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Published: Tue, 21 Feb 2017 00:00:00 -0500

Last Build Date: Tue, 21 Feb 2017 07:23:33 -0500


Energy Efficiency Mandates Are Worse for Poor Americans Than Energy Taxes

Fri, 27 Jan 2017 13:30:00 -0500

When U.S. automakers met with President Donald Trump this week, they asked him to relax the vehicle fuel efficiency standards imposed by his predecessor. Just before Barack Obama left office, the Environmental Protection Agency issued a final determination that its Corporate Average Fuel Efficiency (CAFE) standard of requiring fleet-wide fuel efficiency of 50.8 miles per gallon on new cars by 2025 was achievable. "At every step in the process the analysis has shown that the greenhouse gas emissions standards for cars and light trucks remain affordable and effective through 2025, and will save American drivers billions of dollars at the pump while protecting our health and the environment," said outgoing EPA head Gina McCarthy. Ratcheting up the mandatory energy efficiency standards for vehicles and appliances was a major part of Obama's effort to reduce greenhouse gas emissions. The Department of Energy calculated that the Obama administration's energy efficiency standards would save consumers more than $520 billion on electricity costs by 2030. But not all consumers are alike. In a new study contrasting the effects on consumers of energy efficiency standards versus energy taxes, the Georgetown economist Arik Levinson notes that both energy efficiency standards and energy taxes function as a regressive tax, taking a larger percentage of a lower income and a smaller percentage of a higher income. His analysis aims to find out which is more regressive—in other words, which is worse for poor Americans. Levinson cites earlier research that estimates a gasoline tax would cost 71 percent less than the comparable CAFE policy per gallon of fuel saved. Meanwhile, a 2013 study calculates that CAFE standards cost more than six times as much as a corresponding gas tax for the same reduction in fuel consumption. In other words, if policy makers want people to use less fuel and drive more fuel-efficient cars, taxing gasoline is a much cheaper way to achieve that goal than mandating automobile fuel efficiency. Levinson concludes that "efficiency standards are, ironically, inefficient." But would energy taxes be more regressive? Many analysts argue that while both hit low-income Americans, energy efficiency standards whack them less. Levinson disagrees. Levinson argues that energy efficiency standards can be treated analytically as an equivalent to a tax on inefficient appliances and vehicles. Using data from 2009 National Household Travel Survey, he compares the amount of gasoline consumed by Americans at various income levels. The poorest 5 percent (with annual incomes of under $10,000) consume an average of 247 gallons per year; for the richest 20 percent (over $100,000), the average is 991. Assuming a gasoline tax of 29 cents per gallon, the poor pay $71, compared to $286 per year for the wealthy. Families with 10 times the income pay only four times more in fuel taxes. At the outset Levinson cites research that rejects the notion that consumers are shortsighted when it comes to purchasing more expensive vehicles and appliances that will save them money in the long run. Levinson compares the consequences of a 29 cent per gallon gas tax with a notional CAFE standard "tax" on inefficient vehicles that would raise the same amount of revenue. Rich folks own more and larger vehicles and drive more miles than do poor Americans, so they would pay more in either gas taxes or CAFE "taxes." Another wrinkle makes CAFE standards even more regressive. In 2012, the Obama administration set CAFE footprint standards based on vehicle size, determined by multiplying the vehicle's wheelbase by its average track width. Basically, a vehicle with a larger footprint has a lower fuel economy requirement than a vehicle with a smaller footprint. The footprint standard means that gas guzzlers like full-sized Cadillacs now can more easily meet their footprint standard than can smaller Sonics. Recall that under a 29-cent gas tax, the richest Americans pay an average of $286 a year and the poorest pay $71. Under the earlier CAFE standard, Levinson calculates t[...]

Which Is Worse for Poor Americans: Energy Efficiency Mandates or Energy Taxes?: New at Reason

Fri, 27 Jan 2017 13:30:00 -0500

(image) U.S. automakers are asking the Trump administration to relax the vehicle efficiency standards imposed on them by the Obama Administrtion. Ratcheting up the mandatory energy efficiency standards for vehicles and appliances was a major part of Obama's effort to reduce greenhouse gas emissions. The Department of Energy calculated that the Obama administration's energy efficiency standards would save consumers more than $520 billion on electricity costs by 2030.

But not all consumers are alike. In a new study contrasting the effects on consumers of energy efficiency standards versus energy taxes, the Georgetown economist Arik Levinson notes that both energy efficiency standards and energy taxes function as a regressive tax, taking a larger percentage of a lower income and a smaller percentage of a higher income. His analysis aims to find out which is more regressive—in other words, which is worse for poor Americans.

