Friday, February 28, 2014
The title of this post is drawn from the title of this recent published scholarly article that, on the surface and even in substance, seems be about a lot of topics other than marijuana law, policy and reform. But the title caught my eye, and I think all would-be marijuana reform advocates ought to check out the article, because I strongly believe the marijuana tax stories and regulations that that emerge in state and federal law and policies in the months and years ahead will be the most important predictor of whether pot prohibition eventually gets fully repealed or lives on and on in the United States.
The article is authored by Susannah Camic Tahk, it is published at 50 Harvard Journal of Legislation 67 (2013), and it is available here via SSRN. Here is its abstract:
In contrast to major legislative reform packages in the 20th century, the Affordable Care Act of 2010 took the form of a tax bill. Although this legislation is the first massive social and regulatory overhaul completed through the tax code, in the past twenty-five years the U.S. Congress and Presidential administrations have substantially increased their use of tax law for non-revenue-raising purposes. Growing reliance on the tax code represents a structural transformation of how Congress and Presidential administrations have come to approach lawmaking goals. This transformation defies the near-consensus of previous tax scholarship, which, following Stanley Surrey, disapproves of embedding programs in the tax code. However, that dominant view rests on assumptions that have become outdated. This Article analyzes the ongoing structural transformation by observing and explaining the advantages that accrue from pursuing social and regulatory objectives through the tax code. In particular, this Article identifies a number of legislative and normative advantages that tax-embedded policies offer.
Wednesday, February 26, 2014
The past few days have seen changes in marijuana tax estimates in Washington and Colorado. Pat Oglesby has some insightful thoughts on these developments, and the difficulty of estimating marijuana tax revenue generally, in this post for the Huffington Post today:
While marijuana revenue could be a promising new source of income for states, a wide range of expectations underscores how little we know so far about what mature markets will look like one day. Last week, early projections for marijuana revenue in the first two legalizing states gave way to new ones. In Colorado, expectations rose; in Washington, they collapsed. As projections zig-zag, other states considering legalization don't know what to expect.
In Colorado, the number jumped by 60 percent, from $67 million to $107 million. That's for the first fiscal full year of marijuana excise taxes. The old, lower number came from the Legislature last August; the new, higher one came from the Governor on February 18.
In Washington, the number collapsed from $1.6 billion to $129 million -- a drop of over 90 percent. Oops. Those numbers are for marijuana excises by the end of Fiscal 2017. The old, higher number came from a criticized 2012 legislative estimate; the new, lower, more plausible one came from the state's official Forecast Council on February 19.
That's confusing. But even comparing the official forecasts is confusing. The numbers above are just for excise taxes.
Sunday, February 9, 2014
The title of this post is the headline of this effective new Huffington Post commentary by former congressional tax staffer Pat Oglesby. Here are excerpts:
With marijuana legalization gaining steam, we might ask not just whether to legalize, but how. Here are three tax mistakes that California and other states can still avoid.
Mistake 1. Collecting late....
Mistake 2. Taxing manipulable price....
Mistake 3. Tying lawmakers' hands....
What about this year's crop of marijuana revenue proposals? Some ace the test, avoiding late retail collections, price manipulation, and rigidity. Bills in Maine, Maryland, New York, and Rhode Island — and an initiative in Alaska — tax at the wholesale level by weight, and don't tie lawmakers' hands. That's 3 for 3 right. But the most prominent California initiative, The Control, Regulate and Tax Marijuana Act, would tax only at retail by percentage of price, and would freeze taxes through 2022. That gets everything wrong: 0 for 3.
We are just figuring out how to legalize marijuana. Some legalization plans will work, but some won't. We can follow, adapt, or learn from models for tobacco and alcohol — which we've been forming and reforming since Colonial times. That way, we can at least avoid making the same old mistakes over and over. We'll be making plenty of new ones.
