Taxing Marijuana

  • Thread starter Cali smoke
  • Start date
  • Tagged users None
Cali smoke

Cali smoke

Taxing Marijuana
July 29, 2009 07:45 PM
By: Chris Weigant


California voters may soon get a chance to weigh in on whether marijuana should be legalized and taxed by the state. If enacted, this may help the state's budget by providing revenue from a brand new source, while also freeing up money that previously went to enforcement efforts against marijuana growing. Of course, marijuana would still be illegal under federal law, but this may be a turning point in the legalization movement -- the point where politicians desperate for tax revenues see dollar signs instead of prison bars when looking at the cannabis plant.

And make no mistake -- this is not medical marijuana we are talking about. From the wire service report:

A proposed ballot measure filed with the California attorney general's office would allow adults 21 and over to possess up to an ounce of pot. Homeowners could grow marijuana for personal use on garden plots up to 25 square feet.

Now, 25 square feet sounds like a lot, but it's really only a plot five feet by five feet. Assumably, this was written into the ballot measure so marijuana (at least initially) wouldn't be sown by agribusinesses in 1,000-acre fields. But even with the land-use restriction, the initiative is remarkable for the lack of other restrictions. No mention is made of "medical" or "medicine" or any of that -- just "adults."

There are even two ballot measures to choose from. The second one is even less restrictive:

The Tax, Regulate and Control Cannabis Act of 2010 would set no specific limits on the amount of pot adults could possess or grow for personal use. The measure would repeal all local and state marijuana laws and clear the criminal record of anyone convicted of a pot-related offense.

Bet that would save a few dollars on prisons. And even if these ballot measures fail, state legislators are introducing bills to do exactly the same thing. So, while it should not in any way be seen as inevitable, it now appears possible that California may soon legalize and tax marijuana, used for recreational purposes.

While the concept of taxing marijuana is a new one for most people to consider, it actually has a long history. The very first federal law dealing with (pun intended) marijuana was the Marihuana Tax Act of 1937. Earlier laws outlawing "narcotics" had left out marijuana (or, in the spelling more common at the time, "marihuana"), so this was a more specific law dealing only with cannabis (and hemp). It ostensibly levied a tax on marijuana, which was widely used in medical products of the day. The tax was pretty low (the base rate for a doctor was one dollar for a tax stamp, per year), but the penalties for not paying the tax were the real purpose of the law. The law did not make marijuana illegal, so what the feds would clap you in prison for was not ponying up the tax. This had to be softened during World War II, when hemp was necessary for military supplies (hemp ropes, before nylon became widespread) and the planting of hemp was actually encouraged by the federal government (as in the "Hemp for Victory" movie put out by the feds in 1942).

Later, in the 1950s, marijuana was flat-out made illegal at the federal level. And then, at the beginning of the 1970s, the Controlled Substances Act codified all illegal drugs, and superceded the 1937 Marihuana Tax Act.

But taxing illegal drugs, including marijuana, didn't end there. The next iteration of taxing marijuana came as a result of individual states being annoyed at the federal government. I believe the first of these was Arizona, which (in the late 1970s and early 1980s) had to watch as the feds made a lot of money off the drug traffickers moving through their (border) state. In the 1980s, the big weapon used in the Drug War was property confiscation. So the federal Drug Enforcement Agency (DEA) would catch a semi truck full of bales of weed on an Arizona highway, and they would impound the truck. Later, they'd sell the truck in a government auction, and the DEA got to keep the money. Arizona was annoyed at being cut out of the profits, so they instituted a state tax on marijuana and other illegal drugs. This way, when the semi was auctioned, they could claim "unpaid taxes" on the cargo, and get their cut of the money raised. Many other states followed suit, and passed their own drug taxes for the same purpose -- forcing the feds to share the spoils. They all sold (and some still sell) drug tax stamps for this purpose (Nebraska's stamp unquestionably has the most creative design).

So, once again, the purpose of the tax was disingenuous. The states had no interest in making drugs legal, they just wanted a cut from any busts the feds made in their state. But now, for the first time, California seems to be seriously considering both legalization and taxation simultaneously -- in other words, they are interested in the tax revenues themselves, rather than a back-door method of gaining windfall taxes from federal busts.