Trump Definitively Forsakes His Promise to Release His Tax Returns

Mon, 23 Jan 2017 09:10:00 -0500

After repeatedly promising to release his tax returns, Donald Trump has definitively reneged on that commitment. "He's not going to release his tax returns," presidential counselor Kellyanne Conway said in an interview on ABC's This Week yesterday. "We litigated this all through the election. People didn't care. They voted for him." President Trump has no legal obligation to let Americans see his tax returns, but in refusing to do so before the election he broke with the practice of every major-party presidential nominee since 1980. Now he has abandoned any pretense of sticking to the promises he made on this subject while running for president: February 25, 2015: "I would release tax returns....I would certainly show tax returns if it was necessary....I have no objection to certainly showing tax returns." January 24, 2016: "We're working on that now. I have very big returns, as you know, and I have everything all approved and very beautiful, and we'll be working that over in the next period of time....We're working on it right now, and at the appropriate time you'll be very satisfied." February 25, 2016: "I will absolutely give my return, but I'm being audited now for two or three years, so I can't do it until the audit is finished, obviously." May 10, 2016: "I'll release. Hopefully before the election I'll release." September 26, 2016: "I don't mind releasing—I'm under a routine audit. And it'll be released....As soon as the audit's finished, it will be released." October 9, 2016: "As soon as my routine audit is finished, I'll release my returns. I'll be very proud to. They're actually quite great." As Peter Suderman noted last summer, the audit excuse was always bogus: Trump was free to release his tax returns whenever he wanted. But after Trump accepted his party's nomination in July, Suderman wrote, his campaign manager "confirmed what Trump's year-plus-long dodge on the matter has always implied: Donald Trump won't release his tax returns before the presidential election this November." Or afterward, it turns out. Although Conway claimed "people didn't care" about Trump's tax returns, the fact that he won the election despite refusing to release them does not mean they contain no information of public interest. A CNN poll conducted in late September and early October found that 73 percent of voters thought he should release his tax returns. Last week an ABC News/Washington Post poll found that 74 percent of American adults still thought the public should be able to see the president's returns. It's not clear what exactly Trump is hiding. Perhaps the returns would show that the billionaire developer pays no federal income tax (something he has repeatedly hinted), that he does not give much to charity, or that his earnings are not as robust as he would like people to believe. Maybe the returns would reveal potential conflicts of interest. Or maybe the most revealing thing is how readily Trump has forsaken his unambiguous pledge of transparency. Update: Supplying alternative facts on Twitter this morning, Kellyanne Conway said her statement that Trump is "not going to release his tax returns" did not mean that Trump is not going to release his tax returns. Rather, his position is the "same [as] from [the] campaign: POTUS is under audit and will not release until that is completed." I predict this audit will take at least four more years, possibly eight.[...]

Protesting This New-Fangled Sales Tax

Fri, 06 Jan 2017 12:18:00 -0500

When states started enacting general sales taxes in the 1930s, it wasn't long before there were songs complaining about the new levies. In 1934, the Mississippi Sheiks recorded "Sales Tax," which starts with a spoken skit in which the band is alarmed to learn that they now need to pay three cents more for their cigarettes.

"They say that's the government's rule," one of the Sheiks explains.

"The government's rule?" another replies. "Well, there's lots of things sold that the government knows anything about." And then the bluesmen break into a song where even the bootleggers and prostitutes are now charging extra for their services:

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You might be curious why anyone would still be buying liquor from a bootlegger in 1934, a year after the Prohibition Amendment was repealed. Answer: These were the Mississippi Sheiks, and Prohibition in Mississippi lasted a lot longer than Prohibition nationwide. It was the last place to keep a statewide alcohol ban on the books, eliminating it not in 1933 but in 1966:


(For past editions of the Friday A/V Club, go here. If you want to see one about repealing alcohol regs in the South, go here.)

