Sunday, June 25, 2017
"The Golden State's ‘High’ Expectations: Will California Realize the Fiscal Benefits of Cannabis Legalization?"
The title of this post is the title of this notable new paper authored by George Theofanis now available via SSRN. Here is the abstract:
The federal government has been taking an increasingly relaxed approach to enforcing marijuana laws, allowing states that have legalized to realize the tax benefits of lawful marijuana. California is now seeking to realize those same benefits. In 2016, California voters legalized recreational marijuana with the passing of Proposition 64 (Prop. 64), also known as the Adult Use of Marijuana Act (AUMA).
With the country’s highest population and largest economy, California’s impact on the marijuana industry is expected to be massive. Some are predicting that California’s marijuana market will generate $1 billion in tax revenue alone. Nonetheless, successfully generating revenue from the recreational market largely depends on several unknowable and unpredictable variables. For example, high prices when legal sales begin could polarize consumers toward the illicit market and stall industry growth. On the other hand, low prices could undercut a state’s revenue goals. In addition, even with the general success of the recreational markets in Colorado and Washington, the unique circumstance’s present in California make revenue projections unpredictable. Complicating matters more, marijuana’s illegal status under federal law also has the potential to slow down market growth and decrease revenue, depending on unpredictable circumstances. Accordingly, a sound cannabis tax scheme must take these and other uncertainties into account.
This Article focuses on how a tax regime that strives for short term gains will be more susceptible to the unstable conditions of the market. It explores how California is able to minimize financial risk in the recreational market while facilitating its growth. This Article argues that California should adopt several mechanisms for adjusting the marijuana tax rate, as recommended in the Rand report, because the current tax scheme is too aspiring and will result in slower market growth over time. For instance, by scheduling future tax rate increases and exploiting untapped tax bases, California can cash in long-term without overburdening the market in its infancy. Indeed, a tax scheme that focuses on a short rate of return rather than long term gain will fail to optimize cannabis tax revenue. The marijuana industry will continue to develop in unpredictable ways, making flexibility to change important to the overall success of any marijuana tax regime. By minimizing risk and facilitating market growth, California can seek to become the golden standard of the cannabis industry.
June 25, 2017 in Business laws and regulatory issues, Initiative reforms in states, Recreational Marijuana Commentary and Debate, Recreational Marijuana State Laws and Reforms, Taxation information and issues | Permalink | Comments (1)
Thursday, June 22, 2017
The title of this post is the title of this terrific (and lengthy) article in National Affairs authored by Jonathan Caulkins. Every serious student of marijuana reform ought to read the whole piece, and here are excerpts that highlight just a fee of the many astute observations herein:
The concern with cheap marijuana is not that tens of millions more Americans might smoke marijuana once or twice a week. That would not matter much, because occasional use is, by and large, not terribly harmful. Rather, the concern is that millions more would become habitual users. Over the last decade or so of liberalizing policy, the number of people who report using marijuana at some point within the past year has increased moderately, but the number reporting heavy use has soared. In 1992, fewer than one million Americans self-reported daily or near-daily use of marijuana; by 2014, the figure had ballooned to 7.8 million. Half of the marijuana used in the U.S. is consumed by people who spend more than half their waking hours intoxicated.
Whatever one thinks about the long-term consequences of chronic heavy use, acute marijuana intoxication can interfere with the ability to perform useful and even necessary tasks. Marijuana is not a cognitive-performance enhancer. And while we welcome low prices for most consumer goods — if health care and rent were cheap, it would make life a lot easier for most people — that approach may not apply to "temptation goods." Suppose people could buy essentially unlimited candy and desserts for 50 cents a day. Would that be a good thing? Maybe not. Lots of Americans already struggle with their weight, and consumption tends to go up when prices fall.
Libertarians may want prices to be as low as possible even for temptation goods. But the internalities argument goes as follows: Marijuana is a dependence-inducing intoxicant that leads many users to systematically make bad decisions that harm themselves as well as third parties; more than four million Americans report suffering enough problems with chronic marijuana use to meet clinical criteria for a substance-use disorder.
Chronic drug use involves repeatedly ingesting chemicals that bind to one's neuro-receptors — literally altering the brain in ways that are visible in brain scans. Changes in the brain's reward circuitry can compromise the neural system that normally helps rational actors successfully negotiate free markets. Even if each dose considered on its own seems appealing, regular drug consumption can leave long-term users regretful. The phrase "drugs hijack the brain" is sensationalistic, but not altogether wrong. So there is nothing illogical about adopting a libertarian perspective toward conventional consumer goods but making an exception for temptation goods, particularly for artificially introduced neurotransmitters and their chemical cousins.
To be sure, taxing to protect the minority for whom cheap marijuana would trigger habitual use is paternalistic, and it sacrifices the interests of the majority whose use would not create such problems. But the sacrifice would not be large: A $5-per-gram tax would cost someone who smokes a half-gram joint every weekend only $125 a year. Furthermore, the taxes would not actually increase out-of-pocket costs, but merely lessen the decline in price that would inevitably accompany federal legalization. So even with high taxes, legalization would still save marijuana users money.
June 22, 2017 in Federal Marijuana Laws, Policies and Practices, History of Marijuana Laws in the United States, Recreational Marijuana Commentary and Debate, Taxation information and issues , Who decides | Permalink | Comments (1)
Thursday, May 11, 2017
In a post last month, I asked "Is the Trump Administration driving a 2017 spike in Colorado marijuana sales?" based on data showing increased marijuana sales in Colorado the first two months of this year. Now, via this new Cannabist piece, headlined "Colorado marijuana sales top $131M, set record in March 2017," we have additional data on ever-increasing sales, though there is no way to tell from basic sales data if the market is experiencing general growth or if folks in Colorado may be stocking up on marijuana in light of uncertainty concerning federal marijuana policies under a new administration. Speculations about reasons aside, here are the basic sales details along with some perspectives via The Cannabist:
The Colorado cannabis industry’s unbridled growth hasn’t waned — in fact, it’s still setting records. The state’s licensed marijuana shops captured nearly $132 million of recreational and medical cannabis sales in March, according to The Cannabist’s extrapolations of state sales tax data made public Tuesday.
The monthly sales haul of $131.7 million sets a new record for Colorado’s relatively young legal marijuana industry, besting the previous high of $127.8 million set last September, The Cannabist’s calculations show. It’s the tenth consecutive month that sales have topped $100 million.
