Conservatives Fight Marijuana Taxation Despite “Giggle Factor”

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<> on September 12, 2013 in Washington, DC.

In front of the U.S. Capitol Thursday, two congressmen discussed H.R. 2240, the Small Business Tax Equity Act, a little known bill introduced in June by Oregon Democrat Earl Blumenauer to allow deductions and credits relating to expenditures for marijuana sales conducted in compliance with state law.

The bill, according to GovTrack.Us, has a 0% chance of being enacted and has a tiny chance of even getting out of the House Ways and Means committee. The main reason it has reached national attention is Grover Norquist, the President of Americans for Tax Reform, who has corralled 219 Representatives and 39 Senators to pledge to oppose any and all tax increases. He has taken up the no-tax-penalty-for-pot cause. Norquist—who has “No, absolutely not” ever smoked the stuff—believes that federal encroachment on the nascent field of state regulation of marijuana is a deeply serious topic, irrespective of the drug’s effects.

“There’s always a slight giggle factor on the issue dealing with marijuana,” says Norquist. “That said, this is tax policy, this is real stuff. This is important. This is everything from jobs to whether the federal government comes in and writes rules that upsets the apple cart in many, many different states.”

The fact that taxing marijuana has become an issue of debate is a sign of the success of cannabis advocates. In August, the Administration said it would not challenge laws legalizing marijuana in Colorado and Washington, so long as the they implement “strong and effective regulatory and enforcement systems to control the cultivation, distribution, sale, and possession of marijuana,” according to a Justice Dept. memo. Marijuana is still, however, illegal under U.S. federal law.

Norquist, who says the “double taxation” of marijuana dispensaries received his attention a couple of months ago, says the legal issue should be decided state by state, but as a tax issue there should be no doubt: legal cannabis dispensaries should be able to claim the expense deductions that any other legal business can claim. “In Colorado and some of these other states, marijuana dispensaries are just legal businesses. They should be treated that way. But federal law makes that difficult to impossible,” says Norquist. “We’ve got to take the IRS out of this issue.”

The press briefing, sponsored by National Cannabis Industry Association, also featured Blumenauer and Rep. Dana Rohrabacher, a California Republican. Blumenauer believes that this issue could be a stepping stone for a greater goal: comprehensive tax reform. “I think comprehensive tax reform is not something that is beyond our reach, but it is a heavy lift,” says Blumenauer. “It would be nice to do a little momentum building, and have people work together on things that are common sense and have bipartisan support. And this is a classic example.”

While Blumenauer believes this is a “simple fix,” he admits that it could be awhile before a business can claim a tax deduction in its sale of marijuana. “What we’re doing first is building the understanding of this issue and its support,” says Blumenauer. “But I think that this is a perfect item that can be dropped into any tax vehicle going forward.”