Outrage in Philadelphia as New Soda Tax Doubles Drink Prices

Thu, 05 Jan 2017 10:35:00 -0500

A new tax on soda and other sugary drinks that took effect in New Year's Day in Philadelphia is already generating outrage from some residents and businesses in the city. Meanwhile, in New York and elsewhere, lobbyists and public officials are looking to duplicate the dubious policy. When it was passed last year, Philadelphia became the largest city in the nation to create a specific tax for soda and sugary beverages, a policy that had previously been contained to progressive enclaves like Berkeley, California. The tax is levied at a rate of 1.5 cents per ounce, which makes it 24 times more expensive than Pennsylvania's taxes on beer. Practically, that means that some drinks end up being nearly twice as expensive after the tax is applied, turning $2 sodas into $4 sodas. That's causing quite a stir in the city, as social media posts this week have revealed. In one photo that went viral after being posted to Facebook, a receipt shows more than $3 in tax added to the cost of a $5.99 12-pack of Propel, an energy drink. From a Facebook post, the Philadelphia sugary drink tax implemented today damn, between that & Pennsylvania gas tax no wonder folk revolted — SalenaZito (@SalenaZito) January 2, 2017 The Tax Foundation posted photos from inside grocery stores in Philadelphia and confirmed the ridiculously high taxes on products like Propel and other sports drinks. With the tax added, the 12 pack of Propel ends up costing more than a 12-pack of cheap beer, the organization noted. City officials told KYW-3 that the tax was intended to hit distributors of sugary drinks. In a shocking twist, the TV station reported on Wednesday night that the tax "is being passed onto the customer." After the tax was passed, some economists suggested that it would hurt businesses in the city by giving customers a good incentive to buy beverages outside city limits. Small businesses interviewed by Reason in October expressed similar concerns, since the tax is applied not only to cans and bottles of soda, but to soda fountains (like the ones found in many pizza places and cheesesteak joints across Philadelphia) too. Already, those predictions seem to be coming true, at least anecdotally. @ctemp153 @MeosoFunny @GayPatriot @ChrisLoesch @liars_never_win @chadfelixg @ChrisStigall Weekend grocery shopping trips. — Gay Penn Patriot (@GayPennPatriot) January 2, 2017 Congrats, @PhiladelphiaGov. You've made sure my grocery shopping will be done outside the city with this ridiculous #sodatax. — Dan Baker (@Nadrekab) January 3, 2017 Finks Hoagies in Northeast Phila is outraged with unfair soda tax and posted a nasty note. Hope more outrage 2 follow — Howard Eskin (@howardeskin) January 5, 2017 Rather than nudging people to make heather decisions about what they drink—as the tax is supposed to, even though the health benefits of soda taxes are overrated—it might just nudge Philadelphians to shop outside the city whenever possible. Businesses in the city might suffer from the tax, but they also get to deal with more paperwork too. Marisa Waxman, Philadelphia's first deputy revenue commissioner, tells WHYY that city retailers need to keep their bills to show their compliance, since there won't be a tax stamp or sticker on the beverages. "Even if you are compliant," said Waxman, "make sure you are hanging on to all your invoices and records so if we show up at your establishment you can show us yep I am doing what I need to be doing." The city will be hiring additional tax collectors to make sure everything is paid up, WHYY reports. About the only people happy with the new tax are, predictably, the city officials who will have an estimated $90 million in new annual revenue to spend. Officials in Philadelphia sold the soda tax by promising to use the revenue to fund a new pre-K program for the city's youngest schoolchildren. As Baylen Linnekin noted in July, "s[...]

Bitcoin Exchange User Tries to Stop IRS From Forcing Coinbase to Give Up Customer Information

Thu, 15 Dec 2016 08:30:00 -0500

The IRS is in the process of trying to force Bitcoin exchange Coinbase to give up the identities of its clients, in a quest, the IRS says, to find tax cheats. I reported on this IRS attack earlier this month, and explained the IRS's attitude toward taxing bitcoin profits back in 2014. (It considers the alt-coin legally property, not currency, but you still owe taxes on any profits made by selling bitcoin.) A motion to quash the IRS's subpoena against Coinbase was filed this week in U.S. District Court for the Northern District of California in the name of the anonymous John Does the IRS is trying to track down, by Coinbase customer Jeffrey K. Berns. Berns wants the IRS stopped, the motion says: on the grounds that the IRS has no legitimate purpose in seeking the requested documents from Coinbase concerning its users, enforcement of the IRS Summons would constitute an abuse of process as the IRS does not currently have the ability to enforce compliance with its 2014 virtual currency guidance, and the categories of requested documents are so overbroad such that the IRS Summons would require the disclosure of a substantial amount of information and documents that are not relevant to the IRS's stated purpose in issuing the IRS Summons.... The motion, filed by lawyers with the firm Berns Weiss LLP, relies on some precedent: More than 40 years ago, the Supreme Court stated that the duty of the District Court with respect to an IRS summons was "to see that a legitimate investigation was being conducted and that the summons was no broader than necessary to achieve its purpose." United States v. Bisceglia.... The Supreme Court expounded on the District Court's role by stating, "[o]nce a summons is challenged it must be scrutinized by a court to determine whether it seeks information relevant to a legitimate investigative purpose and is not meant 'to harass the taxpayer or to put pressure on him to settle a collateral dispute, or for any other purpose reflecting on the good faith of the particular investigation.'" The summons at issue here was not sought by the IRS with respect to any "particular investigation," and the IRS has made no attempt to narrow the information covered by the summons to reflect its stated goal of confirming compliance with the tax laws. Instead, based on three isolated incidents and scant other facts, the IRS seeks that Coinbase identify over 1 million American citizens that have transacted in virtual currency and to provide data on every single transaction by those 1 million clients over a 3-year period. The IRS Summons is certainly not what the Supreme Court envisioned. Further, the breadth of the summons, which seeks substantial personal information that is not at all relevant to tax compliance issues, and which could expose these clients to significant risk of having their identity and funds stolen by hackers who have succeeded previously in hacking the federal government, including the IRS, numerous times, makes it easy to conclude that the IRS is engaging in abuse of process. Berns' lawyers note that Coinbase is also trying to fight the IRS, but that its customers have an independent interest in the matter, obviously. The motion makes much of the fact that, despite ample proof in a public comment period that many citizens find the IRS's existing rules regarding virtual currencies confusing, that: Despite the demonstrable need for clarifying virtual currency tax guidance, the IRS has opted not to issue a single word of virtual currency guidance since promulgating admittedly insufficient guidance more than two years ago. Having been unable, or unwilling, to issue such new guidance, it is hard to believe that the IRS has now issued the IRS Summons for a legitimate investigatory purpose. After all, if the IRS admits that it has not properly informed taxpayers of the virtual currency taxation rules, how could it now reasonably seek to review the records of over one[...]