Sales tax revenue generated for the state during March was $22.9 million, according to the Colorado Department of Revenue. March’s sales totals were 48 percent higher than those tallied in March 2016, according to The Cannabist’s calculations. The month closes out a quarter in which sales were up nearly 36 percent from the first three months of last year.
In 2016, the year-over-year quarterly growth rate ranged between 29 percent and 39.6 percent. The Cannabist also found that March 2017’s year-over-year percentage growth outpaced much of what was seen on a monthly basis last year. Monthly growth rates from calendar year 2015 to 2016 averaged nearly 34 percent.
It was this continued rate of growth that caught the attention of some analysts and economists contacted by The Cannabist. Andrew Livingston, director of economics and research for cannabis law firm Vicente Sederberg, separately calculated out the year-over-year monthly growth rate for Colorado cannabis sales and saw a trend emerge.
“The year-over-year rates of growth have continued at a steady pace, which to me indicates that we have not yet reached the point at which we are starting to cap out the market,” he said. At that point, he added, the growth rates would start to decline.
If the current growth rates keeps up, April 2017 should be another record month, and the summer of 2017 should set new highs, Livingston predicted. And by the end of the year, that could add up to an industry boasting $1.6 billion in sales, he said.
“We’re surprised that sales continue to grow so quickly,” said Miles Light, an economist with the Marijuana Policy Group, a Denver-based financial, policy, research and consulting firm focused on the marijuana industry. “We are not surprised that almost all of the sales growth is in the retail marijuana space.” Adult-use sales, which hit a new monthly high of $93.3 million, accounted for the lion’s share of the March totals. Medical cannabis transactions totaled $38.4 million.
Light and other economists have previously projected that Colorado’s marijuana market would eventually hit a ceiling as the draw from the black market becomes more complete, regular economic cycles take hold and other states implement adult-use sales. It’s hard to predict when that plateau may occur, but the license and application fees in the March 2017 report were telling, Light said.
Ten months into Colorado’s fiscal year (the latest report for March sales show tax revenue remitted in April), the license and application fees for medical marijuana businesses and retail marijuana businesses were down 25.4 percent and 8.5 percent, respectively, according to the Colorado Department of Revenue report. “This shows that fewer new firms are entering and, I believe, shows that … sales should be tapering off or declining,” he said.
Whatever the particular reasons for the strong and steady sales growth in Colorado, there numbers seem certain to keep investors and other business players "bullish" on the marijuana industry at least for the time being. And such business bullishness will likely continue to fuel various efforts in various jurisdictions to continue moving forward with or expand the reach of marijuana reform.
Prior related post:
May 11, 2017 in Business laws and regulatory issues, Medical Marijuana Data and Research, Medical Marijuana State Laws and Reforms, Recreational Marijuana Data and Research, Recreational Marijuana State Laws and Reforms, Taxation information and issues | Permalink | Comments (0)
Monday, May 1, 2017
The Colorado Springs Gazette, which has tended to take a skeptical/critical perspective on marijuana reform in Colorado, has this big new series of big new articles under the banner "State of Marijuana." Here are the headlines and links:
May 1, 2017 in Business laws and regulatory issues, Criminal justice developments and reforms, History of Marijuana Laws in the United States, Recreational Marijuana Commentary and Debate, Recreational Marijuana State Laws and Reforms, Taxation information and issues | Permalink | Comments (0)
Monday, March 20, 2017
As noted in recent posts, my Marijuana Law, Policy & Reform seminar students, after a well-deserved Spring Break, are hearing presentations this week about marijuana reform's intersection with immigration (background here) and education (background here). If these presentations (or other realities) end up inspiring my students to want to get into the marijuana industry in the Buckeye State, a third student presentation this week has them covered. Specifically, a student this coming week is presenting on "advising a marijuana dispensary in Ohio," and here are the materials this student has assembled for the planned presentation:
Article discussing 501(C)(4) tax emption (webpage includes link to a law review article for those interested)
Posting on taxation of marijuana dispensaries (includes text of 280E as well as a link to the IRS memo regarding taxation, Memo 201504011, for further optional reading)
---- For further reading on the taxation issue: "Tax Planning for Marijuana Dealers"
Memo summarizing Ohio dispensary rules (with changes after comment period)
---- For further reading, check out the “Dispensary Rules” section of OMMCP website
For more information (not Ohio specific) about industry activity as cultivator or processor and for more general business advice, see "Marijuana Business: How to Open and Successfully Run a Marijuana Dispensary and Grow Facility" (free on Amazon’s Kindle unlimited)
Monday, March 6, 2017
Pennsylvania's Auditor General suggests marijuana legalization could help state close budget deficit
A notable bean-counter is making a notable case for marijuana reform in the Keystone State. This official press release, headlined "Auditor General DePasquale Recommends Regulating, Taxing Marijuana as Right Move to Help Deal with Critical Issues: Result would bring in revenue, create jobs, reduce corrections costs," explains:
Auditor General Eugene DePasquale said today Pennsylvania should strongly consider regulating and taxing marijuana to benefit from a booming industry expected to be worth $20 billion and employ more than 280,000 in the next decade. “The regulation and taxation of the marijuana train has rumbled out of the station, and it is time to add a stop in the Commonwealth of Pennsylvania,” DePasquale said during a news conference at the state capitol.
“I make this recommendation because it is a more sane policy to deal with a critical issue facing the state. Other states are already taking advantage of the opportunity for massive job creation and savings from reduced arrests and criminal prosecutions. In addition, it would generate hundreds of millions of dollars each year that could help tackle Pennsylvania’s budget problems.”...
In 2012, Colorado voters approved legalizing, regulating and taxing marijuana. Last year, Colorado – which has less than half the population of Pennsylvania – brought in $129 million in tax revenue on $1 billion in marijuana sales from the new industry that had already created an estimated 18,000 jobs. “The revenue that could be generated would help address Pennsylvania’s revenue and spending issue. But there is more to this than simply tax dollars and jobs,” DePasquale said. “There is also social impact, specifically related to arrests, and the personal, emotional, and financial devastation that may result from such arrests.”
