massie (R-Ky.), and Jared Polis (D-Colo.) have in common? If you follow drug policy, it probably won't surprise you to learn that they all rate A+ grades in a new voter guide that scores members of Congress based on their votes for reform. A bit more surprising: So do 45 of their colleagues in the House, including 10 additional Republicans: David Schweikert (Ariz.), Duncan Hunter (Calif.), Paul Broun (Ga.), Justin Amash (Mich.), Kerry Bentivolio (Mich.), Walter Jones (N.C.), Mick Mulvaney (S.C.), Mark Sanford (S.C.), Steve Stockman (Texas) and Tom Petri (R-Wis.).
Drug Policy Action (DPA), the political arm of the Drug Policy Alliance, based its grades on seven votes (see list below) dealing with issues such as hemp cultivation, medical marijuana, and banking services for state-legal cannabusinesses. To earn an A+, a representative had to vote in favor of reform all seven times. In addition to the 49 members who rated an A+, 116 got an A (six votes), 33 got a B+ (five votes), 14 got a B (four votes), 31 got a C (three votes), 23 got a D (two votes), and 141 got an F (one or zero votes). The rest did not have sufficient voting records to be graded. The lowest-rated group consists almost entirely of Republicans, as you might expect, but there are also five Democrats who merited an F: Debbie Wasserman Schultz (Fla.), John Barrow (Ga.), Mike McIntyre (N.C.), Jim Matheson (Utah), and Nick Rahall (W.V.).
The failing congressmen include Andy Harris (R-Md.), John Fleming (R-La.), and Hal Rogers (R-Ky.), whom DPA describes as "drug war extremists." Harris distinguished himself by doggedly trying to prevent Washington, D.C., from decriminalizing marijuana possession. DPA describes Fleming as "a committed foe of marijuana reform efforts," known for "distorting and misrepresenting the facts about marijuana use in hearings, floor speeches and briefings" (here, for example) and for "taking to the floor to speak against floor amendments that would support states' rights to reform their marijuana laws, improve access to medical marijuana and improve the ability of states to regulate marijuana businesses."....
It is encouraging that the "drug war extremists" in DPA's report are far outnumbered by the 10 "champions of reform" (including Rohrabacher, Blumenauer, Massie, and Polis) and the 23 legislators receiving "honorable mentions" for sponsoring or cosponsoring reform legislation as well as voting for it.
Wednesday, October 29, 2014
District court evidentiary hearing on the constitutionality of marijuana's Schedule I status is underway
Earlier this year, an Eastern District of California judge granted a very rare evidentiary hearing on the constitutionality of the federal government's treatment of marijuana. That hearing is finally underway this week. I'd recommend the Eastern District of California blog for following all of the news and developments.
The EDCA blog has been linking to relevant news coverage, which so far has been sparse unfortunately.
There have been some posts suggesting things aren't going very well for the federal government, but I'm not so sure how much stock to put in those reports.
For example, the Leaf has this post up on some of the testimony of defense witnesses, reprting that "attempts by US Attorneys to paint [Dr. Carl] Hart – who teaches neuroscience at Columbia University and sits on an advisory board to the National Institute of Drug Abuse (NIDA) – as a researcher blinded by his personal biases blew up, at times embarrassingly, in their faces." The anecdotes cited to support this seem focused more on cross examination drama sorts of points, however.
Though it does sound like Hart had a few snappy and effective replies to questions on cross, I doubt that tells us much at all about how the hearing is actually going ias far as what the likely outcome will be. (Even weirder, the Leaf's post comes with the click-driving headline "Federal Prosecutors Appear to Concede Cannabis' Medical Benefits" but there is absolutely nothing reported in the story that I see to back up that wild claim.)
A rational basis challenge to marijuana's Schedule I status will be a tough claim to make out, as anyone familiar with the law in this area knows. Whatever the result, news about the hearings will be interesting to continue to follow.