Bouncy Houses and American Idol: How Local Governments in Pennsylvania Blew Drilling Tax Revenue

Tue, 13 Dec 2016 09:46:00 -0500

Gas drilling companies tapping into the rich Marcellus shale formation that lies beneath wide swaths of Pennsylvania have to pay an "impact fee"—basically a tax, based on how much gas each well produces—to the state. As the name suggests, the fee is supposed to help the government mitigate the potential environmental impacts of gas drilling. The state government skims some money off the top and the rest gets redistributed to counties and municipalities in parts of the state where gas drilling is taking place, theoretically to fund government-run ecology efforts or to rebuild infrastructure stressed by the influx of drilling companies and the people who work for them. You can debate whether handing money to the state government is really the best way to counteract the potential environmental consequences of drilling for natural gas, but that's for another day. For today, let's focus on how governments in Pennsylvania have handled some of that money that they've demanded from gas drilling companies. In the name of protecting the environment, remember. An audit of impact fee revenue released earlier this month shows that North Strabane Township spent more than $32,000 of its impact fee revenue on what basically amounts to a giant party. Impact fee money was used to rent a bouncy house ($4,250) and to pay for a performance by former American Idol contestant Adam Brock ($1,200). (As an aside: It says something about your status as a reality television singing sensation when you're three-and-a-half times less expensive than a bouncy house.) "I'm pro-people having fun at the holidays," Eugene DePasquale, the state's auditor general said, according to State Impact PA, a project of NPR. "But the impact fee was used for a bouncy house. Come on, that's crazy." Township officials told State Impact PA they believed spending money on fireworks, a bouncy house and a former American Idol contestant was acceptable because the law creating the impact fee lets towns use the money for "parks and recreation," and they were apparently using a generous definition of recreation. The bouncy house might have been the most ridiculous expense, but state auditors say Pennsylvania counties and municipalities wasted millions of dollars in impact fee revenue. DePasquale said 24 percent of all impact fee spending by local governments was considered "questionable" by state auditors. Other misuses of the impact fee revenue might not be known because some municipalities didn't fill out forms saying how they planned to use their cut of the dough. Bradford County used $2.4 million in impact fee revenue to cover operating expenses of a correctional facility, including paying employees' salaries and buying office supplies. The same county used $90,000 of impact fee cash to build a portable boat dock. Susquehanna County used $5.2 million on payroll for the county district attorney's office and bought the DA a new car (valued at $29,000). Thanks to Pennsylvania's gas drilling fee, judges in Lycoming County got newly refurbished offices, Green County built a new swimming pool, and Cumberland County built baseball fields. There's nothing wrong with swimming pools and baseball fields, of course, and one could argue that it might be better for those things to be paid for with tax dollars coming from gas drilling firms instead of from the pockets of local residents. Still, the whole point of the so-called "impact fee" was that it would be an, you know, impact fee—not a slush fund for local officials to blow on parties and new cars for prosecutors. When there is a real need for those dollars—in the event, say, of a well blowout or a massive spill of fracking fluid—the state will have to find more money to deal with the actual impacts of gas drilling. Taxpayers will be put on the hook for costs that should be covered already and lawmakers will argue that the state should seize more money from gas d[...]

