Tax Foundation Commentary On States Reform Act – “Republican Cannabis Bill Would Tax by Category”


This is what the Tax Foundation are saying Today, Representative Nancy Mace (R-SC) released the States Reform Act, which would deschedule, regulate, and tax cannabis products with a novel federal excise tax design—based on quantities and predefined categories, not dissimilar from how the federal government taxes alcohol and tobacco. Rep. Mace’s bill would impose a tax of 3 percent on the removal price of cannabis products. That’s significantly lower than the rates suggested in the other bills introduced this year to deschedule and tax cannabis: the MORE Act (8 percent rate) and the Cannabis Administration and Opportunity Act (CAOA, 25 percent rate). Arguably, the biggest impact on existing cannabis businesses would not be a new federal tax. Today, due to its Schedule I status, cannabis products cannot cross state borders, and as a result, all products must be grown, processed, sold, and consumed within state borders. Descheduling would create a national market where products grown in Oregon can be processed in Colorado and sold in New York. This would revolutionize markets in states, which, given the federal prohibition, are currently able to discriminate against interstate commerce. Descheduling would mean that state laws can no longer do so, as it would violate the Dormant Commerce Clause of the U.S. Constitution. The bill is a discussion draft, similar to the CAOA in the Senate. While unlikely to pass in its current form, it is the first comprehensive cannabis bill introduced by a Republican in Congress, and it could pave the way for a future bipartisan effort to reform cannabis legislation. Even if it is not the most important aspect of the bill, the tax design is still very important. Mace’s bill establishes six taxable categories and instructs that the Secretary of the Treasury can create more if needed. (The main risk with this design is the…

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Source : Tax Foundation Commentary On States Reform Act – “Republican Cannabis Bill Would Tax by Category”

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