Update on marijuana regulation – regulation experiment #8
A few updates on the natural experiments running in Colorado and Washington to see what impact heavy regulation has on a new industry. Maryland offers a few ideas on how to strangle the medical marijuana industry to death before it is born.
Again, so you know why I’m paying attention, my hypothesis is the heavy taxes and regulations will severely restrict the new industry.
8/8 – Spokesman-Review – Pot taxes top $1 million in first month – the first month data isn’t relevant but there’s a number of good stats in the article. A few tidbits to lay out a baseline for future analysis:
- 6 stores were open on the first day; currently 20 are open at least part-time
- 155 – current number of producers and processors
- 1.5M square feet of plant production – (observation: the inventory pipeline should get filled quickly; the state has capped this at 2M)
- 25% excise tax is at each of three levels – producer, processor, retail
- 44% – effective tax rate calculated by Moody’s
- $190M to $586M – state’s forecast of tax revenue over the first 4 years of production
- $898,957 – tax in first month
- $3.6M – sales first month
- 8.5% to 8.7% – sales tax
That would put the forecast for tax collections at between $48M and $147M per year for each of the next four years.
8/23 – Forbes – Marijuana Taxes Are Upheld, But Paying Them Could Incriminate You – Robert Wood explains a trial court in Colorado has upheld the tax on recreational marijuana even though paying the tax would require a person to self-incriminate a violation of federal law. State court say too bad.
Just think of the humongous paper trail created by tracking every plant through the distribution product to individual packages delivered to specific stores. All that would be needed to convict on federal distribution charges would the massive amount of paperwork created by complying with state law.
Article also touches on the issue of not being able to deduct for federal tax purposes the cost of items that are illegal under federal law.
8/27 – Baltimore Sun – Proposed medical marijuana rules under fire – I read a tongue-in-cheek comment a while back that those people who want to completely ban marijuana should get involved at the proposal stage to increase regulations. Looking outside Colorado and Washington state, what do you think this set of rules will do to the medical marijuana industry in Maryland?
Rules proposed for medical marijuana dispensaries in the state of Maryland include:
Doctor may not write a prescription for a person who has any substance abuse in their history, even if the abuse has been under control for many years, even decades.
Doctors may not write a prescription for anyone with a misdemeanor conviction in the last five years. In other words, a charge of paraphernalia possession means you can’t get medical pot.
Growers must have at least two employees on site at all times. Critics have pointed out that doesn’t apply to gun stores or pharmacies (who obviously have lots of controlled substances on site).
A dispensary may not be located within 500 feet of a school, day care center, playground, or church. One critic says this means no dispensaries can be located anywhere in the entire city of Baltimore. Just as a wild guess, that would also likely rule out having a dispensary anywhere in the DC suburbs. Scratch essentially all of Montgomery County and Prince George County off the list of possible locations.
Those rules would likely prevent a medical marijuana industry from even getting started in Maryland. If you are a prohibitionist that wants to shut down the industry, may I suggest you advocate for a 750 foot exclusion distance?
9/3 – Daily Mail – Recreational pot is bringing in two-thirds LESS tax revenue than the governor predicted – For the first six months of legal sales of recreational marijuana, predicted tax revenues were $33M with actual at $12M. Speculation is that most people buying at the medical dispensaries are still doing so.
7/4 – Denver Post – On Colorado pot revenues, a fading promise – Estimate from the Colorado Legislative Council for tax revenue from recreational marijuana in the fiscal 2015 year dropped again, to $30.6M. Speculation for reason is that many people are still buying at medical dispensaries. Article contains one quote that hints that buyers at medical places don’t have official doctor’s orders. That hint would explain much: if you can buy from a medical dispensary without the facade of doctor’s script, why would you buy from a recreational store and pay 20% or 25% higher taxes?