California’s Gift to Its Neighbors: Expanded Cigarette Smuggling Opportunities

Tue, 13 Dec 2016 00:01:00 -0500

Thank you, California! For too many years, Arizona has led the pack—or at least taxed the hell out of it—with among the higher cigarette taxes in the West. "A cigarette tax higher than in neighboring states and cheaper prices on American Indian reservations have helped fuel a growing black market for cigarettes in Arizona," the Cronkite News Service reported in 2014. It's true that few of us actually paid that $2.00 per pack tariff for a pack of smokes; with every single state bordering us stealing less from smokers and a long, handy border with Mexico, half of all of the cigarettes sold in the state are smuggled from elsewhere, according to research by the Mackinac Center for Public Policy and the Tax Foundation. Many Arizonans avoid getting mugged by enjoying life on the receiving end of smuggling routes. But we could be benefiting by running goods in the other direction. And then Californians went to the polls on Election Day and hiked their cigarette taxes by $2.00 per pack. Business opportunities, here we come. California will rake in "[a]dditional net state revenue of $1 billion to $1.4 billion in 2017-18, with potentially lower revenues in future years" according to the state Legislative Analyst's Office. Potentially lower revenue? The analysis acknowledges that "revenue losses would occur due to lower consumption of tobacco products due to the higher excise taxes" although the decline in smoking "appears to have stalled in recent years." So legislative analysts acknowledge that a dramatic tax hike from 87 cents per pack to $2.87 is high enough to depress revenue over time. Actually, that's kind of a feature to the hike's sponsors, who sold it as a social-engineering measure to "save lives" by "getting people to quit or never start this deadly and costly habit" (which they deliberately make more costly, of course). That's a goal that inherently works against any promises of billions of dollars in raised revenue. But "revenue losses" might also result from Californian smokers purchasing cigarettes on the black market where higher taxes don't apply. After all, even at the old 87 cents per pack tax, a third of cigarettes consumed in the state have been smuggled in from elsewhere. There's no particular reason to assume that the black market in affordable smokes is going to shrink now that voters have self-righteously increased the cost of every pack by two bucks. And when that black market grows, it really should come as no surprise to state officials or California voters. "If Proposition 56 passes, California may open itself up as a more desirable cigarette smuggling destination as neighboring Oregon, Nevada, and Arizona all impose cigarette tax rates nearly $1 lower than the proposed California rate," the Tax Foundation's Morgan Scarboro warned before the measure's passage. "While California is no stranger to cigarette smuggling," noted Bloomberg BNA's Audryana Camacho after the election "the upcoming $2 increase may spur more activity as neighboring states have tax rates more than $1 lower than California's new tax." It's really not that hard to figure out. At a tax of 87 cents per pack, one-third of California's cigarettes are smuggled. At $1.66 per pack, 46 percent of New Mexico's cigarettes are smuggled. At $2.00 per pack, half of Arizona's cigarettes are smuggled. At a whopping $4.35 tax per pack of cigarettes, 58 percent of New York's smokes come from the black market where sticky fingered politicians can be avoided. It's almost like there's some sort of pattern here. California officials aren't entirely in the dark on the issue. "[T]he measure would provide additional funding…to support increased enforcement efforts to reduce tax evasion, counterfeiting, smuggling, and the unlicensed sales of cigarettes and other tobacco products," according to the legislative analysis. But using tax money to enforce compliance wit[...]

Court Allows IRS to Order Bitcoin Exchange Coinbase to Give Up Their Customers' Identities

Fri, 02 Dec 2016 21:11:00 -0500

Bad news for patriotic Americans who want to keep their bitcoin business to themselves this week from the Department of Justice: A federal court in the Northern District of California entered an order today authorizing the Internal Revenue Service (IRS) to serve a John Doe summons on Coinbase Inc., seeking information about U.S. taxpayers who conducted transactions in a convertible virtual currency during the years 2013 to 2015. The IRS is seeking the records of Americans who engaged in business with or through Coinbase, a virtual currency exchanger headquartered in San Francisco, California. "As the use of virtual currencies has grown exponentially, some have raised questions about tax compliance," said Principal Deputy Assistant Attorney General Caroline D. Ciraolo, head of the Justice Department's Tax Division. "Tools like the John Doe summons authorized today send the clear message to U.S. taxpayers that whatever form of currency they use – bitcoin or traditional dollars and cents – we will work to ensure that they are fully reporting their income and paying their fair share of taxes.".... The court's order grants the IRS permission to serve what is known as a "John Doe" summons on Coinbase. There is no allegation in this suit that Coinbase has engaged in any wrongdoing in connection with its virtual currency exchange business. Rather, the IRS uses John Doe summonses to obtain information about possible violations of internal revenue laws by individuals whose identities are unknown. This John Doe summons directs Coinbase to produce records identifying U.S. taxpayers who have used its services, along with other documents relating to their virtual currency transactions. The actual order from U.S. District Court for the Northern District of California. The actual summons. As Ars Technica quoted from that summons, the government wants: Account/wallet/vault registration records for each account/wallet/vault owned or controlled by the user during the period stated above including, but not limited to, complete user profile, history of changes to user profile from account inception, complete user preferences, complete user security settings and history (including confirmed devices and account activity), complete user payment methods, and any other information related to the funding sources for the account/wallet/vault, regardless of date. A Coinbase spokesman via email said earlier this week when the DOJ announcement was issued: Although Coinbase's general practice is to cooperate with properly targeted law enforcement inquiries, we are extremely concerned with the indiscriminate breadth of the government's request. Our customers' privacy rights are important to us and our legal team is in the process of examining the government's petition. In its current form, we will oppose the government's petition in court..... We are aware of, and expected, the Court's ex parte order today. We look forward to opposing the DOJ's request in court after Coinbase is served with a subpoena. As we previously stated, we remain concerned with our U.S. customers' legitimate privacy rights in the face of the government's sweeping request. Jim Harper at Cato noted when the news of the summons broke: Equally shocking is the weak foundation for making this demand. In a declaration submitted to the court, an IRS agent recounts having learned of tax evasion on the part of one Bitcoin user and two companies. On this basis, he and the IRS claim "a reasonable basis for believing" that all U.S. Coinbase users "may fail or may have failed to comply" with the internal revenue laws. If that evidence is enough to create a reasonable basis to believe that all Bitcoin users evade taxes, the IRS is entitled to access the records of everyone who uses paper money. Anecdotes and online bragodaccio about tax avoidance are not a reasonable [...]