In Colorado’s experience, after regulation and taxation of marijuana, the total number of marijuana arrests decreased by nearly half between 2012 and 2014, from nearly 13,000 arrests to 7,000 arrests. Marijuana possession arrests, which make up the majority of all marijuana arrests, were nearly cut in half, down 47 percent, and marijuana sales arrests decreased by 24 percent. “All told, this decrease in arrest numbers represent thousands of people who would otherwise have blemished records that could prevent them from obtaining future employment or even housing,” DePasquale said. “Decriminalization also generates millions in savings from fewer arrests and prosecutions.”
DePasquale said Pennsylvania has already benefited by some cities decriminalizing marijuana. In Philadelphia, marijuana arrests went from 2,843 in 2014 to 969 in 2016. Based on a recent study, the RAND Corporation estimated the cost for each marijuana arrest and prosecution is approximately $2,200. Using those figures, that’s a savings of more than $4.1 million in one Pennsylvania city. Last year, York, Dauphin, Chester, Delaware, Bucks and Montgomery counties each had more arrests for small amounts of marijuana than Philadelphia. Those counties had between 800 and 1,400 arrests in 2015.
“Obviously, regulation and taxation of marijuana is not something that should be entered into lightly,” DePasquale said. “Should Pennsylvania join the growing number of states benefiting financially and socially from the taxation and regulation of marijuana; there are many things to consider, including details about age limits, regulatory oversight, licensing, grow policies, sale and use locations, and possession limitations.
“As I said earlier, the train has indeed left the station on the regulation and taxation of marijuana,” DePasquale said. “It is time for this commonwealth to seriously consider this opportunity to generate hundreds of millions of dollars in new revenue.”
March 6, 2017 in Business laws and regulatory issues, Criminal justice developments and reforms, Political perspective on reforms, Recreational Marijuana Commentary and Debate, Recreational Marijuana Data and Research, Recreational Marijuana State Laws and Reforms, Taxation information and issues , Who decides | Permalink | Comments (0)
Friday, February 10, 2017
This article from the Cannabist, headlined "Colorado sold $1.3 billion worth of marijuana in 2016," report on the latest notable sales numbers for the first state to have legalize recreational marijuana stores. Here are the details:
It’s a billion-dollar business — and then some. In 2016, Colorado’s dispensaries bagged $1.3 billion in recreational and medical cannabis sales, based on Colorado Department of Revenue tax data released Thursday.
To put the state’s third year of regulated recreational marijuana sales in perspective, Year One totaled $699.2 million (combined with medical sales) and Year Two jumped up to $996.2 million. The trend should continue in Year Four, but beyond that? It’s a murkier proposition.
“Colorado has had a really good run, being the first mover,” said Miles Light, an economist with the Marijuana Policy Group, which provides economic and market consulting services to legal cannabis markets. “Now, as other states legalize, some of these external benefits that are occurring are going to be eroded.”...
2016 was the year in which the $100-million-month became a baseline and heralded a record-breaking summer: The combined sales for July, August and September were $376.6 million. Monthly sales topped $100 million in eight of the 12 months. In December, which is typically a strong month for cannabis transactions, pot shops’ sales were a little more than $114.7 million, a 13 percent increase from the $101.3 million recorded in December 2015....
The Colorado Department of Revenue’s tax data don’t provide information about transactions, so it’s difficult to know the impact of price declines on the overall sales totals. The data do show that recreational marijuana accounted for an $875 million share of that haul while medical sales accounted for roughly $438 million.
They also show that Colorado brought in about $199 million in tax and fees revenue for the calendar year. Marijuana tax revenue is put toward areas such as school construction projects, public health and law enforcement.
It’s the visitor demand that drives a lot of this incremental growth in Colorado’s marijuana industry, Light said. That includes the tourist who buys an eighth for a ski trip here and that’s also the visitors who come into the state to purchase product to illegally supply to other markets, he said. The Denver Post reported in January that research commissioned by the Colorado Tourism Office found interest in legal weed waning among visitors. “2016 represented a return to the more usual Colorado traveler,” tourism director Cathy Ritter said.
February 10, 2017 in History of Marijuana Laws in the United States, Medical Marijuana Data and Research, Recreational Marijuana Data and Research, Taxation information and issues | Permalink | Comments (0)
Saturday, December 17, 2016
The question in the title of this post is my reaction to this recent Denver Post article headlined "Colorado researchers receive $2.35M to study marijuana use on driving, other impacts of legalization." Here are details:
In a groundbreaking effort to better understand what, exactly, happened after voters legalized recreational marijuana in Colorado, the state’s Health Department on Tuesday announced $2.35 million in grants to researchers who will help answer that question.
Most of the money — $1.68 million — will go toward two studies that look at the impacts of marijuana use on driving. The first will compare driving impairment for heavy marijuana consumers versus occasional consumers. The other will study dabbing — the smoking of highly potent marijuana extracts — to determine its effects on driving and cognitive functioning.
Other studies receiving grant funding will look at how long marijuana stays in the breast milk of nursing mothers, the adverse effects of edible cannabis products, the cardiovascular risks of marijuana use in people with heart problems, the impact of marijuana use on older adults and, lastly, an “analysis of data from before and after implementation of recreational marijuana in Colorado,” by a psychology professor specializing in addiction counseling at Colorado State University.
“This research will be invaluable in Colorado and across the country,” Dr. Larry Wolk, the executive director of the Colorado Department of Public Health and Environment, said in a statement. “The findings will inform our public education efforts and give people additional information they need to make decisions about marijuana use.”
The Health Department previously spent $9 million as part of a historic effort to fund the study of medical marijuana by a state government. Those research projects are still ongoing. Earlier this year, the state legislature approved funding for the new grants to study recreational marijuana. The Health Department received 58 preliminary applications, which were winnowed to a pool of 16 from which the final seven recipients were selected.
I am pleased to see that Colorado continues to invest substantial amounts into medical and recreational marijuana research, and the roughly $11.5 million spent to date is nothing to scoff at. Nevertheless, this article reports that Colorado "collected more than $135 million in marijuana taxes and fees in 2015," and increased sales data in 2016 would suggest that the state is on pace to collect at least another $165 million or more this year. Consequently, the tax monies raised in Colorado from marijuana reform in Colorado being "reinvested" in needed research is only about 4%.
Though my biases as a researcher is showing through, I think reinvesting only 4% of tax revenues into needed research is woefully inadequate given all the important and unanswered questions raised by marijuana reforms in Colorado. Though picking out numbers here, I think at this still-very-early stage of state-level marijuana reforms that states ought to be seriously considering putting 10% or more of revenues raised back into public health and public policy research on the impact of state-level reforms.
