Economist Marijuana Tax and Tax Again
Marijuana legalisation
Revenue enhancement, and tax once again
America'southward outset market for recreational marijuana will be far from free
FREE-THE-WEED campaigners speak not of "legalising" marijuana but of "taxing and regulating" it. True to their discussion, the ballot measure out they placed before Colorado's voters final November, which won the support of 55% of them, was called the Regulate Marijuana Like Alcohol Deed and contained provisions for a xv% excise tax. At present that the law is taking shape, the signs are that one of the globe'due south first fully legal marijuana markets (Washington land also backed legalisation) volition accept all the taxes and rules anyone could take wished for.
Shortly after Colorado'south law was passed John Hickenlooper, the governor, appointed a task-forcefulness to produce a set of proposals for its implementation. The 24-fellow member group concluded its hearings on February 28th and will formally issue its findings to lawmakers next calendar week. A bill should be passed by early May.
In what its co-chair, Jack Finlaw, calls "a crazy couple of months", the task-force rattled through dozens of problems. Many of its ideas are straightforward enough: rules on labelling, restrictions on advert and provisions to protect youngsters. Non-residents should be immune to buy weed, though in smaller amounts than locals. Joe Megyesy, a pro-legalisation lobbyist, calls the proposals "thoughtful and responsible". But they add together up to a far more than restrictive market than exists for alcohol.
Most importantly, the grouping wants to maintain, for three years, the "vertical integration" model that has governed Colorado's medical-marijuana industry. Under this organisation retailers must abound at least 70% of the dope they sell. This forces licence-holders to main a suite of skills from cultivation to distribution. The task-forcefulness also suggests that for the police'due south first year, only established medical-marijuana dispensaries should be granted retail licences. Some campaigners mutter near protectionism, though grudgingly admit that dispensaries deserve some reward for their pioneering (and risky) work.
Mr Finlaw admits that vertical integration makes it difficult to apply the excise tax: licence-holders will have an incentive to undervalue their product. That may help explain some other proposal: to slap a tax on marijuana sales, on top of existing state and local sales taxes and the proposed excise taxation. No figure will be presented to the legislature, only an "instance" of 25% was floated in hearings.
Regulators say they need the funds to enforce their rules. But set taxes as well high, fearfulness campaigners, and you lot leave the illegal market in place, which destroys one of the principal purposes of legalisation in the first place. Either fashion, any new taxes will have to be approved again by Colorado'due south voters, probably in November.
Over-tight rules create opportunities for rent-seeking and cosy relationships between the industry and regulators. But Colorado'south legislators must perform a balancing act, because they are being watched past the federal government. Marijuana remains illegal under federal constabulary, and should Barack Obama's administration decide to fissure down, as information technology has done in some medical-marijuana states, the work of the task-force would rapidly come undone. In December Eric Holder, the chaser-general, said the Department of Justice would effect its response to the votes in Colorado and Washington "relatively soon"; on February 26th he upgraded that forecast to "soon".
Some members of the prohibition industry are running out of patience. On March fifth the president of the International Narcotics Control Board, an arm of the UN, said that marijuana legalisation in America violated international treaties and threatened public health. Hours later, eight former heads of the Drug Enforcement Assistants, which has led America'southward drug war for decades, expressed alert that federal laws were not existence enforced. One predicted that stoned drivers would leave roads "littered with fatalities".
Libation heads accept prevailed in Colorado, at least for at present. Equally the task-force wrapped upwardly its work Mr Hickenlooper, a legalisation sceptic, told members that although he feared the unforeseen consequences of Amendment 64, he acknowledged the need for pragmatism. With luck, his attitude may prove infectious.
This article appeared in the U.s.a. section of the print edition under the headline "Tax, and tax again"
Source: https://www.economist.com/united-states/2013/03/09/tax-and-tax-again
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