States Should be Wary of ITEP Marijuana Tax Policy

The Institute on Taxation and Economic Policy is out today with a report recommending how states should approach taxing legalized marijuana. It’s a topic we’ve written about extensively, and based on that research, we have some concerns with the report’s suggestion that states tax marijuana based on the weight of the amount sold rather than the retail sales price. ITEP argues that weight-based taxes on the grower and/or processor would be less prone to evasion and easier to collect than price-based taxes at the retail level. I disagree. Washington moved away from taxing growers and processors because they found retail collection simpler, prevented an accidental hefty federal tax on processors and growers, and removed an unintentional incentive for vertical integration. Not all marijuana is the same, either: more potent “premium” strains weigh the same as other strains. Price, however, is an effective proxy for potency. ITEP wants to do this because…

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