December 17, 2016 in History of Marijuana Laws in the United States, Medical Marijuana Data and Research, Recreational Marijuana Commentary and Debate, Recreational Marijuana Data and Research, Taxation information and issues | Permalink | Comments (0)
Tuesday, December 13, 2016
As this local article details, during "the first 10 months of 2016, Colorado marijuana shops reached a significant milestone they had barely missed in all of 2015: $1 billion in legal, regulated cannabis sales." Here is more:
When 2015’s year-end marijuana tax data was finally released in February, Cannabist calculations showed $996,184,788 in sales at Colorado marijuana shops that year — spurring a leading industry attorney to tell us at the time, “I think it’s ethical to round that up to a billion.”
That same lawyer, Vicente Sederberg partner Christian Sederberg, celebrated the billion-dollar news on Monday by also pointing to the Colorado cannabis industry’s increasing economic impact and skyrocketing tax revenues for the state as well as numerous cities and counties throughout Colorado.
“We think we’ll see $1.3 billion in sales revenue this year,” said Sederberg, “and so the economic impact of this industry — if we’re using the same multiplier from the Marijuana Policy Group’s recent report, which is totally reasonable — it suddenly eclipses a $3 billion economic impact for 2016.”
Nearly $82.8 million of retail cannabis and more than $35 million of medical pot was peddled at Colorado shops in October 2016; The totals are down from September 2016, when marijuana sales hit an all-time high in Colorado — but October’s sales are cumulatively up year over year by more than 46 percent.
Sederberg and his colleague Andrew Livingston, the law firm’s director of economics and research, also estimate that 2016’s overall tax totals will amount to more than 2014 and 2015 tax totals combined, “and that’s a conservative estimate,” Sederberg added.
Depending on November and December’s forthcoming pot tax totals, that scenario is possible. Not accounting for licensing fees imposed on cannabis businesses, $63.4 million in marijuana taxes were collected by the state in 2014 along with another $120.6 million in 2015. Since 2016 taxes through October sit at $151.4 million, each of the year’s final two months would have to top $16.3 million apiece to best the two previous years’ totals combined. Either way, it’s going to be close.
There are three different taxes on Colorado’s recreational cannabis — the standard 2.9 percent state sales tax, a special 10 percent sales tax and a 15 percent excise tax on wholesale transfers, which is earmarked for school construction projects. The $6 million collected in October excise tax brings the yearly total to $49.7 million — already well over the $40 million mark, which was a point of discussion in 2012’s Amendment 64 campaign. While the first $40 million will go toward school construction projects, any additional tax revenues from the excise tax will go directly to the state’s public school fund.
December 13, 2016 in Business laws and regulatory issues, Recreational Marijuana Commentary and Debate, Recreational Marijuana Data and Research, Taxation information and issues | Permalink | Comments (0)
Monday, November 7, 2016
The title of this post is the title of this recent report produced by the Marijuana Policy Group, which describes itself as a "non-affiliated entity dedicated to new market policy and analysis [seeking] to apply research methods rooted in economic theory and statistical applications to inform regulatory policy decisions in the rapidly growing legal medical and recreational marijuana markets." Here is part of the report's synopsis:
The Marijuana Policy Group (MPG) has constructed a new model that accurately integrates the legal marijuana industry into Colorado’s overall economy. It is called the “Marijuana Impact Model.”
Using this model, the MPG finds that legal marijuana activities generated $2.39 billion in state output, and created 18,005 new FullTime-Equivalent (FTE) positions in 2015. Because the industry is wholly confined within Colorado, spending on marijuana creates more output and employment per dollar spent than 90 percent of Colorado industries....
Legal marijuana demand is projected to grow by 11.3 percent per year through 2020. This growth is driven by a demand shift away from the black market and by cannabis-specific visitor demand. By 2020, the regulated market in Colorado will become saturated. Total sales value will peak near $1.52 billion dollars, and state demand will be 215.7 metric tons of flower equivalents by 2020. Market values are diminished somewhat by declining prices and “low-cost, high-THC” products.
In 2015, marijuana was the second largest excise revenue source, with $121 million in combined sales and excise tax revenues. Marijuana tax revenues were three times larger than alcohol, and 14 percent larger than casino revenues. The MPG projects marijuana tax revenues will eclipse cigarette revenues by 2020, as cigarette sales continue to decline. Marijuana tax revenues will likely continue increasing as more consumer demand shifts into the taxed adult-use market.
As a first-mover in legal marijuana, the Front Range has witnessed significant business formation and industry agglomeration in marijuana technology (cultivation, sales, manufacturing, and testing). This has inspired a moniker for Colorado’s Front Range as the “Silicon Valley of Cannabis.” Secondary marijuana industry activities quantified for the first time in this report include: warehousing, cash-management, security, testing, legal services, and climate engineering for indoor cultivations.
November 7, 2016 in Business laws and regulatory issues, Employment and labor law issues, History of Marijuana Laws in the United States, Recreational Marijuana Commentary and Debate, Recreational Marijuana Data and Research, Recreational Marijuana State Laws and Reforms, Taxation information and issues | Permalink | Comments (0)
Sunday, October 9, 2016
The title of this post is the title of this notable new and timely essay by Pat Oglesby now available via SSRN. Here is the abstract:
Two devastating traps threaten taxes on newly legalized marijuana. One is the quicksand of inflexibility, leading to impotence during a whirlwind of market change. Static laws and price-based taxes lead into that trap.
The trap other is playing favorites by favoring medical users, opening an abyss of tax evasion by recreational users pretending to be sick.
California’s Proposition 64, on the ballot in November, avoids those traps better than the marijuana initiatives in Arizona, Massachusetts, Maine, and Nevada.
It takes lessons from failed initiatives in California, Ohio, and Oregon, and laws on the books in Alaska, Colorado, Oregon, and Washington.
October 9, 2016 in Initiative reforms in states, Recreational Marijuana Commentary and Debate, Recreational Marijuana State Laws and Reforms, Taxation information and issues , Who decides | Permalink | Comments (0)
Friday, September 30, 2016
This new Huffington Post article, headlined "Colorado To Use Pot Tax To Fund Anti-Bullying Programs In Schools," reports on state tax developments that I strongly believe marijuana reform advocates ought to be highlighting and promoting a lot more. Here are excerpts:
Colorado is trying to weed out the bullies from its schools. The Colorado Department of Education is using surplus marijuana tax revenue to create anti-bullying programs in the state’s schools.