But I would caution the state lawmakers -- and the people advocating for the new laws -- to be conservative in estimating the revenue gained from these taxes. This is a by-product of the 100-year history of the Drug War itself. When you read in a newspaper that "$6 million worth of drugs captured" this dollar amount is often vastly overstated. And, even taking such estimates seriously, there's a factor that most people don't even take into consideration, which shouldn't be ignored.

Say you want to estimate how much money California would make off a new marijuana tax. You come up with an estimate of how much pot is sold in the state (let's call it $100 million, just for argument's sake -- since I have no idea what the actual figure is). You then estimate how much the market will grow, due to it now being legal. But then you've got to subtract anyone who grows their own at home, since they won't be selling it to anyone (the tax is usually levied on point of sale, but I guess if it was a production tax they'd theoretically tax peoples' back gardens as well). Finally, you come up with a figure.

But the big factor most people will miss is that the price of something which was previously illegal will go down if it is made legal. The price of moonshine during Prohibition was about ten times what hard alcohol sold for afterwards. Meaning, overnight, that "$100 million" market becomes "$10 million." When something is illegal, most of the price is for the risk involved in producing it and getting it to the customer. Remove the risk, the price always drops. Always. Especially if a law passes without a "25 square foot" restriction, because then farmers out in California's Central Valley will start growing massive amounts of marijuana (and as every economist knows, when the supply goes up, the price goes down).

So California should be careful when estimating what effect a (legal) marijuana tax would have on the state's coffers. An easy way to avoid some of this problem would be to design the tax on "weight" rather than as a sales tax (percent of purchase price, in other words). Then the projections for anticipated revenue might be a little easier to make, because the price per ounce to the customer wouldn't really matter, as the state would be guaranteed a certain dollar amount no matter how low it went.

A recent poll showed that 56% of California voters already approve of the concept of legalizing and taxing marijuana for personal, recreational use. Meaning that a ballot initiative has a fairly good chance of passing. I would just caution everyone to be realistic when making estimates as to how much tax revenue would be raised by doing so. California has such massive budget problems right now that a marijuana tax certainly couldn't hurt the state's cash flow. And, with the voters apparently ready to approve such a scheme, it looks entirely possible that it could happen. But overestimating the revenues expected could actually undermine the case for doing so. The advocates for legalization and taxation should be careful when drawing up their estimates, and keep their promises of tax revenue realistic, to better convince voters of the practicality of the idea.
 
C

CaliKush

so tru smoke, I was born in cali and smuggled from mexico, from 1968 to 1976 and watched price to pound change with quantity avilability, with the changes through drug interdiction. With more grown locally by anyone, quality with drop, pollen will be everywhere, we'll be smok'n Sonora dirt weed, we'll need to reboot with new stock from country's of origin. Remembering Panama Red, Oaxa gold, colombian gold, sweet Jamican, afganii, and Acapulco gold, well them days will come again maybe. But Cali tax will not make it next yr nor the next but we are getting closer.
 
R

ReelBusy1

so tru smoke, I was born in cali and smuggled from mexico, from 1968 to 1976 and watched price to pound change with quantity avilability, with the changes through drug interdiction. With more grown locally by anyone, quality with drop, pollen will be everywhere, we'll be smok'n Sonora dirt weed, we'll need to reboot with new stock from country's of origin. Remembering Panama Red, Oaxa gold, colombian gold, sweet Jamican, afganii, and Acapulco gold, well them days will come again maybe. But Cali tax will not make it next yr nor the next but we are getting closer.
I agree with you we are getting closer.
I disagree with the theaory about a lack of quality.
IMHO think there are enough people who have been protecting strains and lineage through this incredible period of prohibition we are living through.
The lack of prison penalties will make it easier for the tru breeders to do their thing.
And local grown schwag, if sold and not for personal use by the small grower, will only get a poor market price....like now....
 
