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Cannabis 2020

 

Recreational marijuana just blew into Chicago, as the state of Illinois legalized adult-use cannabis on New Year’s Day. Next week, the state of Hawaii will enact a law allowing you to carry up to three grams of  weed. And recreational cannabis will be on the 2020 ballot in   Arizona,  Florida, New Jersey, and possibly  Connecticut,  Montana, New  York, Ohio, and Rhode  Island, so that by year’s end,  19 states could have California-style legal cannabis for anyone 21 and over.

But those new state laws won’t even matter if the U.S. Congress decides to legalize marijuana on the federal level, from sea to shining sea. Two bills before Congress, including one authored by our own Sen. Kamala Harris, would do just that, allowing us to  buy legal weed in any state, take it across state lines, ship it in the mail, and pay for it with a credit card.

“We feel the end of marijuana prohibition is quickly approaching,” Drug Policy Alliance director of national affairs Maritza Perez tells SF Weekly. “Last Congress, we saw a record number of marijuana bills introduced. This year’s Congress is pushing marijuana reform unlike any Congress we’ve seen in the past.”

Of all the 2018 marijuana bills that went before Congress, the most significant was the SAFE Banking Act, which would allow cannabis companies to finally get bank accounts. That bill hasn’t gone before the Senate yet, but passed the House of Representatives in a bipartisan 321-103 landslide.

“Based off that, the chances of passing a federal legalization bill this year are the best they’ve ever been historically,” Perez tells us.

But nothing is certain in politics. And in the age of Donald Trump, everything is especially uncertain.

“The fact that there’s going to be a Presidential election, and there very well might be impeachment proceedings extending into early 2020 might slow that process down and shorten the window with which to actually get something passed in the House,” says Morgan Fox, media relations director for the trade group National Cannabis Industry Association (NCIA).

Fox points out that victories in the Democartic-controlled House of Representatives are no guarantee of success in the Republican Senate.

“They still have to deal with the Senate, which is really not there yet when it comes to legalization,” he tells us. “It’s possible that something could pass through the existing Senate, but it’s going to be very difficult.

“It’s probably more likely that we see passage [of legalization] through both chambers in 2021 or ’22.”

Following on the House’s passage of the SAFE Banking Act comes what Perez calls “the most far-reaching marijuana reform bill to make any sort of headway in Congress,” a pair of bills both called the Marijuana Opportunity Reinvestment and Expungement (MORE)  Act. California senator Kamala Harris wrote the Senate version, while Jerrold Nadler’s (D-NY) House version already passed the House Judiciary Committee in late  November.

“The passage of the MORE Act out of the House Judiciary Committee is definitely historic,” Fox says. “It’s the first time that committee has voted on any standalone, comprehensive cannabis policy reform.”

The MORE Act would remove cannabis from the federal Controlled Substances  Act, where it is currently classified as a Schedule I drug with “no currently accepted medical use.” Marijuana is the same as heroin in the eyes of the federal government, who classify cannabis sales or possession as a criminal charge even in legal states.

If passed, the bill would also require courts to expunge or erase past marijuana  convictions, provide Small Business Administration funding to minority-owned cannabis  businesses, and bar the federal government from denying benefits to anyone over a prior cannabis  conviction.

But the MORE Act does not technically ‘legalize’ marijuana — it decriminalizes marijuana, which comes with a far smaller set of new rights and liberties.

“The big difference between decriminalization and legalization is what the government decides to do on rescheduling,” Fox tells SF Weekly. “When you remove it from the Controlled Substances Act, that effectively decriminalizes. But that doesn’t mean things like interstate commerce are legal, it doesn’t create allowances for export.

“And that’s really what the definition of legalization really is, when the federal government is explicitly allowing and regulating cannabis commerce, research, and things like that.”   

On the downside, the MORE Act also comes with yet another cannabis tax on an industry that’s already hurting from overtaxation. The law would come with a 5 percent “Opportunity Trust Fund” tax on marijuana products to fund loans to small businesses, cannabis job training, and substance abuse  treatment.

But in this case, the industry would actually welcome that new tax.

“The 5 percent rate under the MORE Act is actually a lower tax rate than the industry currently pays,” Perez tells us. “What’s great about this tax is that it specifically funds a social equity program. So it’s a win-win, the industry pays a lower effective rate, and the money funds social justice programs.”

The NCIA’s Fox explains that on a technical level, this tax lowers the total tax burden on the industry because it allows cannabis businesses to take deductions from their taxes. A current IRS code called 280E prohibits marijuana businesses from writing anything whatsoever off of their  taxes.

“When cannabis is descheduled, it immediately fixes the 280E tax problem,” he says. “While this 5 percent tax would be added onto the burden of cannabis businesses, they would also be able to deduct business expenses. Not being able to do so sets their effective federal tax rate at anywhere from 40 to 70 percent. So overall, it’s going to be a tax decrease.”

But that tax money won’t be available right away, since it’s a tax on sales. And sales of commodities can fluctuate, as California unpleasantly discovered last year when the state took in only half of the cannabis tax money they projected they’d make.

Moreover, small businesses will be subject to the exact same tax rate as the big corporate operators, which hurts the smaller players who don’t have outside corporate investment. And equity permit holders will in effect be paying for restorative justice and community reinvestment efforts to undo social ills that they were the victims of during the Drug War.

The MORE Act is not perfect, does not technically ‘legalize’ marijuana, and might not even be the legislation that ultimately does legalize cannabis.

But it is marijuana’s great green hope on Capitol Hill in 2020, and could bring new meaning to the term ‘joint’ session of Congress.