The CDE will award 50 schools grants of up to $40,000 per school each year to administer these programs, ABC affiliate KMGH-TV reports. The programs implemented will employ evidence-based anti-bullying practices and will also teach families and communities strategies to deal with bullying, the grant’s description says....
In November, Colorado voters chose to have the state keep the money made from marijuana sales taxes. The amount totaled $66 million, according to CNN Money. The state is using the cash to support schools, law enforcement, drug education and other programs, reported USA Today.
Aurora, Colorado, for instance, used the $1.5 million it generated to help its homeless population.
September 30, 2016 in Recreational Marijuana Commentary and Debate, Recreational Marijuana Data and Research, Recreational Marijuana State Laws and Reforms, Taxation information and issues | Permalink | Comments (0)
Monday, August 22, 2016
As reported in this local article, "Oregon medical marijuana dispensaries have sold an estimated $102 million in recreational cannabis since January, when the state imposed a 25 percent sales tax on pot" which means it "has collected about $25.5 million in marijuana taxes in the first six months of the year and is on track to meet state economists' projections." Here is more about marijuana tax realities in the Beaver State:
The latest tax figures, released Monday by the Oregon Department of Revenue, include the start of marijuana-infused edibles sales. The products include a wide variety of snacks, sweets and drinks and were available to anyone 21 and older starting in June....
State economists estimate that the state will collect about $44.4 million in marijuana taxes in 2016, the first year of the tax.
The state expects it will cost $28.7 million to regulate marijuana; of that, taxes will cover $12 million with the rest covered by fees and licensing of marijuana businesses.
What's left will be distributed according to a formula spelled out by law: 40 percent to the state's Common School Fund, 20 percent to mental health, alcoholism and drug services, 15 percent to Oregon State Police, 10 percent for city law enforcement, 10 percent for county law enforcement and 5 percent to the Oregon Health Authority for alcohol and drug abuse prevention, early intervention and treatment services.
Oregon's medical marijuana stores have been allowed to sell a limited amount of cannabis flowers, as well as starter marijuana plants and seeds, to anyone 21 and older since last October. The state's temporary 25 percent tax kicked in on Jan. 1.
That tax eventually will be replaced with one ranging from 17 percent to 20 percent once the Oregon Liquor Control Commission takes over regulation of recreational marijuana sales later this year. The Legislature set the base tax rate at 17 percent, but cities and counties can adopt ordinances that add up to 3 percent more.
Friday, August 19, 2016
This local article, headlined "Could legalizing marijuana be West Virginia's pot of gold?," reports on this interesting new policy brief released by the West Virginia Center on Budget & Policy suggests. The article summarizes the themes of the report, which is titled "Modernizing West Virginia's Marijuana Laws: Potential Benefits of Decriminalization, Medical Marijuana and Legalization." This summary comes directly from the first two pages of the full 27-page report:
Over the last two decades, states across the country have modernized their marijuana laws to reflect the growing evidence that doing so will help reduce criminal justice costs, help treat some medical conditions, and boost tax revenues and their state’s economy. As of 2016, four states and the District of Columbia have legalized the recreational use of marijuana for adults, 25 states (and DC) allow for marijuana to be used for medical purposes, and 21 states have decriminalized possession of small amounts of marijuana. With several states considering ballot measures this November and public support for legalization rapidly growing (53% of Americans support legalization) among all age groups, the number of states taking action to undo restrictions on marijuana is likely to grow.
While most states have taken at least one step toward modernizing their marijuana laws, West Virginia has not. However, bi-partisan legislation has been introduced in West Virginia over the last several years to legalize medical marijuana and tax marijuana for retail sales to adults. A 2013 poll found that a majority of West Virginians supports decriminalizing marijuana and legalizing it for medical use, while 46 percent supported regulating it like alcohol.
As West Virginia continues to be plagued by large budget deficits (a projected $300 million for FY 2018), an undiversified economy with a fading coal industry, and poor health outcomes, modernizing the state’s marijuana laws could be a step in addressing these problems and could help save the state money in the long run.
This report provides an overview of the states that have modernized their marijuana laws in recent years– including decriminalization, medical marijuana, and recreational use – and the implications for West Virginia if it decided to pursue a similar path. It provides an overview of federal and state marijuana laws (Section 1), an estimation of the potential tax revenue from legalizing recreational marijuana in West Virginia (Section 2), an evaluation of some potential benefits from modernizing West Virginia’s marijuana laws (Section 3), and recommendations on reforming West Virginia’s marijuana laws (Section 4).
If marijuana was legalized and taxed in West Virginia at a rate of 25 percent of its wholesale price the state could collect an estimated $45 million annually upon full implementation. If 10 percent of marijuana users who live within a 200-mile radius of West Virginia came to the state to purchase marijuana, the state could collect an estimated $194 million.
In 2010, it is estimated that West Virginia spent more than $17 million enforcing the state’s marijuana laws. Legalizing or decriminalizing marijuana in West Virginia could reduce the number of marijuana-related arrests, especially among African Americans, which in turn, could reduce criminal-justice-related costs.
The marijuana industry has the potential to add jobs both directly and indirectly. As of September 2015, Colorado had 25,311 people licensed to work in its marijuana industry and over 1,000 retail marijuana businesses. If marijuana were legal in West Virginia it could also have the effect of increasing tourism to the state, particularly in regions with outdoor recreational activities.
Marijuana may potentially have a positive impact on West Virginia’s opioid-based painkiller and heroin epidemic by offering another, less-addictive alternative to individuals who are suffering from debilitating medical conditions.
August 19, 2016 in Business laws and regulatory issues, History of Marijuana Laws in the United States, Medical Marijuana Commentary and Debate, Medical Marijuana Data and Research, Recreational Marijuana Commentary and Debate, Recreational Marijuana Data and Research, Taxation information and issues | Permalink | Comments (0)
Tuesday, August 16, 2016
This article from the Denver Post report on the latest notable sales numbers from marijuana stores in Colorado. The full headline of the article highlights the main data: "Colorado marijuana shops sell nearly $600 million of weed in first half of 2016; As Colorado's monthly marijuana sales eclipse the $110 million mark for only the second time, analysts predict a $1.35 billion finish for 2016." Here is more:
Colorado marijuana shops sold nearly $600 million of recreational and medical cannabis and related products in the first half of 2016, new Department of Revenue data show. And a prominent cannabis industry analyst says the sales are on pace to reach $1.35 billion by year’s end.