Friday, October 24, 2014
Patrick Gleason, who is the Director of State Affairs at Americans for Tax Reform, has this notable new commentary at Forbes headlined "Marijuana Taxes On The Ballot This November." Here are excerpts:
Voter approval of retail marijuana sales in Colorado and Washington State in 2012 presented lawmakers in those state capitals with a difficult task not faced before in the U.S.: how to tax and regulate legal recreational marijuana. As Joe Henchman, Vice President at the non-partisan Tax Foundation has pointed out, “Because marijuana can be purchased as a cigarette, an edible, a liquid, or vapor, all with a wide variety of concentrations, a specific excise tax is untenable.” Since then, Colorado and Washington State lawmakers have imposed onerous and excessive taxes on marijuana; but on Nov. 4, Washington State voters will have the opportunity to tell their representatives in the state legislature to reconsider.
During the 2014 session of the Washington legislature, state lawmakers passed Senate Bill 6505, which deemed the marijuana industry to be non-agricultural, thereby removing excise tax protections that apply to the state’s agriculture industry. This redefining of the industry will permit, if allowed to stand, more than $24 million in higher taxes over the next decade than would’ve otherwise been the case. On Nov. 4, Washington residents will vote on Advisory Question Number 8, a ballot measure that would urge the legislature to either maintain or repeal this reclassification of marijuana products as non-agricultural.
Washington State taxes marijuana with a 25 percent assessment on sales from producers to processors, a 25 percent tax on sales from processors to retailers, followed by another 25 percent tax on retail sales. That’s not all. Then there is the Evergreen State’s Business & Occupation gross receipts tax, a 6.5 percent state sales tax, along with local sales taxes. Altogether this brings the estimated effective tax rate on marijuana products to approximately 44 percent. In light of the onerous tax treatment of marijuana products and companies tied to that industry, it would be a positive development for Washington voters to vote repeal on Advisory Question 8 and urge lawmakers in Olympia to reverse the non-agricultural reclassification that will beget such punitive taxation.
But it’s not just at the state level where the marijuana industry faces excessive and unfair taxation. It’s a basic principle of sound tax policy that the code should not pick winners and losers or disproportionately target certain industries or groups of taxpayers. Yet unlike any other business, newly-legalized cannabis dispensaries are not allowed to deduct ordinary and necessary business expenses like equipment, rent, and wages from their federal taxable income....
Section 280E of the tax code denies ‘ordinary and necessary’ business expenses as a deduction against income derived from Schedule 1 substances. Unfortunately, tax law does not make any distinction between illegal street drug sales and state-established, legal cannabis dispensaries. These latter businesses comply fully with state law, pay all applicable taxes, and are vigorously regulated. There is no reason why the tax code should deny ordinary and necessary business expenses to legitimate businesses established under state law. The result is an arbitrary and punitive situation where legal employers face very high average effective tax rates that Congress never sought to impose on businesses.
Colorado, like Washington State and the federal government, exorbitantly taxes marijuana. Between the state’s 15 percent wholesale excise tax, a 10 percent state tax on marijuana retail sales, plus traditional state and local sales taxes, the effective rate on cannabis approaches 30 percent in the Rocky Mountain State.
It’s great to have 50 laboratories of democracy across the U.S., and the trials with legal marijuana taking place in Washington and Colorado will be instructive for other states and the federal government. Yet, when such heavy and unreasonable taxation is imposed, it blunts the positive effects of legal cannabis – such as the eradication of black markets and drug cartels – and makes it impossible to fully learn from the experience. Washington voters and members of Congress have the opportunity to help get it right, if they so choose.
Monday, October 20, 2014
As Doug blogged about previously here, last month a Colorado bankrupcty judge dsimissed a Denver marijuana business owner's bankrupcty petition. The court reasonined that allowing the petition to go forward would put the bankrupcty trustee in the untenable position of administering assets that are being used to commit federal crimes.
