Part 2: MMJ limits cannatax to a fraction of what it could be

guy in a suit dragging a ball and chain through the desert

OK, Mr. Taxman, see how much cannatax you can collect in a desert, lugging around a ball and chain . . .

When your state signs up to be an MMJ state, everyone in your state automatically forfeits all but an ineffectual fraction of the cannatax which could be collected in a fully legal and regulated landscape.

Going down that road — instead of repealing prohibition altogether — means your state will now receive a complimentary ball and chain, available in any color you like, as long as it’s black. The iron orb, with its chain encircling the earth, limits the cannatax your state collects to maybe five percent of what it could be, wants to be, and deserves to be.

Cannatax figures don’t get around much. So, no one knows what they’re missing.

The few figures which have been released by academic forecasters beholden to the DEA — who can’t tell a rolling paper from a Post-it note — are low. As in way low. Read all about it in “Cannatax Demystified,” which also provides ballpark figures and a breakdown of how they were compiled.

Meanwhile, the old guard press keeps perpetrating the hoax.

A perfect example ran in the March 24, 2011 edition of The Denver Post, “Medical marijuana sales to reach $1.7 billion in 2011, report says.” That’s for the entire USA, not the state of Colorado. Let’s zoom in on the story:

Medical marijuana will become a $1.7 billion market in 2011, according to a new report released today by See Change Strategy LLC, an independent financial analysis firm that specializes in new and unique markets.

This typically brief blurb provides not one detail about how that figure was calculated, presuming, per usual, that no one could possibly follow the math. Certainly no one The Post’s editorial staff can follow it. The Post regurgitated the statement without questioning the number in any way, shape, or form [not that any other “great metropolitan daily” did, either].

Fortunately, Cannabis Commerce is here to question it in every way, shape, and form.

Want reaction? That’s what I’m here for.

I suppose The Post provided its $1.7 billion figure to pique my interest, and to impress me on some level. Otherwise, why print the story? Stories like “Dotted White Lines Don’t Need Repainting” don’t get a lot of ink. So, am I impressed by $1.7 billion?

I’m sickened by $1.7 billion.

I’m repulsed by $1.7 billion.

I’m disgusted by $1.7 billion.

It piques my interest, all right. Because with the crippling adjective in “medical marijuana” surgically removed, and prohibition laid to rest, that anemic annual sales figure could be doubled every week.

In fact, it is doubled every week — untaxed. What a wonderful world for Mexican cartels and outlaw US growers! Vaya con dios!

But in a world without prohibition, wouldn’t those zany, Uzi-toting scofflaws just keep on keeping on, avoiding paying taxes on the lion’s share of cannabis sales? No, they wouldn’t. Skirting authorities is a major inconvenience and a major expense both cartels and outlaw botanists could live without. They’d both accept partially reduced gains — in exchange for freedom to transact without facing incarceration— in a heartbeat.

bricks of Mexican commercial weed interceepted by US Border Patrol

Untaxed bricks of Mexican marijuana seized by the border patrol. That eagle icon atop the badge might look familiar: the symbol was used extensively by a certain European nation which attempted to conquer the world in the 20th century.

Why am I sickened, repulsed, and disgusted . . . as opposed to impressed?

According to Jon Gettman, author of the classic Lost Taxes and Other Costs of Marijuana Prohibition, one of the most lucid voices in the cannabis chaos — over $113 billion worth of marijuana is going to be sold in 2011. Want that from a national news source? CNBC states that the figure may be $120 billion on its Marijuana and Money website.

So wtf is $1.7 billion?

A tiny newt held between a thumb and forefinger

“Did someone mention me?”

I can tell you what $1.7 billion in MMJ sales isn’t: it isn’t even two percent of total MJ sales. $1.7 billion is newt piss!

If $1.7 billion were part of a cannabis crumb cake, it wouldn’t even be the crumbs. It would be the dusting of sugar on top.

So, how much cannatax is possible for that amount of sales? Good question.

Economics 101 tells us that the amount of “government receipts” [i.e. personal and business state and federal income taxes; local, county, and state sales taxes, FICA etc.] individuals and businesses wind up paying on any given product averages 28.70%.