The state’s marijuana tax data for June 2016 shows near-record highs for Colorado’s recreational and medical cannabis markets. June’s $73.6 million in recreational marijuana sales marks the second-busiest month for the state’s cannabis stores, according to Cannabist calculations. A few months earlier in April 2016, home to the 4/20 holiday, retail sales totaled more than $76.5 million. The $38.1 million worth of medical marijuana sold in June ranks in the top six most lucrative months of medical pot sales since the recreational era began in January 2014.
While Colorado cannabis sales totaled $996 million in 2015, this year’s totals are on pace to reach $1.35 billion, according to BDS Analytics, which collects data from dispensaries’ point-of-sale systems. “The rate of growth in this industry never ceases to astound us,” said BDS Analytics founder and CEO Roy Bingham. “The combined recreational and medical markets are more than two years old, yet they both continue to expand rapidly — especially the recreational marketplace. And within the overall market, sales in every segment, from concentrates to flower to edibles, continue to swell.”...
There are three different taxes on Colorado’s recreational cannabis — the standard 2.9 percent state sales tax, a special 10 percent sales tax and a 15 percent excise tax on wholesale transfers, which is earmarked for school construction projects. The $5.4 million collected in June excise tax brings the yearly total to $26.6 million. Through the first six months of 2016, Colorado has amassed more than $88 million in taxes and fees for medical and recreational cannabis.
Monday, June 6, 2016
The title of this post is the title of this notable new article authored by Benjamin Leff and now available via SSRN. Here is the abstract:
Over a year ago (March 7, 2015), a little store called the Cannabis Corner opened up in the small town of North Bonneville, Washington, about an hour by car from Portland, Oregon. The Cannabis Corner is the first marijuana store to be operated by a “public development authority,” an independent entity created by a state or local government. Public development authorities are generally exempt from federal income taxes under section 115 of the Internal Revenue Code. For a marijuana business, this exemption is especially valuable because section 280E of the Code currently prevents marijuana businesses from deducting many of the ordinary expenses other businesses regularly deduct, resulting in extremely high federal income taxes.
This Article is the first to address whether independent governmental affiliates that sell marijuana are exempt from federal income tax under section 115 of the Internal Revenue Code. It argues that such entities should easily pass the IRS’s current interpretation of the three requirements for tax-exemption under section 115: (i) that exempt income be derived from “the exercise of any essential governmental function;” (ii) that such income “accru[e] to a State or any political subdivision thereof;” and (iii) that the income “not serve private interests[.]” In addition, this Article argues that the fact that selling marijuana is illegal under federal law is not a bar to exemption under section 115 of the Code the way it is under section 501(c)(3).
Tax exemption for public development authorities that sell marijuana is important because of the non-tax benefits of a marijuana market dominated by government sellers. Some of these benefits exist when governments are participants in a marijuana market that is open to private sellers as well, such as is the case in North Bonneville, Washington. This Article also explores the benefits that might accrue if a state chose to create a regulatory regime for legalizing marijuana in which all marijuana selling took place in government-owned stores. Many states have experimented for years with state control of liquor sales, but there are reasons to believe that marijuana may be significantly more suited to a state-controlled market than alcohol, at least for a transitional period. The question of whether an independent governmental affiliate is exempt from federal income tax, including section 280E, is especially important to governments contemplating the contours of their legal marijuana markets.
June 6, 2016 in Business laws and regulatory issues, Federal Marijuana Laws, Policies and Practices, Medical Marijuana Commentary and Debate, Recreational Marijuana Commentary and Debate, Taxation information and issues | Permalink | Comments (0)
Friday, May 27, 2016
This new Denver Post piece, headlined "Marijuana sales tax revenue huge boon for Colorado cities," highlights some notable community benefits in those Colorado towns allowing regulated and taxed marijuana sales. Here are excerpts:
From small towns that barely dot the map to the state’s largest urban areas, revenue from retail marijuana sales is helping communities address homelessness, send children to college, patch potholes, secure water rights and fund an array of projects.
Aurora is using $1.5 million of its revenue from pot sales and fees to address its homeless issue. Money also is going to road improvements and a new recreation center. Adams County has earmarked more than $500,000 for scholarships for low-income students. Wheat Ridge keeps its revenue in the city’s general fund, and it’s used in a variety of areas. The same goes for Northglenn, where five marijuana stores generated $730,000 in 2015. The money will go toward water purchases and capital improvements to infrastructure and city facilities.
Although many cities stash the cash in their general funds, Aurora City Councilman Bob Roth, who led a committee that drafted retail marijuana regulations, said it was important to show residents exactly how the money is being spent — especially those who opposed marijuana legalization. “One thing I felt very strongly about was that it not just to go the general fund but kept in a separate bucket so we could show the community what specifically we were doing with it,” Roth said. T
here are 62 cities and 22 counties in Colorado that allow retail marijuana sales, according to the state. Marijuana sales this year are expected to reach $1 billion in Colorado, and local government entities are cashing in. “A lot of communities have struggled to have enough revenue to fill potholes and to keep the street lights on,” said Mike Elliott, executive director of the Marijuana Industry Group. “What we’ve seen out of Aurora is that money going to address homelessness. It’s a great use for the money.”
Henny Lasley, project director for Smart Colorado, a group that advocates for protections for children from marijuana, noted that about 70 percent of communities in the state have opted out of retail marijuana. Lasley said pot proceeds should go toward marijuana education and other efforts to enlighten the public on pot. “We believe that if you are going to collect money from marijuana, let’s do something with marijuana from those taxes,” she said.
In Aurora, the money earmarked to help the homeless will be used to purchase two vans for local nonprofit outreach groups to use to transport people to shelters and for other needs, said Nancy Sheffield, project manager for Aurora’s neighborhood service department. Two outreach workers will be funded with the money for the Comitis Crisis Center and the Aurora Mental Health program. “Our City Council has been very wise in how they’re allocating the revenue,” Sheffield said.