As the story last month noted, the debtor was appealing the decision. And, late last week, the bankruptcy judge granted the debtor's request to stay enforcement of the court's judgment pending appeal. The decision does not seem to be available yet on the Colorado bankrupcty court's site (or, at least, it is not coming up in response to my searches.) But, it is on Lexis at 2014 Bankr. LEXIS 4409.
This development will essentially put everything on hold in the case until the appeals court has weighed in.
Here are a few excerpts from the court's opinion:
The Debtors' appeal raises important questions. As illustrated by this case, the intersection between the federal marijuana prohibition and state level liberalization of marijuana laws significantly complicates bankruptcy proceedings where those issues arise. For a trustee, taking custody of and administering assets that are used in the commission of a federal crime can involve a trustee in conduct that violates the federal criminal law. Because of those complications in this case, the Court found that bankruptcy relief was impossible to grant to these Debtors.
The policy of The United States Department of Justice, with respect to state citizens who are acting in compliance with liberalized state marijuana laws, is to initiate enforcement actions under the CSA primarily where overriding federal concerns are implicated. The same Department of Justice, through the United States Trustee (the "UST"), moved to dismiss these Debtors' bankruptcy case on account of conduct which does not appear to implicate the type of federal concerns that would typically lead a United States Attorney to initiate a criminal prosecution or other enforcement action under the CSA.
The Court finds that the balance of the harms favors granting the stay. In the Court's Dismissal Order, after hearing evidence at the trial of the UST's motion to dismiss, the Court recognized that the denial of bankruptcy relief would be "devastating" to the Debtors. (Dismissal Order at p. 9). Also, in its response to the Debtors' Motion, the UST has not alleged that the creditors would suffer any harm if the Court's Dismissal Order is stayed and the UST asserted that it does not oppose the stay. Given that the UST is statutorily tasked with supervising "the administration of cases and trustees in cases under chapter 7 . . . ," 28 U.S.C. 586, and is the party that sought dismissal of the Debtors' case in the first instance, his lack of opposition to the Debtors' Motion is significant to the Court. Thus, the balance of the harms strongly favors granting a stay pending appeal.
The Court also believes that the Debtors' appeal presents novel and substantial questions of law that will benefit from appellate review. As a consequence of these factors, the Debtors have raised at least some uncertainty as to the merits of their appeal.
Even though the Court cannot assess the Debtors' likelihood of success as being great, because the balance of the harms supports granting the stay, the UST does not oppose granting such relief, and the Debtors' appeal raises important legal issues, a stay of the Court's Dismissal Order pending appeal is appropriate in this case.
This appeal will certainly be worth watching closely.
Friday, October 17, 2014
Regular readers already know that The Brookings Institution has been committed to doing throughtful and cutting-edge research and reports on the legal, political and social realities surrounding modern marijuana reform. Today Brookings released its latest significant report resulting from this work, titled "Marijuana Legalization is an Opportunity to Modernize International Drug Treaties" and authored by Wells C. Bennett and John Walsh. The full 27-page report is available at this link, and here is how it is summarized via this Brookings webpage:
Two U.S. states have legalized recreational marijuana, and more may follow; the Obama administration has conditionally accepted these experiments. Such actions are in obvious tension with three international treaties that together commit the United States to punish and even criminalize activity related to recreational marijuana.
In essence, the administration asserts that its policy complies with the treaties because they leave room for flexibility and prosecutorial discretion. That argument makes sense on a short-term, wait-and-see basis, but it will rapidly become implausible and unsustainable if legalization spreads and succeeds.
To avoid a damaging collision between international law and changing domestic and international consensus on marijuana policy, the United States should seriously consider narrowly crafted treaty changes. It and other drug treaty partners should begin now to discuss options for substantive alterations that create space within international law for conditional legalization and for other policy experimentation that seeks to further the treaties’ ultimate aims of promoting human health and welfare.
