Grover Norquist Says Taxing Pot Is Not a Tax Hike


Gage Skidmore

Grover Norquist, who last month spoke in favor of legislation that would allow state-licensed cannabusinesses to deduct expenses on their federal tax returns, tells National Journal that politicians who vote for taxes on newly legal marijuana need not worry that they are violating the pledge promoted by Norquist's group, Americans for Tax Reform. The ATR pledge says, "I will oppose and vote against any and all efforts to increase taxes." But according to Norquist, marijuana taxes don't count:

"That's not a tax increase. It's legalizing an activity and having the traditional tax applied to it," he says.

He compares legalization to changes in alcohol regulation, as when a state legalizes the sale of liquor on Sundays or allows grocery stores to sell beer and wine where they previously couldn't.

"When you legalize something and more people do more of it and the government gets more revenue because there's more of it…that's not a tax increase," he explains. "The tax goes from 100 percent, meaning it's illegal, to whatever the tax is."

At 25 percent on three levels of sales (on top of the state's standard sales tax of 8.75 percent), Colorado's marijuana tax is significantly higher than its levy on alcohol, but it's all the "same zone," says Norquist.

If we were talking about the standard sales tax or income tax, Norquist's description would be accurate: Legalizing marijuana automatically makes it subject to taxes that apply to other legal industries. But the special marijuana taxes are another matter. Surely those count as new taxes. And even if you accept the general idea of "sin" taxes on politically disfavored products, the pot taxes in both Colorado and Washington are much higher than those states' taxes on alcoholic beverages, contrary to what Norquist implies.

The tax of "25 percent on three levels of sales" to which National Journal refers is actually Washington's scheme, not Colorado's. By comparison, Washington imposes the following taxes on alcoholic beverages: $8.08 per barrel (26 cents per gallon) for beer, 23 cents per liter for wine, and $3.77 per liter, plus 20 percent of the retail price, for distilled spirits. The tax on distilled spirits, by far the heaviest, raises the price of a $20, 750-milliliter bottle by about 35 percent. By contrast, the marijuana taxes will raise retail prices by about 58 percent, according to calculations by BOTEC, the consulting firm hired by Washington's cannabis regulators. 

In Colorado, where the legalization initiative proposed taxing marijuana "in a manner similar to alcohol," the disparity between alcohol taxes and pot taxes is even bigger than in Washington. Next month voters will decide whether to approve Proposition AA, which authorizes a 15 percent excise tax and a special sales tax of up to 15 percent. By comparison, Colorado imposes the following taxes on alcoholic beverages: 8 cents per gallon for beer, 7.3 cents per liter for wine, and 60.3 cents per liter for distilled spirits. Again, consider the impact of the tax on distilled spirits, the most heavily taxed alcoholic beverage. The tax adds about 45 cents to the price of a 750-milliliter bottle; assuming a starting price of $20, that's an increase of about 2.3 percent, or one-tenth the price increase that the Proposition AA campaign says will result from the marijuana taxes. I would not say Tax A is in the "same zone" as Tax B if Tax A is 10 times as high as Tax B. Would you?

Even if we say, as Norquist suggests, that Colorado and Washington are replacing a "prohibition tax" with excise and sales taxes, consumers still could see the equivalent of a tax increase if legal prices turn out to be higher than black-market prices. That seems likely in Washington, at least over the short term, and might happen in Colorado as well.

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  1. “That’s not a tax increase. It’s legalizing an activity and having the traditional tax applied to it,” he says.”

    So increased taxes aren’t increased taxes if they were never taxes before?

    1. He’s arguing that being illegal and people being threated with criminal sanctions is a worse effective tax rate than the excise tax in these cases (and just plain worse for the buyer).

      His organization exists to score legislators on voting for tax hikes. In the vast majority of cases, I would not treat legalization with imposing excise taxes as worse than having it be illegal either.

      As noted, the devil can be in the details, but in most cases, I don’t have a problem with that.

      Once the product is legalized, he, like I do, supports lower taxes, but he’s not going to score the initial vote on the legislation as a tax hike.

      1. The question isn’t whether its worse than prohibition.

        The question is whether its a new (and higher) tax. And there’s no doubt it is. Anything other than sales tax applied to any retail sale is a new tax. And, since any tax is higher than zero tax, its a higher tax.

        1. I don’t think so. When it was illegal, they could take the entire proceeds of the sale, and the product as well, so effectively it was a greater than 100% tax.

  2. I agree, tax marihuana at the same rate as you tax other herbal mixtures like chamomile tea. Good idea Norby.

    1. Don’t toss that out there, they’ll just jack up the taxes on my precious, precious chamomile tea.

      1. Jesse, glad you’re here. I heard the cops were chasing a bear near the Rose Bowl and got concerned.

        1. I thought jesse was a power bottom.

          1. I think he has repeatedly described himself as some other animal… Aardvark, anteater… shit.

            1. Umm, probably not anteater.

    2. Why would chamomile tea be the standard, and not tobacco as marijuana is usually consumed more like the latter?

  3. Fuck you, Norquist. I smell KULTUR WAR all over you. You don’t care about prohibitive taxes on weed because only the dirty hippies will have to pay it, right?

