See Me, Feel Me, Touch Me, Tax Me

In a post on Wednesday, When Taxpayers Welcome Taxes, Steven Levitt discussed this CNN report on Oakland’s new “pot tax”:

OAKLAND, California (CNN) -- Oakland's bid to become the first U.S. city to tax proceeds on medical marijuana passed Tuesday by a landslide vote. About 80 percent of voters chose to impose the tax on Oakland's medical marijuana facilities, according to the Alameda County Registrar of Voters.

Interestingly, Steve DeAngelo, a leader of one of the city's cannabis clubs, helped lead the effort to get the tax approved, despite the fact that his business will now have to pay more than $350,000 from the new tax next year. Oakland's City Council supported the tax.  Says councilwoman Rebecca Kaplan, “Given that the medical cannabis dispensaries are something that was legalized in California, why not have revenue from it?”  There was no formal opposition to the new tax, although some anti-drug groups believe “that the tax sends the wrong message.”

Levitt asks (and answers):

Why is DeAngelo so eager to pay these taxes? I’m almost certain it is not because he is an altruist.

The real answer, I suspect, is that he is generating $19 million a year in revenues selling in a market (medical marijuana) that is barely legal. And DeAngelo probably suspects that taxation will increase the likelihood that his business remains legal, for two reasons.

The first reason is that taxing a good implicitly says that the government acknowledges the legitimacy of the activity; we tax legitimate goods, and we fine and imprison those who sell illegitimate goods. Second, while experts suggest that marijuana itself is not very addictive, new sources of tax revenue surely are addictive! So once the revenues start coming, government won’t want to turn off the spigot.

Although Al Roth beat me to the punch, I was immediately reminded of Nevada SB369, which would have imposed a tax on the legal Nevada brothel industry.  Unlike the Oakland pot tax, SB 369 died this spring after a 3-4 vote in the state’s Senate Taxation Committee, despite support from many sex workers and the brothel industry. 

The arguments on both sides were similar to those raised in connection with Oakland’s pot tax.  Noting the state’s desperate fiscal situation, Senate Taxation Committee Chairman Bob Coffin supported the tax.  Coffin argued that, although the brothel industry welcomed the tax and the idea of generating tax revenue from the brothels had been discussed for years, “people weren’t willing to get their hand’s dirty.”  “I don't know why people won't recognize that we have a legal industry,” said Coffin.  “I'm willing to go in and do the dirty work if no one else will.”

As reported by MSNBC:

The bordellos are practically begging the state of Nevada to tax them, hoping the extra revenue for schools, parks and health care will endear them to the public and give them more political security and, ultimately, more business.

But the politicians are not interested.

The costs of societal and legal pretense surrounding the existence of many markets in which women are the primary suppliers is a topic about which I’ve written before (see here, here, and here) and to which I’ll return again this fall for a symposium in the North Carolina Law Review – assuming that I can stop blogging long enough to finish this draft . . .

For those needing a reminder on the source of this post’s title:  Download 10 See Me, Feel Me

Comments

[Roberta Mann]

Kim:

What an awesome title to your post! I hope you haven't copyrighted it : ) BTW, income does not need to be legal to be taxed -- see, e.g., James v. Comm'r., 366 U.S. 213 (1961).

[Kim Krawiec]

Thanks Roberta. And to think I almost called it something as pedestrian as "Taxing Pot and Sex" . . .