Despite the broad success of Colorado’s legal cannabis programs, the state’s medical and recreational market has remained hampered by federal prohibition. Federal control over the banking system has precluded legitimate marijuana businesses from obtaining bank accounts, business insurance offerings are limited and businesses are also punished on their federal income taxes and may not claim most deductions.
Furthermore, Colorado’s marijuana industry employees may be denied home loans, student loans, and bank accounts because their income is derived from marijuana sales. Worse yet, federal prosecutors could, at any moment, reverse course on their discretion and seize all assets of anyone involved in a state-licensed marijuana business and prosecute those individuals.
Only the full removal of marijuana from the federal Controlled Substances Act can cure all these ills.
A new bill, from Representative Nancy Mace (R-S.C.), which marks the first comprehensive marijuana legalization effort spearheaded by a Republican, could do just that.
Representative Mace’s bill, the States Reform Act would lay the groundwork for interstate commerce of regulated marijuana products between states with authorized programs. Under the legislation, the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) would become the primary federal regulatory agency for marijuana and would facilitate transfers of inventory from one state regulatory system to another, so those products can continue to be tracked from seed to sale while expanding the potential market for state-licensed marijuana businesses.
The bill has several key advantages over previous efforts considered by Congress. First, it establishes low fees and makes it easy for individuals with no violent criminal history to secure a federal license to operate a legal marijuana business. This will open an exciting new industry to all American workers and aspiring entrepreneurs.
Second, it relies on the expertise that has been painstakingly developed over the past decade by state regulators. Although there are some differences between state regulatory systems, and free-market states like Michigan have generally had fewer issues than limited license states like Nevada, this knowledge should be seen as a resource, not ignored by federal authorities.
Third, it imposes only a modest federal excise tax at 3% of a marijuana product’s value. Recent proposals in Congress have pegged that rate as high as 25%. Federal policymakers must remember these fees are in addition to the high taxes already imposed at the state and local levels. In Colorado, a 25% federal tax would be added to the state’s 15% excise tax and 2.9% sales tax. Too high of a federal tax could make the legal market uncompetitive with the illicit market.
The new proposal’s 3% rate, however, would represent a net tax cut once marijuana businesses gain the ability to deduct basic expenses from their federal corporate income taxes.
Fourth, the bill would expunge the criminal records of all individuals who have been arrested for non-violent federal cannabis crimes. This major restorative justice component would remove counter-productive barriers for people to engage in fruitful behaviors like enrolling in college, securing a business loan or even applying for a job.
Most notably, the States Reform Act is sponsored by a Republican from a state with no legal marijuana. These characteristics may give Rep. Mace a political advantage over Democrat-led legalization efforts that seem to have died in Congress. Even the legislation led by Senate Majority Leader Chuck Schumer (D-N.Y.) has been unable to secure the broad, bipartisan support necessary for a major change in federal law.
The Republican-led legislation could provide the much-needed motivation for a bipartisan group to put their heads together to get federal cannabis reform to President Biden’s desk.
Colorado’s marijuana industry entrepreneurs and employees hope policymakers in D.C. will be able to do so soon.