Cannabis Law Prof Blog

Editor: Franklin G. Snyder
Texas A&M University
School of Law

Sunday, October 21, 2018

ANALYSIS: Marijuana Revenue & Regulation Act ( S.776)

AnalysisOn March 30, 2017, Senator Ron Wyden (D-Ore) introduced S.776, the Marijuana Revenue and Regulation Act.

The bill’s official title is “A bill to amend the Internal Revenue Code of 1986 to provide for the taxation and regulation of marijuana products, and for other purposes.”  The legislation aims to remove marijuana from the list of controlled substances and set out requirements for the taxation and regulation of marijuana products.

Specifically, the federal tax code would be amended to impose: (1) an excise tax on any marijuana product produced in or imported into the U.S.; and (2) an occupational tax on marijuana production facilities and export warehouses. The definition of “marijuana product” wouldn’t include industrial hemp or any item containing marijuana that’s been approved by the FDA for sale for therapeutic purposes and is marketed and sold solely for that purpose.

Consequently, the Department of Justice would be required to remove marijuana from all schedules of controlled substances under the Controlled Substances Act (CSA).

Pros

The bill appears to have contemplated criticism of legalizing marijuana on a federal level. The legislation would require producers, importers, and exporters of marijuana products to comply with rigorous licensing, recordkeeping, packaging, labeling, and advertising requirements. This would mean there will be greater control over the production and use of marijuana. The bill would establish penalties for violations of marijuana laws, including the prohibition of the sale of more than one ounce of marijuana in any single retail transaction.

Further, S.776 amends the CSA to require penalties for shipping or transporting marijuana into any state or jurisdiction where it’s illegal. Thus, states where cannabis is not legal will be protected from the substance crossing their borders. Currently, 39 states and the District of Columbia have laws legalizing marijuana (either medicinal or recreational), and the trend is towards greater acceptance of the substance.

Roughly six-in-ten Americans (62%) believe the use of marijuana should be legalized—a steady increase over the past decade, according to a new Pew Research Center survey. This is twice the number that were in favor of legalization in 2000 (31%). And the majorities of younger Americans say the use of marijuana should be legal, including Millennials (74%), Gen Xers (63%), and Baby Boomers (54%). Given these numbers, in addition to the clinical data showing that it can help improve patient quality of life and its potential for revenue and jobs, the proposed legislation has backing among most working adults in the country.

Cons

While there are numerous compelling arguments for legalization and the passing of S.776, opponents say there’s also research demonstrating the dangers of marijuana use. A study by Northwestern Medicine and Massachusetts General Hospital/Harvard Medical School found that young adults who used marijuana only recreationally showed significant abnormalities in two key brain regions that are important in emotion and motivation.

In addition, law enforcement claims that parameters don't exist for determining when someone is under the influence of marijuana. There’s no blood-alcohol content (BAC) test, which makes enforcement worrisome. Critics also point to the fact that THC, the psychoactive component of cannabis, can stay in the bloodstream for days or weeks. As such, getting an accurate reading of impairment, and determining when marijuana was used, would entail some guesswork.

Potential Implications for the Cannabis Industry

As mentioned above, passage of S.776 would have a positive economic impact for the cannabis industry. For example, researchers in Colorado found that their taxed and regulated cannabis industry contributed more than $58 million to the local economy. Opponents are quick to point out that there was about $23 million in added costs to legalization, such as law enforcement and social services. However, the researchers at Colorado State University-Pueblo found that the county still wound up with a net positive impact of more than $35 million. The university’s report examined trends in revenue, construction, marijuana use, homelessness, crime, environmental impact, and other topics and found little conclusive evidence to support claims that marijuana legalization has caused widespread social change in the county.

Also, a national study in January found that legalizing marijuana across the country would create at least $132 billion in tax revenue and more than a million new jobs across the United States in the next decade. New Frontier Data, a data analytics firm that sponsored the study, said that the marijuana industry could create an “entirely new tax revenue stream for the government,” with millions of dollars in sales tax and payroll deductions.

Takeaway

The momentum certainly appears to be moving towards widespread legalization of marijuana at the federal level.

Another bill, the Marijuana Data Collection Act, with bipartisan support. would direct the Department of Health and Human Services to partner with other federal and state government agencies to study "the effects of State legalized marijuana programs on the economy, public health, criminal justice and employment." If enacted, the National Academy of Sciences would conduct the research and publish its findings within 18-months.

However, none of the several bills recently introduced in Congress, including S.776, are given more than a 3% chance of passage into law by Govtrack. Whether the push towards adoption of bills such as these once Congress reconvenes after the mid-term elections remains to be seen.

--Jason Carr

https://lawprofessors.typepad.com/cannabis_law/2018/10/carr-s776-marijuana-revenue-and-regulation-act-is-it-time-for-marijuana-to-be-legal-under-federal-la.html

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Comments

This act tackles a significant issue regarding the financial obstacles that cannabis companies face. By removing marijuana from the list of controlled substances, not only would the federal government be able to tax and regulate marijuana, but cannabis businesses would also be able to conduct safer and more efficient transactions by not having to rely on cash.

Posted by: Gianna | Oct 24, 2018 10:47:51 AM

Thanks for reading, Gianna. I totally agree regarding taxes and regulations. This is why I have such a difficult time understanding the delays in adoption of laws like this in so many states. Speaks volumes about the power of the anti-cannabis lobby, in my opinion.

Posted by: Jason Carr | Oct 31, 2018 2:52:29 PM

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