Canadian Panel Reportedly Recommends Low Marijuana Taxes and Purchase Ages

Fri, 02 Dec 2016 06:30:00 -0500

The task force charged with advising the Canadian government about how to legalize marijuana delivered its report this week. Although the report won't be released to the public until December 21 or thereabouts, National Post columnist John Ivison has the scoop on its major recommendations. It sounds like the panelists learned from some of the mistakes made in Colorado and Washington—in particular, the policies that have helped preserve a black market. "The key recommendation of the panel charged with outlining the framework for Canada's legal marijuana regime is that the system should be geared toward getting rid of the $7-billion-a year black market," Ivison writes. "All the other recommendations flow from that guiding principle." The task force cautions against prioritizing revenue from marijuana taxes, which has been a major selling point for legalization measures in the U.S., because high tax rates make legal merchants less competitive with black-market dealers. "To eat into the black market," Ivison says, "the report is expected to recommend prices should be lower than the street price of $8-$10 a gram." That's $6 to $7.50 in U.S. dollars, which is substantially lower than the prices typically charged by state-licensed retailers in Colorado and Washington. Grams at Medicine Man in Denver, for example, currently range from $12 to $14 (including taxes). Uncle Ike's in Seattle offers a "cheap pot" special for $7 a gram, but prices otherwise range from $10 to $19. Concerns about a lingering black market also inform the task force's recommendations concerning a minimum purchase age. "Provinces will set the legal age for marijuana consumption," Ivison writes, "but the report is likely to recommend the limit be the age of majority—18 in six provinces; 19 in B.C., Newfoundland and Labrador, Nova Scotia, New Brunswick and the three territories—which would keep many young people from turning to criminal sources." In the U.S., by contrast, all eight states that have legalize marijuana for recreational use have set the minimum age for buying, possessing, and consuming cannabis at 21, the same as the purchase age for alcohol. That decision exposes adults younger than 21 to criminal penalties for harmless activities (such as passing a joint) that are legal for their slightly older friends and siblings. It also helps keep the black market alive as a source of pot for college-age cannabis consumers who are not allowed to patronize legal retailers. Another consumer-friendly policy reportedly recommended by the task force would allow home delivery of cannabis by mail, the way medical marijuana is currently distributed in Canada. Home delivery was not part of the first four state legalization initiatives approved in the U.S., but it was included in the measures that passed in California and Massachusetts last month. Each Canadian province will decide whether marijuana should also be available from storefronts. Ivison notes that Ontario might sell marijuana at its provincially owned liquor stores, although that idea is controversial among people who worry about encouraging consumers to mix bud with booze. Prime Minister Justin Trudeau's government won't necessarily follow the task force's recommendations. It is expected to introduce legislation next April, and legal recreational sales could start as soon as January 2018.[...]

Brickbat: Sounds Like the Right Man for the Job

Fri, 18 Nov 2016 04:00:00 -0500

(image) Jimmie Thorns has resigned from the Louisiana Tax Commission after a local TV station found he has not paid property taxes on a business property in New Orleans for some 30 years. Thorns currently owes $140,000 on the property.

Lower Taxes Will Help Bring Legal Weed out of the Black Market

Mon, 31 Oct 2016 16:57:00 -0400

If California voters decide to legalize marijuana for recreational purposes on Nov. 8, there will still be important decisions left to local elected officials. One crucial element that cities and towns will have to decide—if voters approve legalization statewide, as polls suggest they will—is whether to apply local sales taxes on cannabis. Proposition 64 sets a statewide sales tax of 15 percent on marijuana, but gives local jurisdictions the right to layer additional taxes on top. As I explained in a column in the Orange County Register this weekend, cities should resist the urge to set high tax rates that could keep a portion the state's marijuana market—a market that could account for more than $5 billion in annual sales—in the shadows and make it harder for legal marijuana businesses to get started. Other states aiming to legalize weed should take the same cautious approach. From my piece, which you can read here: The tax plan contained in Prop. 64, pro-marijuana activists say, could help California avoid some of the pitfalls that Colorado, Oregon and Washington dealt with in the aftermath of legalization. Each of those states initially imposed tax rates in excess of 25 percent (Oregon had the highest initial rate, 37 percent), but all three already have taken steps to reduce their taxes on weed. Higher tax rates, those states found, kept the marijuana industry partially in the shadows. California's lower tax rate should help to bring the state's robust black market for weed into the light. That's good for consumers, good for businesses and good for the state's tax coffers. California isn't alone in learning this lesson. States considering legalization this year are all aiming at lower tax rates. Voters in Arizona and Nevada, like those in California, will decide on Nov. 8 if they want to legalize recreational marijuana and tax it at 15 percent. A marijuana legalization initiative in Maine would set taxes at 10 percent, and Massachusetts' proposed 3.75 tax rate would be the lowest in the nation for recreational weed, if voters approve it. Estimates vary, but California is likely to net more than $650 million in revenue from the state sales tax on marijuana. An analysis by the Los Angeles Times suggests that that figure could rise to $1 billion within a few years. The state plans to use the revenue to pay for a wide range of things somewhat related to legalization, including law enforcement, drug education and treatment programs, environmental projects and DUI enforcement. Still, the biggest benefit of legalization is the end of a destructive and expensive war against the black market for marijuana. That's why it's important that legalization doesn't come with tax burdens that could force marijuana to stay in the underground economy. "It's a balancing act," says Lynne Lyman, whom I interviewed on this week's episode of American Radio Journal. Lyman is the California state director for the Drug Policy Alliance, which is supporting the passage of Prop 64. "Overtaxing will not only not generate the revenue—because people will stay in the underground market," says Lyman. "It will also increase crime, increase arrests, all the things we're trying to reduce with legalization." You can listen to the whole interview here, and check out more about California's Proposition 64 below. src="" allowfullscreen="allowfullscreen" width="560" height="340" frameborder="0">[...]

