Marijuana Growers Face 90 Percent Federal Tax Rate

[Jacob Redmond]

Three of four proposed marijuana-related bills recently were passed by the U.S. House of Representatives, according to an analysis by the National Cannabis Industry Association, a Washington D.C.-based lobbying group.

But state and federal law in the U.S. still conflict on pot regulation for medical and recreational purposes, and going into the marijuana cultivation or sales business may be hazardous to an entrepreneur's fiscal health, at least for now.

At a briefing last week in Washington for conservative activists, marijuana entrepreneurs reported that per the federal tax code, any business that sells a Schedule I or Schedule II drug - narcotics under federal law - cannot deduct their business expenses from their taxes.

That increases costs dramatically for the erstwhile, legal (in some states) pot growers. "Because marijuana businesses are not allowed to deduct their expenses, in certain circumstances, legal marijuana businesses can pay federal income tax rates of nearly 90 percent, while the Small Business Administration estimates that many small businesses pay an effective rate of 20 percent," a grower said during the background briefing last week.

According to the ArcView Market Research survey, legal cannabis sales last year were $2.7 billion in the U.S. The industry employs 30,000, and, despite the draconian taxes, is America's fastest-growing industry, with a 74 percent year-to-year growth rate. All but nearly $270 million of those sales figures were subject to federal tax.

News Moderator: Jacob Redmond 420 MAGAZINE ®
Full Article: Marijuana Growers Face 90 Percent Federal Tax Rate, As Deductions for Expenses Not Allowed by IRS | Somewhat Reasonable
Author: Gene Koprowski
Contact: https://www.heartland.org/contact-us
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Website: Somewhat Reasonable

 

[Happy Hemper]

And yet industries that pollute, degrade, imperil etc. our environment, bodies and minds can effectively do so while paying little to no taxes nor penalties for their activities.

 

[jayhawk67]

The success of the medical cannabis businesses may lead to a no-win situation where the Federal government is involved. As long as they see the money coming in from the 90% tax rate they will be loathe to remove cannabis from a Schedule 1 drug to a non-scheduled plant where it should be. Hopefully the movement to de-schedule cannabis/hemp/marijuana is successful quickly before the Federal government becomes addicted to the sweet tax money derived from the punitive taxation of this industry which is geared to helping patients with medical conditions poorly helped via patent medications. Recreational cannabis is another situation where a sin tax of varying percentages can be anticipated to punish tokens from enjoying themselves to much. Never trust the government when it has its hand in your back pocket.