Making narrowly crafted treaty reforms, although certainly challenging, is not only possible but also offers an opportunity to demonstrate flexibility that international law — in more areas than just drug policy — will need in a changing global landscape. By contrast, asserting compliance while letting treaties fall into desuetude could set a risky precedent, one that — if domestic legalization proceeds — could damage international law and come back to bite the United States.
Thursday, October 16, 2014
The title of this post is the headline of this notable and lengthy new CNN article. Here are excerpts:
When Hillary Clinton graduated from Wellesley College in 1969 -- where the future first lady and Secretary of State says she did not try marijuana -- only 12% of Americans wanted to legalize the drug. In 45 years, however, the tide has changed for legalization: 58% of Americans now want to make consumption legal, two states (Colorado and Washington) already have and two more states (Oregon and Alaska) could join them by the end of the year.
Despite their growth in approval, many activists see 2014 as a smaller, but important, step to their end goal. It is 2016, when voters will also have to decide who they want in the White House, that marijuana activists feel could be the real tipping point for their movement.
"There will certainly be even more on the ballot in 2016," said Tamar Todd, director of marijuana law and policy and the Drug Policy Alliance. "More voters coming to the polls means more support for marijuana reform and in presidential election years, more voters turn out."
Demographics and money are also an important consideration. Big donors who are ready to fund pro-legalization efforts are more loose with their money in presidential years, according to activists, while Democrats and young people are more likely to turn out. This means legalization activists will be better funded to reach the nearly 70% of 18 to 29 year old Americans who support legalization.
On paper, activists feel their plan will work. But it is one yet to be decided factor -- who Democrats will nominate for president in 2016 -- that could throw a wrench into their push. Clinton is the prohibitive favorite for the Democrats' nomination, but to many in the marijuana legalization community, she is not the best messenger for their cause.
"She is so politically pragmatic," said Allen St. Pierre, the executive director of the National Organization for the Reform of Marijuana Laws. "If she has to find herself running against a conservative Republican in 2016, I am fearful, from my own view here, that she is going to tack more to the middle. And the middle in this issue tends to tack more to the conservative side."...
Clinton has moved towards pro-legalization, though. Earlier this year, during a town hall with CNN, she told Christiane Amanpour that she wants to "wait and see" how legalization goes in the states before making a national decision. At the same event, she cast some doubt on medical marijuana by questioning the amount of research done into the issue.
Later in the year, Clinton labeled marijuana a "gateway drug" where there "can't be a total absence of law enforcement."
"I'm a big believer in acquiring evidence, and I think we should see what kind of results we get, both from medical marijuana and from recreational marijuana before we make any far-reaching conclusions," Clinton told KPCC in July. "We need more studies. We need more evidence. And then we can proceed."
This is more open, however, than in 2008 when Clinton was outright against decriminalization, a step that is less aggressive than legalization. Despite warming on the issue, Clinton's position is concerning to activists like St. Pierre because he feels they are far from solid. "If reforms keep picking up... the winds in our sails are clear," he said. "But if we lose one of more or all of those elections this year, cautious people around her could make the argument that this thing has peaked and you now have to get on the other side of it."
Thursday, October 9, 2014
Yesterday, the Second Circuit upheld a Board of Immigration decision finding a woman subject to removal from the US based on a since-vacated 1997 conviction for attempted possession of marijuana for sale. Though the decision does not break new legal ground, it is a reminder of the serious collateral consequences marijuana convictions can carry (and of the fact that under our immigration laws longtime residents can be forced back to countries they may now barely know based on relatively minor convictions.)
The court itself lamented the outcome, writing in its conclusion:
The sad truth of this case is that petitioner’s removability only came to light after she applied for citizenship. For almost seventeen years, she has owned and operated a business and by all accounts was a productive member of our society. Now, she will be returned to Jamaica and her community here will be the poorer for it. The Attorney General may, of course, review this matter in the exercise of his discretion in immigration matters. The petition for review is DISMISSED and any outstanding motions are DENIED as moot.