Saturday, November 2, 2013
Colorado could have more than 100 recreational-marijuana stores open Jan. 1, according to newly released numbers from the state's Marijuana Enforcement Division. The division, which oversees Colorado's regulation of marijuana businesses, accepted 136 applications in October from people seeking to open recreational pot shops. The division also accepted 28 applications for recreational marijuana-infused-products businesses and 174 applications for recreational cultivation facilities.
The businesses that applied in October will have a decision made on their applications by the end of the year, said Julie Postlethwait, a spokeswoman for the Marijuana Enforcement Division. That means they are in line to open Jan. 1, the earliest date for recreational-marijuana sales in Colorado.
By law, all of the applications came from people currently operating medical-marijuana businesses in Colorado. But the tallies represent just a fraction of the state's medical-marijuana industry. Colorado has 517 medical-marijuana dispensaries, 138 medical-marijuana-infused products businesses and 736 medical-marijuana-cultivation facilities, according to the Marijuana Enforcement Division.
"It's expensive," Meg Collins, the executive director of the Cannabis Business Alliance, said in explaining why so few medical-marijuana businesses are seeking to add a recreational component. "In the discussions I've had with folks, I think that one of the things that possibly forestalled people from immediately jumping in is the financial consideration."
Application fees for new recreational-marijuana businesses start at $500 and licensing fees range from $2,750 to $14,000, depending on the type of business and other factors. Postlethwait said the division has not finished its accounting on how much money it collected in October, but estimated that application fees alone brought in around $179,000.
Only two of the businesses that have applied indicated they would make a full conversion to recreational sales, Postlethwait said. The rest intend to operate jointly as medical- and recreational-marijuana stores. In some cases, those businesses will have to divide the shops with a wall and give each shop a separate entrance.
Local bans and moratoriums on recreational pot sales — including in places such as Colorado Springs and Boulder, each of which has dozens of medical-marijuana dispensaries — have also kept recreational applications down, said Mike Elliott, the executive director of the Medical Marijuana Industry Group. Still, Elliott said more businesses are applying for recreational licenses this month and they, too, could receive permission to open shortly into the new year.
Tuesday, October 29, 2013
The title of this post is the student-selected topic for discussion this week in my Marijuana Law, Policy and Reform seminar. Here is the outline of issues and resources the students prepared to foster and facilitate discussion:
My Experience Working at a Marijuana Dispensary – One girl's first-hand account of her experience working at a dispensary in California for one year
14 Kinds of Jobs Sustained by Marijuana – According to Indeed.com, which tracks job listings, in 2011 there was over a 3,000 percent increase in the medical marijuana industry since 2005. This is a list of 14 types of jobs available in medical cannabis.
Your Genius Idea for a 420-Friendly Lazer Tag Arena Could Soon Become Reality in Colorado – Colorado’s Marijuana Enforcement Division (MED) is accepting applications for business proposals, but only existing medical marijuana shop owners are allowed to apply for the recreational marijuana licenses for the first nine months. Investors have committed “well over $1 million” to Colorado marijuana companies.
High-Paying Jobs Available in New Medical Marijuana Industry? – Dixie Elixirs, Denver-based company that manufactures medicated edibles, employed directly in excess of 10,000 employees, including high-salary executive jobs, scientists, and attorneys.
Cannabis Career Institute Hits Chicago to Help Residents Cash in on ‘The New Gold Rush’– CCI is continuing its educational tour in Chicago, teaching students the ins and outs of owing a dispensary or grow operation through their “pot college.”
Marijuana Entrepreneurs, Seminars, and Finance
These are all resources that pertain to creating your own marijuana business. They are comprised of seminar services, RSS feeds regarding important marijuana entrepreneur news, and derivative sources of some economics that marijuana creates.
