When
I first began practicing law I spent a lot of time in criminal courts
all over southern California and in some places not in southern
California. I was hungry and there was money to be made, justice to
be done. I spent a lot time doing minor drug cases most of which were
pot cases. On one occasion early on I remember being in a courtroom
waiting for my case to be called. I was brought up to attention when
the court called the case of one of the sons of a prominent
California officeholder. I listened intently to the colloquies
between the DA and defendant's lawyer. It was a discussion about
terminating proceedings and sending the defendant off to drug school
and bringing him back in a year or so and dismissing the case when he
comes back to court. That was my very first exposure to pre-trial
drug diversion for minor drug cases that had heretofore been treated
as serious life changing felonies. That also marked the beginning of
the changes in California law that ultimately resulted in the1996
passing by the electorate of the Compassionate Use Act which created
the affirmative defense of a treating physician's recommendation.
In the almost 18 years since its enactment it has created a booming
new industry in California the medical marijuana industry. California
may yet join the company of Washington and Colorado by the
legalization of marijuana for recreational use. We shall see.
Colorado's
model for legalization is an integrated model in which 70% of
what each retailer sells must be produced on site. This has not yet
been called the Tenant Farmer model but that is really what it is.
One of the consequences of this regulation seems to me to result in
an artificial shortage and consequently higher prices to the
consumer. Perhaps allowing a retailer to sell up to 30% from non
on-site sources is an attempt to ameliorate that economic fact of
life. Colorado's scheme went into effect on January first and by all
accounts was a bigger success than the first days of signup for the
ACA. It will be fun to see how Washington handles the distribution
issue later in the year when its system goes live.
Washington's
model is more like California's alcohol model of the package store in
which alcohol of mostly any brand and type is available for purchase.
This plan would seem to be one that may result in cheaper prices for
the consumer. However we should note that part of selling point in
the legalization of recreational mota was the pocket book.
Both
states share a single problem. That problem is how do we collect the
taxes? Who is ultimately responsible to pay the taxes? There are a
couple of models. The excise tax model in which the tax is imposed on
the manufacturer and it is recovered by the seller by folding this
tax and some administration fees into the price of commodity like the
federal excise tax on automobile tires is one that may be used by
Colorado. Another example of the excise tax model is the proof based
tax on beverage alcohol paid to the federal government by a distiller
of liquor. Then there is the transaction-based tax more commonly
called the “sales and use tax” model. Under this model the
ultimate consumer is liable to pay directly the sales or use tax
imposed on the commodity. This tax is generally collected by the
seller and remitted to the tax collector at regular intervals.
There
is nothing to prevent either of those two states, Colorado or
Washington from using one or the other method other than some
proscriptions in the Constitution that forbids taxation of goods made
in another and forbidding excise taxes or 'imposts' on the goods of
another state. Thus neither Colorado nor Washington could tax the
mota produced in the other state simply because it was produced
elsewhere. There is also nothing to prevent either state from
utilizing a double taxation scheme. Either or both of them could
impose both an excise tax on each pound (or other unit) produced and
a percentage based tax on the transaction with the ultimate consumer.
Greed is not an unheard of phenomenon.
Once
the federal government comes to its senses about the issue of
marijuana (misspelled by the feds as “marihuana” because of the
lack of Spanish language skills of a congressional clerk) and realize
what the phrase “the marijuana industry is a $25 billion
underground economy” means it will join the feeding frenzy also.
There
is one issue that all of us should be concerned about and that is the
danger that the new lawful industry in states doesn't end up becoming
monopolized by large corporations so that Americans are forced to buy
prepackaged mota from only specified and licensed providers. There
needs to be some sort of safety valve because a monopolized industry
is always bad economically and qualitatively for the consumer. If you
doubt this look at your utility bills including your cable and
internet bills and you will instantly see what I mean. This problem
bothers me a lot. The only way I can see to solve this problem in
these opening years of a new economy for mutual benefit is to permit
each person to grow a certain amount of marijuana for his or her own
personal or household use and for gifting purposes.
I
suppose we shall see what we shall see once the lobbyists and
special interests are heard from.
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