Monday, September 29, 2014
As reported in this interesting local piece, headlined "U.S. senators join request for medical marijuana waiver: Schumer, Gillibrand back N.Y. in Justice Dept. effort," New York officials are making a concerted effort to aid in marijuana importation. Here are the details:
U.S. Sens. Charles E. Schumer and Kirsten E. Gillibrand on Monday joined New York State’s effort to obtain a waiver from the U.S. Department of Justice allowing the state to import medicinal marijuana to treat children who suffer from rare and deadly seizure disorders.
The letter by the two Democratic senators from New York to Attorney General Eric H. Holder Jr. comes three days after the state Health Department submitted a new waiver request to Washington permitting the emergency importation of the drug while New York prepares to enact a broader medical marijuana program in the beginning of 2016.
The senators, acting after families of ill children sought their intervention with Justice, wrote to Holder that children with severe epileptic disorders “urgently need medicinal marijuana to ease the symptoms of this horrible disease, and these children obviously do not hold any imminent criminal threat.”
The senators are asking that the federal government help pave the way for Charlotte’s Web, a strain of marijuana grown in Colorado that is not smokable, to be permitted to cross state lines for distribution in New York. Parents of children with the condition say the drug offers no real attraction to the black market because the strain of marijuana they seek does not get users high....
There are an estimated 60,000 New Yorkers who suffer from a form of epilepsy that cannot be controlled by over-the-counter medicines, Schumer and Gillibrand said. How many of those are children with the rare seizure disorders who might qualify for the medical marijuana is uncertain, state officials say.
The specific request by Schumer and Gillibrand seeks assurances from Justice that individuals would not be prosecuted for shipping medical marijuana into New York under a state-created emergency program while the broader marijuana program is being developed.
At least three children have died in New York from the seizure disorders, including 9-year-old Anna Conte of Orchard Park, since the medical marijuana measure was signed by Cuomo in July. Before and after the law’s enactment, families urged the state to carve out an emergency exception for their children to get access to cannabidiol, or cannabis oil, which can be taken in pill, oil or other form other than smoking with no psychotropic effects....
In July, the state legalized medical marijuana, but the program is not set to begin before January 2016. Advocates were upset with Cuomo in June, when the medical marijuana deal was struck, because he insisted on killing a legislative provision to permit the state to participate in an emergency-type program for the seizure treatments by allowing marijuana to be transported across state lines into New York.
Now, advocates say that even if the federal government approves the waiver requests, the legislation Cuomo insisted upon and signed in July would have to be amended. That, they say, would require a special session of the State Legislature if patients don’t want to have to wait until January to gain access to the drug.
Emily Pierce, a Justice Department spokeswoman, said the two letters by the state Health Department have been received and are being reviewed. She said the department does not believe that it has ever granted a waiver like the one being requested by New York.
Assemblyman Richard N. Gottfried, D-Manhattan, sponsor of the medical marijuana law in the Assembly, recalled how the governor at the last moment during negotiations insisted that New York not be permitted to import the drug on an emergency basis and that any marijuana dispensed in the state must be grown in the state. “Even if the state licensed a registered organization tomorrow, it would not be allowed to dispense a product that was produced in Colorado or Vermont,” Gottfried said, suggesting that Cuomo call a special session of the Legislature to deal with the matter.
September 29, 2014 in Federal Marijuana Laws, Policies and Practices, Medical Marijuana Commentary and Debate, Medical Marijuana State Laws and Reforms, Political perspective on reforms | Permalink | Comments (2)
Thursday, September 25, 2014
This new Denver Post article, headlined "Judge denies bankruptcy protection to Denver marijuana business," highlights another notable business problem created by the conflict between state and federal marijuana laws. Here are the basics:
A U.S. bankruptcy judge has dismissed the case of a Denver marijuana business owner, saying that although his activities are legal under Colorado law, he is violating the federal Controlled Substances Act. In dismissing the case, filed in U.S. Bankruptcy Court in Denver by Frank Anthony Arenas, Judge Howard Tallman said he realizes the "result is devastating for the debtor."