    People are delusional about these pot taxes. Do they really think I’m going to pay more for potentially shitty weed in a store where I have to pay 25% taxes, or continue to get it from the guy who makes the stuff I like and charges me a flat price? Fuck you.

    1. Bullshit. Norquist isn’t a culture warrior at all.

      He’s just saying that he doesn’t regard a vote in favor in a “legalize and apply excise tax” bundled legislation as a tax increase. Once it’s legalized, votes to increase or decrease the excise tax will be scored appropriately.

      SoCons who hate legalization are going to simultaneously blast him for finding excuses to let legislators off the hook here for the taxes, saying that it’s because he’s a notorious social liberal and he’s bending the rules to favor pot legalization.

      Given what Norquist actually thinks (including on immigration, gay marriage, etc.), the socons are closer to the truth than you.

      1. So if the legalization happens first then there can be no excise tax added after? I’d love to hope that Norby is consistent. He is a devil to some, but at least be a consistent devil.

        1. Well, isn’t that what most of us here believe? I think that legalization is a big enough win that I’d be willing to take excise taxes up to a certain point.

          Once it’s legalized, I’d fight to lower the taxes. And yeah, if the taxes were totally absurd for the legal stuff there comes a point where I’d oppose, I guess.

          I realize that some people thought that the taxes in the CO and WA proposals went too far already. I understand and appreciate that view, but I disagree. (I realize that some people were able to get their weed without trouble, but there were too many lives being ruined anyway for me to avoid supporting this. Change had to start somewhere.)

          His point on Sunday sales is that, yeah, normally ATR fights even attempts to get the government more revenue, but they weren’t going to score something as a tax increase just because it was legalizing sales on a certain day and thus increasing the tax take by decreasing illegal sales.

          1. You have a real hardon for taxes, don’t you, Thacker. You’re all over defending them today. How about you stop wasting my time and fuck off?

            1. He is not defending taxes, neither is Norquist. They are saying that making something illegal to something legal but taxed is a step forward that should not be penalized.

              1. Then Norquist needs to fucking change the wording of his Pledge, because that isn’t what it says.

                And good luck with changing the wording in such a way that it doesn’t eviscerate the meaning of it. “It’s OK to raise to taxes if it is bundled with legalizing an activity that is currently illegal” would have all sorts of perverse consequences.

                1. Like what? What perverse consequences?

            2. The taxes suck, but legalization with taxes is better than continued criminalization without taxes. I don’t think it is that difficult a position to understand. I think it is a reasonable position. It is a bit of a difficult position for Norquist to take, but I’m glad he is not opposing legalization measures. We just aren’t going to see legalization without taxes. It sucks, but it’s reality at the moment.

          2. Yes but I, like many here, do fear that punitive excise taxes will give drug warriors the wiggle room to point and say that the presence of black markets means legalization doesn’t work.

            1. Fair point, but I have trouble it would amount to efforts comparable to the current WOD.

  4. It’s still hard to say whether the high taxes will make any difference or not because there are some unknown factors at play beyond the economics.

    -A pent up desire among people to purchase marijuana legally, at any price.
    -The wider selection and more professional atmosphere that goes along with a storefront
    -Convenience (stores don’t move around and rarely are simply “dry”)

    Don’t get me wrong, I don’t agree with taxing the crap out of it for no reason at all, I just think this market might be able to bear the high prices, at least in the beginning.

    1. There will also be increased supply once people aren’t afraid to be arrested.

      Artisinal varieties!

      1. Cannibis mayo?

    2. Legalization should allow supply and demand to increase. I expect Supply to increase more and drive down base prices, while government taking will increase the price some.

      The current sets of risks with raising and selling MJ inflate prices and so any users already pay a de-facto tax on MJ.

  5. I think that most people looked at the Colorado and Washington proposals and decided that, while the taxes were annoying, they weren’t so high as to make it actually better to oppose the legalization laws. It was still better than the status quo. ATR is just making the same decision.

    1. How high would the taxes have to be that people would therefore oppose legaliz’n, as opposed to merely being indifferent to it?

  6. “The tax goes from 100 percent, meaning it’s illegal, to whatever the tax is.”

    Umm, Grover, I know what you meant to say, but a 100% tax merely doubles the price. Years in prison isn’t a 100% tax, it’s worse.

    1. Years in prison isn’t even a tax under the wording of Norquist’s pledge. It’s worse than a tax, but that doesn’t make it a tax.

      The rationalization here is really thick. Someone who has signed the Pledge ought to call Norquist out on this BS.