Pennsylvania’s New Tax on Vape Shops is Forcing Them Out of Business

Mon, 03 Oct 2016 14:05:00 -0400

It's Friday afternoon and Chris Hughes is sitting inside his now-empty store in Williamsport, Pennsylvania. For the past three years, Hughes owned and ran Fat Cat Vaping, one of hundreds of small shops across Pennsylvania catering to the nascent community of electronic cigarette users. Hughes is a "vaper" himself, having switched from traditional cigarettes to the healthier electronic version a few years ago. After state lawmakers and Gov. Tom Wolf signed off on a budget bill that included a massive new tax on electronic cigarettes, Hughes knew Fat Cat Vaping's days were numbered. "I knew immediately that I would have to close," he says. He's not the only one. The estimated 350 vape shops scatter across Pennsylvania are getting hit hard by the new 40 percent wholesale tax on all vaping equipment and supplies. The real kicker is that the same 40 percent tax applies not only to purchases made after October 1—the day the tax took effect—but also covers all inventory on store shelves on that date. That means a store with $100,000 worth of inventory—about what a small vape shop would carry—owes the state $40,000 as of Saturday. "It's ludicrous to think what was a viable business yesterday — by the stroke of a pen — is no longer a viable business today," Dave Norris, owner of the Blue Door vape shop in Harrisburg, told PennLive in September as he prepared to close down all three of his locations because of the tax. The tax was passed in July as part of the 2016-17 state budget (taxes on packs of traditional cigarettes increased by $1 as well). It had support from both sides of the Republican-controlled legislature and was signed by Democratic Gov. Tom Wolf. The tax will raise an estimated $13 million. Some aren't so sure about that. "I am 100 percent confident that 40 percent of nothing is nothing," says Jeff Wheeland, R-Lycoming. What he means is that the state shouldn't be banking on revenue from the vaping tax if the tax decimates the businesses expected to pay it. Wheeland and state Sen. Camera Bartolotta, R-Washington, are rallying support to repeal the months-old tax. They are proposing a volume-based tax of five cents per milliliter on vaping fluid to replace the 40 percent wholesale tax. Wheeland says the trade-off would be almost revenue neutral, but would be easier for vaping businesses to handle and would be more in line with how other states tax e-cigarettes. Consumer Advocates for Smoke Free Alternatives, a national e-cigarette consumer group, favors the 5 percent sales tax. The 40 percent wholesale tax is "completely unworkable," the organization says. The clock is now ticking. The wholesale tax took effect on October 1, but businesses have 90 days to remit tax revenue to the state treasury. That gives lawmakers until the first day of 2017 to repeal the tax—but with the election looming, the state legislature is scheduled to be in session for fewer than a dozen days between now and the end of the year. Opponents of the vaping tax say it will not only wreck Pennsylvania's growing vape shops, but will also make it harder for smokers who want to use e-cigarettes to quit the habit. "A pack of cigarettes is going to be more affordable," Dori Odosso said in an interview last week. "That's something that I don't ever want to hear someone say to me—that they are smoking cigarettes instead of vaping because they can't afford to switch." Odosso owns the Sweet Home Vaper Company in Kittanning, Pennsylvania. She started the business in 2014 after switching from smoking to vaping and finding out that other smokers in her small hometown wanted to do the same. Despite fears from the federal government and anti-smoking groups, medical research shows vaping to be a safer alternative to smoki[...]

