Marijuana sellers unfairly penalized, say odd couple Norquist, Blumenauer

Legal marijuana dispensaries unfairly face a higher tax burden than other businesses, two strange political bedfellows said Thursday.

Rep. Earl Blumenauer (D-Ore.) and anti-tax activist Grover Norquist said a three-decade old law meant to bar street-level drug dealers from deducting business expenses should be revisited given rapidly changing laws on marijuana.

ADVERTISEMENT
Roughly 20 states have legalized marijuana for medical purposes over the last 15 years, and voters in Colorado and Washington last year backed a measure to allow recreational use of the drug.

Businesses can generally write off a range of expenses – from wages to equipment to state and local taxes. But Blumenauer said that cannabis dispensaries were denied those deductions because of a high-profile case in the early 1980’s when a drug dealer tried to write off a yacht.

The end result, according to a paper from Norquist’s Americans for Tax Reform, is that an average marijuana dispensary could face an effective tax rate more than twice as high as a business selling other goods.


A bill from Blumenauer, a member of the tax-writing Ways and Means Committee, would allow marijuana dispensers operating under state law access to normal business deductions.

ADVERTISEMENT
Norquist and ATR are urging other lawmakers to sign on to Blumenauer’s measure. Rep. Dana Rohrabacher (R-Calif.), a supporter of the bill, also appeared at the news conference.

“This is not about a drug dealer and a yacht,” Blumenauer said the event outside the Capitol also sponsored by the National Cannabis Industry Association. “This is about legal businesses providing, for example, over a million people with medical marijuana that’s been in most cases authorized by local voters. And it’s a change that’s long overdue.”

Both Blumenauer, who is known for advocating bicycle use, and Norquist, who famously called for making government so small it could be drowned in a bathtub, acknowledged they made for a strange partnership.

But Norquist, who has made stand-up comedy appearances, also said that the news conference was about a serious tax policy issue, and that the government shouldn’t pick winners and losers among businesses.

“Look, there’s always a slight giggle factor on an issue that deals with marijuana,” the ATR founder said. “That said, this is tax policy, guys. This is real stuff. This is, like, important. This is everything from jobs to whether the federal government comes in and writes rules that upset the apple cart in many, many states.”

Blumenauer added that he had not specifically discussed his bill with Ways and Means Chairman Dave Camp (R-Mich.), who has made a full rewrite of the tax code his top priority for the current Congress.

But the Oregon Democrat said that, while he wasn’t particularly optimistic that tax reform could happen, he did think that coalescing around more targeted provisions could help build the sort of trust that would be necessary to push a tax overhaul across the finish line.

The bill, Blumenauer said, could also be dropped into just about any tax vehicle that develops.

“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,” Blumenauer said. “And this is a classic example of where I think there would be good, bipartisan support.”

Both Blumenauer and Norquist also dismissed the idea that support for the bill amounted to backing the legalization of marijuana.

Norquist noted that gambling businesses and "those guys that build those nasty windmills that kill birds" get standard business deductions. And Blumenauer pointed out that the Justice Department has already declined to challenge the new laws in Colorado and Washington.

“That train’s left the station,” Blumenauer said.