Cannabis Science & Policy Summit - Day 2 - Oglesby

Tax and PricingTax bases and tradeoffs

Pat Oglesby

Center for New Revenue

Www.newrevenue.org

18 April 2016

Pat Oglesby 18 April 2016 newrevenue.org

http://Www.newrevenue.org

Revenue -- A side issue

Government storesFeesStandard taxes (income, sales, property)Taxes that apply only to cannabis


Tax issues

• Adjustments over time

• How much to tax

• Where to collect

• Free passes

• What to tax – The Tax Base


7 tax bases (and originators)

• Price – Oakland

• Weight of cannabis – Colorado

• Weight of THC – Untried

• Advertising deductions – Federal 280E

• Indoor electricity – Arcata

• Canopy (grow area) – Berkeley, Long Beach

• Number of plants -- Mendocino


Price – Ad valorem (Oakland on medical 2009)

• Simple – log bridge

• Related to THC

• Melts away if prices go down

• Beatable by shenanigans

– Bundling

– Bartering

– Relationships

• Maybe not worth beating if low enough


Weight of cannabis (Colorado 2013)

• No disputes

• Requires set-up

• Rewards extra-powerful product

– Weak gram or strong gram – same tax

• Needs multiple categories


Weight of THC (untried)

• For concentrates, eventually doable

• Bud is not homogeneous

– Like tar and nicotine in tobacco

• Sampling ~ appraisal – what number do you want?


Weight of Stated THC (~ Book income 1986 Tax Reform Act)

• Opposing incentives

• Shenanigans may make it flimsy

• Backstop – Alternative Minimum Tax


No deductions for selling expenses (USA 1982)

• 280E rule: Deduct only cost of the product

• Nudges against marketing, keeps the noise down

• Discriminates v. cannabis – the point

• High early burden

• Overbroad

• Shenanigans

• Expand to alcohol and tobacco and Rx?


Indoor electricity (Arcata 2012)

• Mainly environmental

• Will melt away


Canopy (Berkeley, Long Beach 2010) and

Number of plants (Mendocino 2011)

• Addresses government cash flow problem

• Modest fees are an option

• Weirdly taxes production rather than consumption

– Exporters don’t tax alcohol or tobacco

– Targets only smell


Caulkins asked for steps, over time

• Start low and go slow

• 280E ad deduction rule -- Retain or tweak

• Tiny canopy license fee

• Modest tax on percentage of retail price

• Later, tax on cannabis by weight; Tax stated THC (backup – AMT)

• Later, tax on concentrates by weight of THC


Pushback and Questions

• Pat Oglesby

• Www.newrevenue.org

• [email protected]


http://Www.newrevenue.org

mailto:[email protected]

Cannabis Science & Policy Summit - Day 2 - Oglesby

Science

Transcript of Cannabis Science & Policy Summit - Day 2 - Oglesby