Donald Trump's Billion-Dollar Tax Loss Is a Diversion From More-Serious Matters

Sun, 02 Oct 2016 12:15:00 -0400

If you care about substantive policy debate, it's not good for Donald Trump that The New York Times has published a few pages of 21-year-old state-tax returns showing he declared a $916-million loss in 1995. Cue another week wasted with trivial distractions from what we should be talking about in the final month-plus of a presidential campaign. Care about foreign policy, government spending, and more? Maybe we'll get around to hashing all that out after the election. But don't hold your breath. To be sure, a billion-dollar write-off is a lot of money and, as the Times suggests in the story's headline, it means "He Could Have Avoided Paying Taxes for Nearly Two Decades." This adds fuel to the fire that Hillary Clinton lit during last week's presidential debate when she said that there are only sketchy reasons for Trump not to release his federal tax returns to the public, as presidential candidates have almost all done since 1976. A billionaire who doesn't pay any taxes who dares speak for the common man! Ouch, even though there's no reason to think there's anything at all illegal or even fuzzy about Trump's taxes. This will harden Clinton supporters in their contempt for Trump and it will do the same for Trump supporters toward Crooked Hillary, especially if a Clinton operative is unmasked as the leaker. For the record, here's the Trump campaign's official response: Mr. Trump is a highly-skilled businessman who has a fiduciary responsibility to his business, his family and his employees to pay no more tax than legally required. That being said, Mr. Trump has paid hundreds of millions of dollars in property taxes, sales and excise taxes, real estate taxes, city taxes, state taxes, employee taxes and federal taxes, along with very substantial charitable contributions. Mr. Trump knows the tax code far better than anyone who has ever run for President and he is the only one that knows how to fix it. More here. As I type, Trump and Clinton surrogates are duking it out on the Sunday morning shows, explaining why this unmasks Trump as a uniquely awful plutocrat or reveals him to be the single person who can dismantle our terrible tax code and replace it with something that will allow economic growth. This story, like the Miss Universe controversy that immediately preceded it, clearly puts Trump on the defensive. Given his softening in the polls after a weak debate performance and the rapidly approaching end of the campaign season (there are just 37 days leftt), the tax revelation forces Trump to engage an issue that has nothing to do with the core issues that put him in a tight race to the next president. Whatever. Sucks to be Trump right now. But you know what? No laws apparently have been broken and this doesn't even amble into the territory of bad judgment that many of his (and Clinton's) actions do. As Seinfeld's Kramer would note, most of us don't even know what a write-off is, and Trump is the one who's writing it off. Far more important, this sort of story is a major distraction from actually serious issues tied to the current state of the world and the specific proposals that candidates have laid out in their bids to become the country's next leader. As Matt Welch demonstrated with respect to foreign policy and failed military interventions, we already know that the "Media Would Rather Talk About Gary Johnson's 'Aleppo Moment' Than a Damning New Report on Hillary Clinton's Actual War." And as Brian Doherty pointed out, it turns out that Gary Johnson's trade-and-diplomacy vision for "has impressed even the foreign policy mavens at Foreign Policy magazine." Even as Aleppo is now being besieged by Syrian government, Iranian, and Russian forces and the president has dispat[...]

Battle Over Publicly-Financed Las Vegas Stadium Heats Up

Wed, 28 Sep 2016 11:30:00 -0400

A prominent Las Vegas labor union and a conservative tax watchdog group have both come out in vocal opposition to the proposed $750 million public subsidy for a new stadium intended to lure the National Football League (NFL)'s Raiders to Sin City. As I noted here at Reason earlier this month, to get the stadium built, "the Raiders, who currently call Oakland (Calif.) home, will contribute far less at $500 million, while Sheldon Adelson, the billionaire casino owner and financier of failed political campaigns, will contribute $650 million through his Las Vegas Sands corporation." If the deal goes through as presently constructed, Adelson's group will not be required to share any profits with the public. Via the Twitter feed of KTNV political analyst Jon Ralston, The Nevada Taxpayers Association sent out a letter featuring 16 reasons to oppose raising hotel taxes one percent to help finance the stadium, including: The bond will have to be paid out of the public tax coffers whether or not the tax increase raises sufficient revenue. A recently as this year, a NFL team abandoned a city which publicly financed its stadium—before the debt on the stadium was paid off. The public won't share in the stadium's profits. Nevada Gov. Brian Sandoval (R)—who supports the stadium proposal—has called for $300 million in budget cuts "because other taxes are under-performing." And finally, "There is no evidence to suggest that a publicly funded stadium brings any benefit to taxpayers and there is significant data indicating that subsidized stadiums can be a detriment to a community." Earlier this week Nevada's largest private sector labor union—the Culinary Workers Union—released a Dr. Seuss-esque video mocking the stadium proposal. Watch below: src="" allowfullscreen="allowfullscreen" width="560" height="340" frameborder="0"> Not to be outdone, the Adelson-funded group Support the Las Vegas Dome (which has been pushing the unintentionally hilarious hashtag #DOTHEDOMETHING) released an NFL Films style video obviously directed at the jock-sniffers, but which was also loaded with overblown promises made countless times elsewhere about the thousands of new jobs and hundreds of millions of dollars that will be added to the economy. Tiltled "Five Things to Know About Bringing the Raiders to Las Vegas," the video includes such sound and reasoned arguments as, "The stadium will be awesome. Not awesome-awesome, Vegas-awesome," and "The public will own the stadium. That's right, it's YOUR stadium," though the video doesn't recommend you show up to the stadium without paying for parking and admission: src="" allowfullscreen="allowfullscreen" width="560" height="340" frameborder="0"> Gov. Sandoval has called for a special session of the legislature to convene in early October to vote on the stadium proposal, which if passed by two-thirds of both the Senate and the Assembly will become a reality. Read more Reason coverage on the never-ending boondoggle of publicly-financed stadiums here.[...]