Marijuana Moment: Why Are Republicans Fighting To Raise Taxes On Cannabis Businesses? (Op-Ed)

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“These Republican members of Congress appear to be hoping to undermine President Donald Trump’s position…by preserving punitive tax treatment for licensed cannabis businesses, regardless of their classification under federal law.”

By Michael Cooper, National Cannabis Industry Association

Sometimes you have to wonder what some congressional opponents of cannabis reform are smoking.

The continued march of reform at the state level (buoyed by roughly two-thirds of Americans who believe it should be legal) paired with prohibition at the federal level leads to many odd results.

Few are more counterproductive than a small group of Republican members of Congress advancing policy that would effectively raise taxes on state-legal cannabis. Indeed, for casual observers of cannabis reform—such as patients and families who rely on medical cannabis—nothing may illustrate the through the looking glass legislative machinations that have slowed reform progress more than the No Deductions for Marijuana Businesses Act whose bill sponsors wrote to Treasury officials this month following recent federal changes to the classification of marijuana.

First, the legislation does exactly what its name suggests: it preserves and reinforces the federal tax penalty under Section 280E, which prevents state-legal cannabis businesses from taking ordinary business deductions.

Of course, Republicans have long run on lowering taxes for small businesses. That principle has broad support across the political spectrum. Yet this bill would do the opposite for a category of highly regulated, state-legal operators—many of them small businesses already operating on thin margins.

Second, the bill runs counter to the federal government’s own recent direction on cannabis policy, with the Trump administration moving medical cannabis into Schedule III where 280E is dropped. The administration is holding a hearing on extending Schedule III to adult use that would come with the same accompanying tax parity.

In other words, these Republican members of Congress appear to be hoping to undermine President Donald Trump’s position and the DOJ’s Final Order rescheduling state-regulated medical cannabis by preserving punitive tax treatment for licensed cannabis businesses, regardless of their classification under federal law.

Whether one supports broader cannabis reform or not, it is difficult to reconcile acknowledging accepted medical use for cannabis while simultaneously advancing legislation designed to preserve one of the industry’s harshest financial penalties.

Third, let’s give these Republicans the most charitable reading possible and assume they truly believe that cannabis should be as tightly controlled a substance as possible and believe it so deeply that they will abandon their normal anti-tax beliefs.

The problem is that, even if so, their bill completely undermines their goal.

The state-legal cannabis industry targeted by this bill sells age-restricted, taxed and tested products. For example, licensed cannabis dispensaries excel at verifying purchasers’ ages, both anecdotally and in studies. If you care about keeping cannabis out of the hands of minors, promoting the regulated market should be a top priority.

Instead, this bill would have the effect of driving up costs for state-regulated cannabis small businesses and will undoubtedly put some out of business. Simultaneously, it’s a windfall for the unregulated illicit market, which largely transacts under the table, avoiding any taxes at all and worse, selling to anyone they chose, including children.

Something about cannabis reform makes its opponents do inexplicable things, from attempting to ignore the countless doctors recommending medical cannabis to patients by declaring that the plant has no currently accepted medical use to making Republicans cheer for job-killing, small business tax hikes to sponsoring legislation that would drive Americans into the open arms of dealers of untaxed, untested, unregulated products.

At a time when most Americans support legalization and nearly every state has moved away from blanket prohibition, Congress should be focused on strengthening regulated markets—not undermining them.

More than three in five Americans are hoping common-sense prevails.

Michael Cooper is policy chair for the National Cannabis Industry Association.

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