The Arenas case is at least the second such one involving a marijuana business tossed out of bankruptcy court in Colorado. At least two others have been dismissed in California. Tallman made a similar decision in a 2012 case involving Rent-Rite Super Kegs West Ltd, a company that operated a warehouse partially rented to a tenant cultivating marijuana.
"Violations of federal law create significant impediments to the debtors' ability to seek relief from their debts under federal bankruptcy laws in a federal bankruptcy court," Tallman wrote in the Arenas decision last month.
Arenas, who couldn't be reached for comment, has appealed the decision to the U.S. 10th Circuit Court of Appeals in Denver. According to his bankruptcy petition, Arenas owes more than $556,000 to unsecured creditors. He has assets of $595,925, personal property worth $47,191 and monthly income of $4,315.16. He has testified that he owns about 25 marijuana plants valued at $250 each, according to Tallman's decision.
Arenas, a wholesale producer and distributer of weed, filed for Chapter 7 protection, in which a debtor turns over assets to a trustee to liquidate and give the proceeds to creditors.
In the decision, Tallman alludes to the contradictions that dueling marijuana laws pose to liquidating assets and distributing the proceeds among creditors. The trustee can't take control of assets or liquidate the inventory without running afoul of federal law, he said. Nor can the debtors convert the case to Chapter 13, which would allow them to pay off debts over time because the plan would be funded "from profits of an ongoing criminal activity under federal law" and involve the trustee in distribution of funds derived from violation of the law.
Those who own and operate marijuana businesses are caught in a legal limbo with federal law restricting access to banking services and creating obstacles that other legitimate — at least by state law — businesses don't, said Sam Kamin, a professor at University of Denver's Sturm College of Law. "As long as it is illegal under federal law, we are going to have weird anomalies like that," Kamin said.
Tuesday, September 23, 2014
The title of this post is the title of this new paper by Julie Andersen Hill now available via SSRN. Here is the abstract:
Although marijuana is illegal under federal law, twenty-three states have legalized some marijuana use. The state-legal marijuana industry is flourishing, but marijuana-related businesses report difficulty accessing banking services. Because financial institutions won’t allow marijuana-related businesses to open accounts, the marijuana industry largely operates on a cash only basis — a situation that attracts thieves and tax cheats.
This article explores the root of the marijuana banking problem as well as possible solutions. It explains that although the United States has a dual banking system comprised of both federal- and state-chartered institutions, when it comes to marijuana banking, federal regulation is pervasive and controlling. Marijuana banking access cannot be solved by the states acting alone for two reasons. First, marijuana is illegal under federal law. Second, federal law enforcement and federal financial regulators have significant power to punish institutions that do not comply with federal law. Unless Congress acts to remove one or both of these barriers, most financial institutions will not provide services to the marijuana industry. But marijuana banking requires more than just Congressional action. It requires that federal financial regulators set clear and achievable due diligence requirements for institutions with marijuana business customers. As long as financial institutions risk federal punishment for any marijuana business customer’s misstep, institutions will not provide marijuana banking.
Saturday, September 20, 2014
The title of this post is the headline of this recent lengthy and informative Forbes article by Jacob Sullum. Here is how it gets started:
During a visit to the Dixie Elixirs & Edibles plant in Denver last summer, I saw the machines the company uses to produce cannabis concentrates, the kitchen where it makes marijuana-infused chocolates, and the bottling line for its THC-spiked sodas. Toward the end of the tour, I had a semi-serious question for the company’s CEO, Tripp Keber: “Where do you keep your piles of money?”
