The market is a moving target, and it needs a moving tax rate
In November, Massachusetts voters approved a 12 percent marijuana tax that would undercut the black market, but the House has proposed a 28 percent rate, in line with what other states collect.
Both sides are right — at different times. The marijuana market is a moving target, and needs a moving tax rate. As time goes on, pretax prices will fall, and the black market will weaken. So taxes can go up.
But as the Globe, supporting the higher rate, points out, “Once the legal market is up and running, raising the tax will become far more difficult” (“Dude, don’t bogart our marijuana revenues,” Editorial, June 18). A solution is at hand — provided by proponents of marijuana legalization in federal bill S.776, the Marijuana Revenue and Regulation Act: Schedule rate increases to phase in year by year.
If increases come too fast, the Legislature can cut taxes. That avoids the problem of having legislators vote to raise taxes as needed, which is like cutting off a cat’s tail an inch at a time. Do it now and get it over with.
The writer, founder of the Center for New Revenue, is former chief tax counsel of the US Senate Finance Committee and was cochair of the Regulatory and Tax Structure Working Group of the Blue Ribbon Commission on Marijuana Policy for California.
Data or no data, black market is apt to thrive with a tax hike
The editorial “Dude, don’t bogart our marijuana revenues” strongly endorses the high end of the sales taxes being discussed (28 percent vs. 12 percent). In so doing, it tries to shoot down what to me is the most salient objection to the high tax — that it would encourage continuation of the black market. The editorial’s rationale seems to depend on the assertion that there are “no empirical data” on what rate “would keep crooks in business.” I, too, find it frustrating that no data are introduced to justify taxes and other regulatory costs that will be loaded onto legal sellers.
But we surely can all acknowledge that the higher the cost for legal sellers, the more the black market is apt to thrive. And we surely can agree that driving out the illegal sellers is an important goal of the new law and its regulatory regime. So, let’s keep the tax low, test its effect on legal and illegal commerce — develop that missing empirical data — and, if there is room later, raise the tax if that is then seen as an appropriate way of raising revenue.
After all, the lower rate is what the voters favored. Let’s go with it and see the effect.
Lawmakers meddling with a carefully crafted law
So, let me get this right: Question 4, the marijuana legalization initiative, had a carefully crafted provision in which a community could vote to exclude retail shops if they didn’t want them. The vote was put in there to avoid the danger of some puritanical local politician imposing his or her views on everyone else. So now there are some members of the Legislature who want to take this power of choice away from the voters and give it back to local officials, but also want to entice those officials to open shops by increasing the taxes they could impose.
So the taxes get upped, and the goal of eliminating the black market gets sidelined.
There are two ways to try to end black markets: Undercut them on price, which works. Or crush them with force, which we’ve been trying for a hundred years without success.
Psst, policy makers — ask a high schooler
According to Joshua Miller’s recent reporting, the Massachusetts House of Representatives is in the process of rewriting the laws regarding recreational marijuana that we voted on and passed in November. Members of the Senate are working on a competing bill of their own. My suggestion to streamline this whole process would be to assemble a panel of high school students from around the state. They have been distributing marijuana efficiently and profitably for decades, and with their help the Legislature ought to be able to get this right in one try.