Cannabis Taxes: Weight, Potency Or Price? Impact On Businesses, Patients And Consumers
Cannabis companies are bracing for a cash flow boost. President Biden’s decision to reschedule cannabis could free up over a billion dollars in tax breaks thanks to the elimination of the burdensome IRS code 280E. This tax code currently prevents cannabis businesses from deducting normal operating expenses.
Estimates suggest a potential market valuation exceeding $110 billion by 2030 although this question remains: what does this mean for the future of cannabis taxation on a national level?
Comparing Cannabis Tax Designs: Weight vs. Potency vs. Price
The most common approaches to cannabis taxation include weight-based tax, price-based tax, and potency-based tax. A 2023 report by the Tax Foundation offers valuable insights into the tightrope states have to balance when designing cannabis tax schemes. It highlights the drawbacks of current methods like weight-based taxes, which don’t consider potency variations.
Potency-Based Taxation
An optimal system, according to the report, would tax based on THC content – the psychoactive compound in cannabis.
According to the report, potency-based taxation ensures fairer pricing for consumers. The report argues that a weight-based tax would charge the same, despite the significant difference in effects. Thus, …