George Boardman: We should resist the temptation to tax legal marijuana out of business | TheUnion.com

George Boardman: We should resist the temptation to tax legal marijuana out of business

George Boardman
Columnist

America has a long history of taxing sin, so it's no surprise that various California government entities are hyperventilating over the prospect of creating a new revenue stream when commercial marijuana becomes legal in January.

Whether it's a sales tax, excise tax, gross receipts tax, growers tax or — for all I know — a tax if you just look like you're in the business, county and city governments are busy carving out their slice of the pie. And this doesn't include permit fees that make you legal so you can be taxed.

The problem here is that if we make legal marijuana too expensive, we will lose one of the benefits of legalizing the stuff: Ending the illegal market for pot. The Mexican cartels are probably gearing up production as I write this.

Officials in Nevada County have yet to address the issue in a comprehensive manner, but a recent report from Fitch Ratings shows other jurisdictions have been busy carving out their share of what is expected to be a $7 billion state market.

Fitch, which provides financial information services to big institutional investors and others, surveyed the cannabis tax situation in California and found that state and local taxes could be as high as 45 percent in some jurisdictions.

The state will impose a 15 percent excise tax on cannabis as well as cultivation fees that range from $9.25 per ounce of cannabis flowers to $2.75 per ounce of leaves. Municipalities will also levy sales taxes and a business tax, which could be anywhere from 1 to 20 percent, on gross receipts.

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Business taxes on recreational pot have been approved by voters in 61 California counties and cities, according to the Fitch report. The report was issued before election day, when voters in Pacifica and Cotati approved gross receipts taxes ranging from 6 percent to 10 percent. Nevada City will ask voters to approve a proposed cultivation tax that will range from $1 to $4 per square foot. Grass Valley and the county have yet to address the issue.

State Treasurer John Chiang expects pot taxes to approach the $1 billion mark in the next few years. The biggest problem will be collecting the money since federally chartered banks can't provide banking services to people in the pot business. Chiang envisions a fleet of armored cars fanning out across the state to collect the money.

Pot sellers and growers have other unique problems. Because the federal government considered marijuana a Schedule 1 drug, people who are trying to go legit cannot deduct operating expenses from their income tax, further increasing the costs of somebody who wants to obey the law.

"The existing black market for cannabis may prove a formidable competitor to legal markets if new taxes lead to higher prices than available from illicit sources," Fitch wrote in its report.

But there is always hope the rational will triumph over greed. Colorado, Oregon and Washington all reduced their pot tax rates to shift customers back to the legal market. The excise tax should be kept at 15 percent, about the same for alcohol. That discouraged the mob and undercut bootleggers when Prohibition was repealed, and just might work in the pot market as well.

Otherwise, state and local authorities can spend that extra tax money on the additional police they'll need to keep the drug cartels under control. We know how well that's worked with other drugs.

Good cause

While they are considered deplorables by a sizeable portion of the population, journalists perform a necessary function in our society. The Founding Fathers considered that contribution to be so valuable, they included freedom of the press in the First Amendment to the Constitution.

That's one reason journalism as a profession should be encouraged and supported among our youth, which brings me to the current plight of the journalism students at Bear River High School. The program was moribund until teacher Christina Levinson brought it back from the dead two years ago. Bowing to the realities of the day, Levinson revived the BR Current as a digital newspaper that has become a lively and necessary part of Bruin Nation.

The presentation is clean and professional (kids really know this stuff) and the student journalists make a real effort to cover meaningful issues in a fair and balanced manner — you know, like professional journalists.

A recent article on the cafeteria — a perennial punching bag for students—provided a balanced look at all aspects of the tricky task of feeding students nutritious food they might actually like. Reporter Ciana DeMink interviewed students, cafeteria staff, and administrators to produce a fair and nuanced report. (Check out the publication at BRCurrent.com.)

Now Levinson would like to take her students to the National High School Journalism Convention in San Francisco next April, where they can spend time with other student journalists and learn more about the craft from accomplished professionals.

That will require an expenditure of almost $9,000 the program doesn't have, so a fundraising effort has been started at YouCaring.com (just type in "Bear River journalism students" to get to the right page).

Most of the students in the program will probably pursue other careers, but the skills they learn — critical thinking, research and interviewing, writing and editing — will serve them well in any walk of life.

If nothing else, they will leave the program with a better appreciation of how difficult it is to create good journalism.

That's worth whatever you can contribute.

George Boardman lives at Lake of the Pines. His column is published Mondays by The Union. Write to him at ag101board@aol.com.

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