Texas Kid

Texas Kid

Some guy with a light
If you read any of the proposed tax plans, none of them really allow for the small producer at all. All the Cali plans will basically outlaw growing except for personal use and the government will go into the weed business with big agro, all despensaries will be state run or affiliated, no one will be able to sell into the state run system except for there cronies and sweet heart pact members that will cut thoer deal on the front end. The first step in each of the plans is to flood the market with cheaper weed to take the profit out of it, drive local dealers and despensaries out of business, kill competition ala Unckle sam and capture the tax dollar by basically having state grown and distributed product. They do not want to tax the really grower but it sounds good, they want to drive the growers out of business and tax us all at the counter. Much eaiser for them to get their money when they get to take there tax first and then give you the change instead of leaving it up to you pay.

But make no mistake, when they talk about taxing this whole enterprise, it's not to get all us growers into the IRS fold and paying our taxes, they want us gone...they want all the money and then decide what to give you back afterwards.

I mean anyone could grow tabacco or make whiskey now, but damn its only 5 bucks for 20 cancer stcis and $12 bucks a 750ml for devil juice, who wants to go through the trouble for that...heres my $12 bucks

Tex
 
R

ReelBusy1

But make no mistake, when they talk about taxing this whole enterprise, it's not to get all us growers into the IRS fold and paying our taxes, they want us gone...they want all the money and then decide what to give you back afterwards.
very true

I mean anyone could grow tabacco or make whiskey now, but damn its only 5 bucks for 20 cancer stcis and $12 bucks a 750ml for devil juice, who wants to go through the trouble for that...heres my $12 bucks
lol
 
B

been

Guest
If you read any of the proposed tax plans, none of them really allow for the small producer at all. All the Cali plans will basically outlaw growing except for personal use and the government will go into the weed business with big agro, all despensaries will be state run or affiliated, no one will be able to sell into the state run system except for there cronies and sweet heart pact members that will cut thoer deal on the front end. The first step in each of the plans is to flood the market with cheaper weed to take the profit out of it, drive local dealers and despensaries out of business, kill competition ala Unckle sam and capture the tax dollar by basically having state grown and distributed product. They do not want to tax the really grower but it sounds good, they want to drive the growers out of business and tax us all at the counter. Much eaiser for them to get their money when they get to take there tax first and then give you the change instead of leaving it up to you pay.

But make no mistake, when they talk about taxing this whole enterprise, it's not to get all us growers into the IRS fold and paying our taxes, they want us gone...they want all the money and then decide what to give you back afterwards.

I mean anyone could grow tabacco or make whiskey now, but damn its only 5 bucks for 20 cancer stcis and $12 bucks a 750ml for devil juice, who wants to go through the trouble for that...heres my $12 bucks

Tex
That won't be a problem until cannabis is being sold retail, over-the-counter. All pharmaceuticals get more expensive on the black market. You know that any well-informed American is going to stay off the list.

Growers will still have it good in the near future. Anyway, I know a lot of the "bad-off" medical patients are spending crazy money on their Kush prescription at the "pharmacy", "".
 
C

CaliKush

I agree with all the brothers, I grow and have grown since 1969 mostly for myself and my bros. I got my eyes on my buds and ears to the good music, I am going to party until I die.
peace out

calikush
 
P

philthy

2
0
0
it's hypocritical to support the apparatus of the state thru enabling the coffers of the same bureaucrats eho fight the legality of prop 215.it's bad enough the state board of equaliztion taxes medical mj and not prescription
drugs,lets keep the lowhanging fruit out of the states hands.
 
T

tritonite

That won't be a problem until cannabis is being sold retail, over-the-counter. All pharmaceuticals get more expensive on the black market. You know that any well-informed American is going to stay off the list. ".

agree




There is so much arists about regulation that makes me wonder if this is really a good thing...

One one side growing will not be a risk, but im not sure if i want a pharma growing my stuff and pay a tax for it...

Lets face it... Marijuana will not save any economy in any country, this will only make politics and gov empoyees richer, we the people will only get fucked as usual

I do prefer keep quiet and reserve the right of choose what i grow in the quantities that i need

Fuck taxes!!!!
 
N

North

Guest
yeah just another money grab for big agro/tobacco and the feds, while squeezing us little guys outta the picture.

more money(taxes), bigger brother.
 
whiplash

whiplash

9
2
3
all good and valid points on both sides. However you have to start somewhere and this is just a 1st step.what with the cost of all the licenses we have to purchase(hunting,fishing,etc)the cost of a grow license is probably where they will end up.
 
Top Bottom