By the end of this year, Aurora expects to see $8.1 million in sales taxes and fees since the first pot shop opened in Aurora in October 2014, city spokeswoman Julie Patterson said. Aside from the $1.5 million for the homeless, about $3.8 million is earmarked for improvements to the East Alameda Avenue and Interstate 225 intersection. Another $2.8 million will go toward bonds for a new recreation center in the growing southeast part of Aurora. And $680,000 will be put in reserve to help outreach programs that work with the city’s needy. Because the number of pot shops is capped at 24 in Aurora, revenue is expected to stabilize going forward, with about $6.4 million in 2017, 2018 and 2019.
Even Pueblo West, which isn’t a town or city but a special district west of Pueblo, is seeing marijuana revenue. Pueblo West received about $200,000 from the county, and it plans to use that to fill pot holes and fix roads. For a district of roughly 28,000 residents that is funded primarily through property taxes, it has a limited revenue source. The money from marijuana sales is a “big deal,” district officials said. Wheat Ridge has five locations that sell recreational marijuana, and four of them also sell medical pot, said city spokeswoman Maureen Harper. She said the city saw a total of $530,105 in sales taxes and fees associated with marijuana sales last year.
That revenue goes directly into Wheat Ridge’s general fund and is not earmarked for any one program. “We treat revenue generated by marijuana like we treat other general fund revenue, and it helps support city operations,” Wheat Ridge Mayor Joyce Jay said. “At this point, I don’t see the number of establishments increasing here in Wheat Ridge.”
In Denver, which has the state’s most extensive recreational and medical marijuana markets, the city took in $29 million last year from all sales by taxes and licensing fees. That money goes into the general fund, and Denver devotes some to ramped-up regulation, enforcement, public health and education efforts — budgeted at $9.1 million this year. It also has dipped into pot taxes to cover higher costs on a recreation center project.
In Northglenn, five recreational marijuana stores generated $730,000 in 2015, spokeswoman Margo Aldrich said. The city also has medical marijuana shops. Northglenn has seen about $3.6 million in total revenue since 2009. The money is used for capital projects, and some is used for purchasing water rights, she said. Elliott said part of the money cities and counties receive is used to properly regulate and license the industry — and that makes communities safer. “There’s a lot of money left over to address safety issues that come up or really take on projects that these local communities do not necessarily have the funds to deal with,” he said. “For some communities, this tax revenue has made a huge difference.”
No matter the size of the community, retail marijuana has been, well, a big hit. For Mountain View, a 12-block enclave nestled among Wheat Ridge, Lakeside and Denver, the extra revenue has been a godsend. Known more for funding its budget through speeding tickets, which Mayor Jeff Kiddie said is not true, the influx of cash is much needed.
The town has two pot shops that both sell recreational and medical marijuana. It uses that revenue to take care of streets, alleys and other improvements. “We have such as small tax base,” said Kiddie, who opposed allowing pot stores in Mountain View. “Medical and retail marijuana have definitely helped the town’s bottom line. I’d be lying if I said it didn’t.”
May 27, 2016 in Business laws and regulatory issues, Recreational Marijuana Commentary and Debate, Recreational Marijuana State Laws and Reforms, Taxation information and issues , Who decides | Permalink | Comments (0)
Tuesday, May 24, 2016
The title of this post is the title of this new report produced by Gargen State public policy groups. This ACLU of New Jersey press release, which is subtitled "NJ Policy Perspective & NJ United for Marijuana Reform analysis projects $300 million in annual sales tax revenue to come with legalization for adults," provides this context and highlights:
New Jersey would bring in hundreds of millions of dollars in new revenue by legalizing marijuana, a new report released by New Jersey Policy Perspective and New Jersey United for Marijuana Reform has found. Legalization, taxation, and regulation of marijuana for use by adults aged 21 and older would ultimately add an estimated $300 million in sales tax to state coffers rather than divert consumers to the illegal market, the two policy-focused groups said at a Trenton press conference.
"The lessons from around the country are loud and clear: marijuana legalization makes fiscal sense, and it makes practical sense," said New Jersey Policy Perspective Policy Analyst Brandon McKoy, a co-author of the report. "Expanding economic opportunities and addressing our persistent budget deficit aren't the only reasons to legalize and regulate marijuana, but they are extremely persuasive ones."
The report estimates that New Jersey would bring in at least $300 million annually if marijuana legalization were fully implemented, using graduated tax increases over a three-year period, going from 5 percent, to 15 percent, to the final rate of 25 percent. The first-of-its-kind report in New Jersey relies on conservative estimates, predicting the tax revenue only from marijuana sales. The report's projections are based on the experiences of other states, current information on marijuana users in New Jersey and the surrounding area, current pricing, and the tax structure of other states as they relate to New Jersey's interests.
Including a small percentage of New Yorkers and Pennsylvanians from counties neighboring New Jersey who are expected to participate in the legal, regulated market, the state could take in approximately $305.4 million once the sales tax is fully scaled to 25 percent, the report said. The report estimates that approximately 343,100 New Jerseyans would participate in a legal marketplace, spending $1.2 billion each year. Currently, New Jerseyans spend more than $850 million on marijuana each year. The calculation of tax revenue was based on a price of $350 per ounce, similar to the current estimated price of $343 per ounce in New Jersey.
Legalization would bring other economic benefits not covered in the report, such as job creation, growth in business, research and development, and boosts in property, agricultural, business, and income taxes. In addition, it would increase public safety, protect young people, save resources, advance racial justice, bolster public health, and reduce the strain on the police, corrections, and the criminal justice system, the report argues. New Jersey arrests more people for marijuana possession each year than for any other crime. A June 2015 Rutgers-Eagleton poll found that 58 percent of New Jerseyans support legalizing, taxing and regulating marijuana for use by adults aged 21 and older.
Tuesday, May 17, 2016
I am a fairly strong proponent of marijuana reforms in large part because there seem to be a number of tangible immediate benefits from legalizating, regulating and taxing the marijuana marketplace, while significant drawbacks rarely prove to be as dire as predicted by opponents of reform. Two new stories in major newspapers today discussing developments in Colorado reinforce my views. Here are headlines, links and exceepts:
From USA Today here, "These kids are going to college on pot":
Colorado pot smokers are helping send 25 students to college, the first scholarships in the U.S. funded with taxes on legal marijuana. The awards offered by Pueblo County, in southern Colorado, are the latest windfall from legal Colorado marijuana sales that are also helping build schools and aid the homeless — and in one county, providing 8% raises to municipal workers.
