As legalization of cannabis moves from "Whether" to "How," revenue for government might be part of any reform law. When it came to "Ways and Means of raising Money," in Part 3 of Gulliver's Travels, Jonathan Swift had a fictional professor say, "the justest Method would be, to lay a certain Tax upon Vices and Folly; and the Sum fixed upon every Man to be rated, after the fairest Manner, by a Jury of his Neighbours."
That is, let juries decide how much tax everyone should pay - one person at a time.
Whoa. Some folks in the cannabis community argue that moderate, responsible use is beneficial - a plus for society. The opposite of Vice and Folly. They might even ask for cannabis subsidies, if the government had plenty of money. They insist that taxing responsible use is counter-productive, and exactly wrong.
So individualized taxes won't be easy. Well, use by kids falls in the harmful category - that's hard to argue with. So shouldn't straw buyers, who buy for resale to kids, pay a higher tax? Not exactly. If you could identify those straw buyers, you probably wouldn't hit them with a higher tax; you'd stop them cold instead.
So are there any cannabis Vices and Folly you might want to tax? Well, you can aim at use by chronic, dependent over-users - folks with "marijuana use disorder." Tax them. Slow them down - or make them pay.
To identify "them," to make this plan work, Swift's professor uses the gold standard of legal fairness - the jury.
Juries, in America and many other countries, answer "questions of fact" -- not just who-done-it in criminal cases, but also who's telling the truth and who's lying. Jury decisions, though, are prohibitively expensive in America today. And even picking juries takes too long. So we don't use juries much. Impaneling juries to identify and measure Vice and Folly for every cannabis user would be absurd.
So if juries aren't realistic, are we willing to have some other decisionmaker, less democratic and less time-tested than the jury, decide who pays tax on cannabis?
We are! In Colorado and Oregon, at least, where cannabis is legal for all adults, the law puts some users in the non-Vice category altogether. And gives them a huge tax break. This is "medical cannabis." Cannabis use is taxed there, or not, depending on who uses it - and why. Folks who get into the category of medical patients pay no tax. For every other legal buyer, tax is due.
Who decides who is actually sick? Doctors do. Which can lead to Pot Docs, who have a business incentive to say, "Yes, you're sick" to healthy folks who fake being sick, just to avoid tax. So medical cards in Colorado, for instance, are easy to get, even for healthy people. Tax amounts are low, so the stakes are not high enough for government to bother finding out who is actually sick. Juries aren't being called in to decide. And as a physician friend says, "We all have chronic pain in the soul." At least Colorado will convict a Pot Doc who doesn't even bother to ask a patient if he's sick.
But maybe Gulliver's professor had a point in looking at Vices and Folly. Thinking about how to tax cannabis focuses on harmful intoxication. (Figuring out how and what to tax comes before the hard work of enforcement.) Still, all users and sellers might be expected to pay for the costs of legalization, and for making the system work. And even if you could tax just over-indulgers, there's a danger that even moderate users will become immoderate. So you could decide to tax all users a little.
Meanwhile, for other behavior, Swift had another professor, with a completely different method of assessing tax due: Instead of juries, let the taxpayer himself assess tax, on the honor system. Here's one example: the "highest Tax was upon Men who are the greatest Favourites of the other Sex, and the Assessments, according to the Number and Nature of the Favours they have received; for which, they are allowed to be their own Vouchers." Decode the olde English, and you've got a tax on either promiscuity or boastful lies about sex -- a "Swaggering Stud" tax.
OK, if you want serious tax design, Gulliver's Travels won't get you far. You might try State Tax Notes, or High Tax States, or RAND's Vermont Insights instead. But if you think something is a Vice, taxing it won't eliminate it. Not only do taxes miss targets you want to hit, they hit targets you want to miss. The real world is messier and trickier than fiction.