Comparison to Casino and Alcohol
Links with state-by state jobs numbers for the wine and spirits industry (not including the beer industry). No need to read through all of them, just click on a few links to get a sense of the alcohol industry's job impacts. http://www.wswa.org/search_results.php?search=repeal%20prohibition&type=news
A PDF fact sheet of the total number of jobs the alcohol industry supports: http://www.discus.org/assets/1/7/ContributionFactSheet.pdf
A brief survey of casino jobs across America: http://www.americangaming.org/industry-resources/research/fact-sheets/casino-employment
An employment study from "The Journal of Gambling Business and Economics." Apparently that's a thing. It's a technical read, so they should read the descriptive parts and skip the technical parts. http://www.walkerd.people.cofc.edu/360/AcademicArticles/Cotti2008.pdf
Another employment study, done by the St. Louis Federal Reserve. The gaming has had a positive impact on employment in localities across the country. http://research.stlouisfed.org/publications/review/04/01/garrett.pdf
1) In addition to the educational aspects of the store, weGrow provides anywhere between 15 and 20 full- and part-time jobs. But Mann says it’s the ancillary jobs created that make a difference, including hiring a doctor on site for medical marijuana evaluations; professors to teach classes, including technicians and experienced growers; design and construction positions; security positions, and distributors. About 75 indirect jobs are created with the opening of each weGrow store. http://aznow.biz/small-biz/wegrow-phoenix-opens-cultivates-opportunities-arizona%29
2) By recognizing the potential for medical marijuana business advertisements, the Sacramento News and Review is expanding its distribution and hiring more staff. http://www.today.com/id/43641235/ns/business-us_business/#.Um8iJiRieiY
3) Interesting stats — apparently only a quarter of people think legalized pot would lead to more jobs in their community, while 57% believe there would be no effect. Makes you wonder if this is a (mis)perception that should be hit harder by legalization reformers. If the benefits can be demonstrated to those in the 57% camp maybe you pull in some new supporters. http://www.huffingtonpost.com/2010/04/20/legalizing-pot-will-not-b_n_544526.html?
4) Mr. McPherson said the city stood to reap more of what he called the “secondary benefits.” “You’ve got accountants that are working for them, you’ve got all the security companies that are working for them, you have labs that are working for them, you have bakeries that are baking all the edibles, you have union employees that are getting great benefits, you have delivery services, hydroponic stores, doctors get some benefit,” he said. “It’s the secondary market that gains from this, and all of those pay business taxes to us.” http://www.nytimes.com/2012/02/12/us/cities-turn-to-a-crop-for-cash-medical-marijuana.html?_r=2&
Sunday, October 20, 2013
This past week in my Marijuana Law, Policy and Reform seminar, two students did a wonderful job focusing the class readings (assembled here) and the class discussion on tax issues. I came away from the experience not only once again impressed by how effectively law students can deliver complicated legal content to fellow law students, but also truly fascinated by the array of tax policy issues and questions that legalized state marijuana regimes necessarily engender. Pat Oglesby (a former Congressional tax staffer) has put together this commentary for the Huffington Post, titled "Taxing Marijuana: Four Questions," which highlights just a few of the challenging policy issues that a legal marijuana industry is now creating:
Marijuana legalization brings tax questions: Whether to tax, how much, for whose benefit, and by what measure. None of the answers is obvious....
American consumers today reportedly spend around $30 billion a year for marijuana. That's a pot of gold. Where will that money go?.... Ganjapreneurs — producers and sellers of legal marijuana — are lining up to share in that $30 billion (or whatever the number turns out to be). But tempering the profit motive may go a long way toward building public support — and toward addressing concerns of worried parents. Colorado's successful 2012 initiative enticed voters with taxes for school construction; Washington's helped a laundry list of programs. Marijuana revenue could go into the general fund, or allow cuts of unpopular taxes. There will never be a "right" way to split up the money....