Keber laughed but quickly turned serious. “We actually have strong banking relationships,” he said. “We don’t talk about them. Asking someone about their banking is like asking them what they wear to bed at night. It’s an intensely personal question, even within the industry.” You can begin to understand why banking is such a touchy subject for the newly legal cannabusinesses in Colorado and Washington (as well as growers and dispensaries in the 21 states that allow medical but not recreational use of marijuana) if you consider the federal laws a financial institution violates when it does business with a state-licensed company like Keber’s.
“By providing [a] loan and placing the proceeds in [a] checking account, the institution would be conspiring to distribute marijuana,” writes University of Alabama law professor Julie Andersen Hill in a paper she presented at a conference on marijuana and federalism last week. “By facilitating customers’ credit card payments, the institution would be aiding and abetting the distribution of marijuana. And by knowingly accepting deposits consisting of revenue from the sale of marijuana, the institution may be acting as an accessory after the fact.”
That is not the end of the possible charges. “A financial institution that knowingly processes transactions for marijuana-related businesses commits the crime of money laundering,” Hill notes. Failure to meet the detailed monitoring and reporting requirements of the humorously named Bank Secrecy Act (BSA), which requires financial institutions to keep an eye out for suspicious activity, also can be treated as a felony.
Bank employees, officers, and directors can be prosecuted for these crimes, some of which may, depending on the amount of marijuana involved, trigger five- or 10-year mandatory minimum sentences. BSA violations are punishable by up to 10 years in prison when combined with other federal offenses. Money laundering can get you up to 20 years, and life is the maximum for participating in a marijuana conspiracy. In addition to the daunting threat of criminal penalties, financial institutions that deal with cannabusinesses have to worry about offending federal regulators with the power to impose millions of dollars in fines or sentence a bank to death by revoking its deposit insurance.
It is little wonder, then, that financial institutions are wary of cannabusinesses, or that the growers, manufacturers, and retailers who are lucky enough to obtain banking services do not want to talk about how they managed to do that. The lack of banking services, which Aaron Smith, executive director of the National Cannabis Industry Association, calls “the most urgent issue facing the legal cannabis industry today,” makes it difficult for marijuana entrepreneurs to raise capital and forces most of them to deal exclusively in cash, which creates administrative, logistical, and security headaches.
Friday, September 19, 2014
From Marijuana Business Daily, a new poll shows 65% of registered voters in support of Washington D.C.'s Initiative 71, a quasi-legalization measure on the ballot this November.
Initiative 71 is a bit different from previous marijuana ballot measures. Though the campaign appears to be promoting the measure as a vote for legalization, it would really enact something that is much closer to decriminalization. Legalization really refers to some sort of legal and regulated marketplace. All I-71 would make legal is possession, home cultivation (of up to 6 plants) and transfer without payment between adults. Removing criminal penalties for use is usually referred to as decriminalization, not legalization. And I think permitting home cultivation and non=profit transfers also fit best in the same category since the reforms are really targeted at removing criminal penalties for users (who grow for themselves or share with friends).
My sense has always been that "decriminalization" polls better than "legalization," so it is curious that I-71 is using the legalization language. Since it seems to be comfortably ahead, perhaps the backers are confident of the outcome and want to be able to promote it as a win for "legalization" and so are using that language in the campaign.
Opponents of the initiative launched their campaign this week, so it will be interesting to see if the current numbers hold.
Friday, September 12, 2014
As Rob noted yesterday, Case Western Law is hosting a conference today on Marijuana, Federal Power, and the States. The first panel has just begun and Rob's presentation will be beginning soon. Doug and I will both be speaking on a panel this afternoon. There is a fantastic lineup top-to-bottom today (myself excluded). Best of all, if you'd like to watch, you don't have to buy a last minute ticket to Cleveland. The event is being webcast--the webcast link and the conference agenda are both here. The conference's organizer, Jonathan Adler, has a post with some additional background on the conference here.