Therefore, the cannatax on $1.7 billion works out to about $487 million.

The cannatax on $113 billion comes out to about $32 billion. Or sixty times as much. There’s actually lots more potential cannatax — “sin tax” springs to mind. For the moment, let’s remain plaid-pants conservative.

When an industry wants to contribute a bare minimum of $32 billion in annual cannatax, and presently it’s chipping in maybe $487 million, it’s hauling around a ball and chain.

Forgive me if I’m not dancing the Charleston with a lampshade on my head over the tremendous inroads the MMJ “industry” is making. Quotes since industries in chains don’t count as industries in my book.

And industries in chains can’t do a lot to prop up vital services and maintain infrastructure.

Consider the following:

  • It would be nice if libraries could stay off the extinction watch, which currently includes rural US Post Offices. Surely cannatax collected in a fully legal, regulated landscape could pay someone to open the doors, turn on the lights, and stack the shelves? Is that a psychedelic thought? Forgive me if I’m reaching too high.
  • Maybe I’d like to spend five minutes at a soon-to-be-extinct post office instead of a half-hour every time I have to buy stamps.  Stamps no longer come in a machine, cause vending machines require tending to by humans that there is no money to pay.
  • If I need a duplicate title for my car, it would be refreshing if the harried customer service rep over at the Department of Motor Vehicles didn’t have to tell me, “Our computer system from the 80’s is down again, so we’ll have to mail it to you in a few weeks, that is, assuming someone still knows how to fix it.”
  • The current budgetary crisis has forced states to slash mental health services. Who knows what certain individuals currently receiving mental health services will do when that is no longer the case?

Cannatax collected in MMJ states isn’t going to make much of a dent on any of that.

Conversely, if MJ cannatax was collected, the city of Denver could build marble post offices or erect a Cannabis Exchange in the Greek Revival style.

If governments could get out of their own way, The International Cannabis Exchange could look like this.

Ironically, states are already dependent on liquor and tobacco taxes to maintain vital services — yet they’re barely hanging on. According to Stephanie Saul, writing for The New York Times:

The government has become a financial stakeholder in smoking, some would argue, even as public health officials warn people about its deadly consequences. The reliance of government coffers on the taxes smokers pay, and on the tobacco settlement money, essentially provides a financial cushion for state governments and could be viewed as a government guarantee for the survival of the tobacco industry. Would politicians shut down an industry that supplies so much money?

Yes. The cannabis “industry.”

To be precise, politicians haven’t completely shut down the stuttering trickle of commerce they — in their infinite munificence — permit.

They just put it in bondage.

From what I’ve seen, even with the tobacco settlement money and sin taxes from alcohol and tobacco, whatever “cushion” states have that Ms. Saul is referring to can’t be very comfortable. Everyone knows how well vital services are being maintained. Things are so desperate, politicians are running around with their heads chopped off, trying to identify fresh sources of revenue.

Duh!!!!!!!!!!!!!!

The potential rewards of collecting unfettered MJ cannatax are off the charts. Here’s where it would come from:

  • City sales tax, usually around 3.9% of the sale price.
  • County sales tax, usually another 3.9% of the sale price.
  • Personal federal income tax, around 25% for most workers.
  • Personal state income tax in most states, around 10%.
  • Corporate federal income tax from huge entities like Big Pharma, Big Food, Big Agra, Cosmetics, et al.
  • Corporate state income tax from huge entities like Big Pharma, Big Food, Big Agra, Cosmetics, et al.
  • Import/Export taxes
  • Licenses and Fees, which vary but can add up in a hurry considering most MMCs [medical marijuana carecenters including dispensaries, clubs, co-ops, collectives] need separate licenses for retail, cultivation, and medibles.
  • Sin tax, a.k.a. excise tax, which often runs fifty percent or higher for sin twins alcohol and tobacco. Taxing a healing herb at those rates would ruffle a lot of feathers, but it could happen.

There’s more, but nosh on that on for now.

There’s ample pot-ential cannatax to keep things humming along “the American way” until karma catches up. Or there would be, if we rise up and repeal prohibition.