So far, taxes have been based on percentage of sales price. That's easy to calculate: It requires no weigh stations or product testing. But a percentage base is easy to get around. Free Joint Giveaways, like those designed to boost opposition to taxes in Colorado, would be tax free, since any percentage of zero is always zero. And how would anyone figure the tax on hotel stays bundled for one price with free marijuana? When the seller winks at the buyer when selling something for below its fair market price, it's hard for auditors to figure out its "real" price — that's how Google, Starbucks, GE, and other multinationals make a laughing stock of international tax rules.
Price-based taxes will swing wildly up and down as an industry starts up and prices find equilibrium. That's not good. If we look for analogies, price is not the base for any federal alcohol tax. Taxes on liquor and wine depend on alcohol content; beer taxes depend on volume.
Taxing marijuana by weight would solve some problems, but powerful ounces would be taxed the same as weak ounces. Still, the choice for marijuana plant material is either price or weight: Taxes based on content of psychoactive THC (tetrahydrocannabinol) won't work. Test results are not replicable because the material is not fungible enough — not consistent in THC content....
Still, percentage-based taxes don't require indexing for inflation. In real terms, unindexed Federal alcohol taxes have shrunk dramatically since the last increase, in 1991....
Taxing marijuana is no easy matter, but tax-free marijuana could cause a voter backlash -- or intervention from a federal government worried about leakage to other states and underage users.... A state monopoly would be the most cautious approach to legalization, but states have steered clear of selling through state stores, which would directly violate federal law. We are not even at the end of the beginning of figuring out the revenue issues -- and many more things -- around legalized marijuana.
This effective new Time magazine article highlights an important reality that was also stressed by my students in this week's class: there are significant differences in the tax rates and approaches being adopted in Colordo and Washington as they become the first two states with a legalized and regulated recreational marijuana marketplace. And though a range of factors are sure to impact the "success" of new pot policies in these states, there are good reasons to believe tax policies may be the legal factor that has the most tangible and consequential impact on how the marijuana marketplaces emerge and evolve.
Because I know very little about tax policy, especially at the state level, I am certain I will be unable to follow closely and with sophistication the tax policy debates and developments that will continue to unfold as marijuana laws get reformed and marijuana markets transform in the months and years ahead. But as the title of this post highlights, I think this is an important and fertile arena for the work of tax policy experts.
Sunday, October 13, 2013
Over the next two months, the students in my Marijuana Law, Policy and Reform seminar are "taking over" the class and classroom by selecting topics of special interest to them and assembling readings to provide the basis for our classroom discussions of these topics. I am excited to be able to post those readings in this space, and the first week is devoted to coverage of tax issues. Here is my students' recommended reading list with links to all the terrific reader-friendly resources they have assembled:Sources addressing Colorado and Washington's tax plans
"Colorado Amd 64 Taskforce Tax Recommendations," an attached PDF [available here Download Colorado Amd 64 Taskforce Tax Recommendations] excerpting 4 pages from the Governor's taskforce's report on regulation more generally. These recommendations shaped Proposition AA.
Information on Proposition AA, the Colorado tax law that voters will approve (or not) in November. Includes the text of the proposition and some analyses. Also, a link to H.B. 1318, which basically created Prop AA and submitted it for voter approval.
The Anti-Proposition AA movement. The proposed taxes are too high, they say.
Denver wants a 3.5% local tax on marijuana, with ability to increase up to 15% later.
"Cato Estimated Tax Revenue from Legalization," attached PDF [available here Download Cato Estimated Tax Revenue from Legalization] projecting revenues from 50% excise tax on marijuana, asserted to be comparable to existing alcohol and cigarette taxes.
- Rand Study on Legalization Effects, chapters 3 and 4 are relevant to our topic. Having trouble excerpting from the full PDF.
- Federal bill, H.R. 501, proposing 50% excise tax on marijuana
SAMSHA National Survey on Drug Use and Health, 2013: The relevant portion is Section 2: figures 2.1, 2.2, 2.9 and 2.10. Illicit Drug Use. Details marijuana use figures by frequency, amount, and age categories.