    2. Which has the perverse effect of making his position stronger, actually.

  7. It’s a violation of the ATR pledge. Currently, if you are a person growing marijuana, you are still technically required to pay certain taxes on it, despite the underlying activity being illegal. Remember, they nailed Al Capone on tax evasion charges, even though alcohol was illegal.

    So, if a legislator at the state or federal level votes to both legalize a product, and raise the taxes above what is technically required under current law, they are violating the pledge.

    Basically, Norquist is trying to rationalize a tax hike because he’s uncomfortable with the implications of his pledge actually being carried out as written, the way SCOTUS incrementally tried to nullify vast swathes of the Constitution, bit by bit.

    1. This is hyper-literalism. Is it a move toward or away from more liberty to move from X being illegal to X being legal but taxed at a higher rate than other things? It seems plain the latter is better and Norquist’s point is he does not want to penalize any legislators (especially Republicans, the only ones who will care about the pledge btw) that are willing to support legalization efforts.

      1. How about we legalize weed without taxing it? Could we do that?


        Then you and Grover and Thacker can all go squat-fuck a wasp’s nest.

        1. One of the arguments to convince legislatures of ending pot prohibition has always been to make it available to tax (like how alcohol prohibition was ended). You are moving goalposts here.

      2. So you are saying he is technically correct? I agree.

  8. “He’s arguing that being illegal and people being threated with criminal sanctions is a worse effective tax rate than the excise tax in these cases ”

    I see his point, but he’s intentionally muddying the language, and that insticntively puts me against his position.

    He’s trying to make something extremely complicated that just isn’t, by comparing pre ban pot to post ban pot.

  9. Why do I have to pay taxes on a plant? Why do they need more money at all? Just once, Just F*cking once, trying spending less as an option to balance a budget.

  10. Did we ever repeal the Marihuana [sic] Tax Act of 1938? IIRC, it placed a tax of $100 per ounce, which is the way the feds used to control drugs back before they got the idea that “interstate commerce” means “any damn thing that Congress wants to legislate about.” If we didn’t repeal it, the feds could just dust it off and start collecting the tax again.

    (Timothy Leary was prosecuted under the Act, but beat the rap when he got the Supreme Court to agree with him in 1969 that informing the feds that he had some weed on which he needed to pay the federal tax would put him in jeopardy of prosecution under state anti-marijuana statutes, so that requiring him to do so would violate his 5th amendment right not to incriminate himself. As a result, even if Congress didn’t get around to repealing the Act, it hasn’t been used much since the Leary case.)

    1. I looked it up, and yes, we repealed the Marihuana Tax Act of 1937 (not 1938), the year after the Supreme Court’s decision in Leary v. United States. So we’d have to reenact the law to get any revenue from medical marijuana. (It appears, BTW, that the Act provided that physicians or other practitioners who administer or prescribe marijuana in the course of their professional practice would be required to pay a tax of $1 for every year they engaged in those activities. They were also required to keep a record of all transfers of marijuana. Further, pharmacists filling prescriptions for marijuana were also required to keep all prescriptions for marijuana available for inspection by the feds for a period of two years (kinda the way they are now required to keep records of all purchases of Sudafed, because meth).)

  11. I think the answer is he needs to give conservative pledge-signers an out here, since taxing it is broadly popular among pro-tax progressives and anti-pot conservatives. By giving them space to vote for pot taxes, it preserves the pledge as something that’s toxic to ever abjure. He doesn’t want to set a precedent that thousands of pledge signers (state legislators) would violate the pledge in this instance.

    Which suggests that the strength of the pledge is often overstated by progressives. Taxes in general are unpopular, so the pledge works well; pot taxes are very popular, so the pledge is not very effective.

  12. Excise taxes are always tax hikes.

  13. Let me get this straight. Politicans make up their own personal rules on how things should be and then spend a career justifying them despite the fact that it was criminal to begin with. Gee, political analysis is easy.

  14. So, Grover, did you study at the Bill Clinton “Let’s try to define what “Is” is?” school of logic?

    The thing that amuses me is the “what’s the right level of taxation” for something that’s just now on the verge of being legal AND taxed?

    If we’re talking about fuel taxes like gasoline or Diesel, it’s pretty much whatever the taxing authorities can foist upon us before we look for alternatives they can’t tax. Make my gas price too high with taxes and I buy a Prius and cut my consumption in half. You tax per gallon? I just cut your income by a factor of two. Now you’ve got a new problem to solve!

    So, nobody knows what level of taxation is “right,” but one starting point just MIGHT be to make the total “pump price” a little lower than the “black market price.”

    Otherwise, the black market will continue to own a large share of the market and state tax revenues will be lower than “optimum.” Tell me there’s no economics degree candidate in CO who’d be willing to figure out an optimization curve for a commodity product? Somebody tell me that’s how they set the taxes already… I need a good laugh.

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