Pueblo County is granting $1,000 each to the students, with recipients to be announced later this month. “It’s incredible,” said Beverly Duran, the executive director of the Pueblo Hispanic Education Foundation, which is overseeing the scholarships. "Every year we get a nice pool of students … but we can always only award to a small percentage. This for us expands that to extraordinary lengths.”...
Further south in Colorado, Huerfano County expects to collect an extra $500,000 in cannabis taxes this year. That’s bankrolling an 8% raise for almost all of the county's 96 municipal employees, a big deal in an area where a county road worker earns $12 an hour and most employees haven’t had a raise in more than five years....
In Aurora, the state’s third-largest city, marijuana taxes are helping improve roads, pay off a municipal recreation center, and provide direct services for homeless men and women. Aurora has nearly 20 pot shops and five grow sites, generating a projected $5.4 million in new taxes this year.
From the Los Angeles Times here, "Governor who called legalization 'reckless' now says Colorado's pot industry is working":
“The predictions of fire and brimstone have failed to materialize,” said Mason Tvert, spokesman for the Marijuana Policy Project, a national group working to reform pot laws. “Most Coloradoans, including the governor, recognize that the law is working.”
From the start, [Colorado Gov] Hickenlooper saw the legalization of marijuana as a great national experiment, something utterly new in this country and fraught with potential public health and safety issues. He fretted about a potential rise in drug use among children and was clearly uncomfortable with an amendment directly conflicting with federal law, which considers pot an illegal drug on par with cocaine.
There were plenty of snags at first. Marijuana edibles proved especially problematic because few people had experience with them. High-profile overdoses made national news. Just last week a lawsuit was filed against the maker of a marijuana-laced candy, alleging the product triggered a "psychotic episode" that caused a man to kill his wife in 2014. Still, none of Hickenlooper’s worst fears were realized.
Colorado is booming. The state has a 4.2% unemployment rate, one of the best in the country. High-tech companies are moving in. Small towns across the state, some once teetering on the brink of bankruptcy, have been saved by tax revenues from pot dispensaries. And the $1-billion-a-year cannabis business will pump $100 million in taxes into state coffers this year.
Andrew Freedman, director of marijuana coordination for Colorado, said the governor’s views reflect a growing sense of optimism about how the industry is regulated. “In the short run, there have been a lot fewer public safety and health issues than the governor feared in the beginning,” said Freedman, who is often referred to as the state’s marijuana czar. “In the beginning, we had problems with edibles and hash oil fires but now, for the most part, Colorado looks a lot like it did before legalization.”
Marijuana consumption has not changed much from pre-legalization levels and there has been no significant increase in public health and safety problems, he said. As for the $100 million in tax revenue, Freedman noted, that's out of a $27-billion state budget. Some 70% of the money is earmarked for school construction, public health initiatives and other projects. The rest goes back into regulating the industry.
“The governor has called this a grand experiment from the beginning. He looks at data points as he goes along and I think he’s pleasantly surprised that there were not as many challenges as he thought,” Freedman said. “He would say the jury is still out on this experiment but he’s optimistic.”
Some are less circumspect. “The state’s image is actually rising. We were just ranked as the best place to live in America,” Tvert said. “The idea that businesses would not relocate here or conferences wouldn’t be held here was untrue. In fact, attendees at conferences are now offered pot tours as day trips.”
May 17, 2016 in History of Marijuana Laws in the United States, Recreational Marijuana Commentary and Debate, Recreational Marijuana Data and Research, Recreational Marijuana State Laws and Reforms, Taxation information and issues , Who decides | Permalink | Comments (0)
Saturday, May 14, 2016
The Tax Foundation describes itself as the "nation’s leading independent tax policy research organization," and it claims that "since 1937, [its] principled research, insightful analysis, and engaged experts have informed smarter tax policy at the federal, state, and local levels." Helpfully, it has recently turned its attention to marijuana reform via these two new publications:
Here are the "Key Findings" from these two reader-friendly reports (which overlap a bit):
- Marijuana tax collections in Colorado and Washington have exceeded initial estimates.
- A mature marijuana industry could generate up to $28 billion in tax revenues for federal, state, and local governments, including $7 billion in federal revenue: $5.5 billion from business taxes and $1.5 billion from income and payroll taxes.
- A federal tax of $23 per pound of product, similar to the federal tax on tobacco, could generate $500 million per year. Alternatively, a 10 percent sales surtax could generate $5.3 billion per year, with higher tax rates collecting proportionately more.
- The reduction of societal risk in being engaged in the marijuana trade, as well as the inclusion of taxes, will combine to reduce profits (and tax collections) somewhat from an initial level after national legalization.
- Society pays all the costs regardless of legality but tax revenues help offset those costs.
- Marijuana tax collections in Colorado and Washington have exceeded initial estimates, and a nationwide legalization-and-tax regime could see states raise billions of dollars per year in marijuana tax revenue.
- Colorado, Washington, and Oregon have all taken steps to reduce their marijuana tax rates, with Alaska considering it, after initial rates of 30 percent or more did not reduce the black market sufficiently. More recent ballot initiative proposals across the country propose rates between 10 and 25 percent.
- Tax rates on final retail sales have proven the most workable form of taxation. Other forms of taxation that have been proposed, such as taxing marijuana flowers at a certain dollar amount, taxing at the processor or producer level rather than the retail level, or taxing products by their level of THC, have faced practical implementation difficulties.
- Medical marijuana is usually more loosely regulated and less taxed than recreational marijuana. In Washington, moving non-medical sales to the retail market has proven difficult given the enormous differentials in tax rates and regulatory structure, and officials there wish the two systems had been tackled simultaneously.
- While the revenue can be in the tens or even hundreds of millions of dollars, it takes a lead time to develop. Revenues started out slowly in Colorado and Washington, as consumers became familiar with the new system and after state and local authorities spent time and money setting up new frameworks and regulatory infrastructure.
- Significant attention must be given to health, agricultural, zoning, local enforcement, and criminal penalty issues. These important issues have generally been unaddressed in ballot initiatives and left for resolution in the implementation process.
May 14, 2016 in Business laws and regulatory issues, Medical Marijuana State Laws and Reforms, Recreational Marijuana State Laws and Reforms, Taxation information and issues | Permalink | Comments (0)