Pubdate: Wed, 08 Nov 2017
Source: Wall Street Journal (US)
Copyright: 2017 Dow Jones & Company, Inc.


Regarding your editorial "High on Incentives" (Nov. 2): After the 21st
Amendment lifting prohibition in 1933, the excise tax rate on alcohol
was adjusted down to around 5% to undercut moonshiners and to
eliminate any continuing profit for the mob. Later, the excise tax
rate was adjusted up to approximately 15%. Mentor Capital's elasticity
analysis of the cannabis tax load in various locales versus illegal
marijuana-market activity shows a roughly inverse linear relationship.
That is if the tax rate is 45%, the illegal market will be 45% of the
whole cannabis market.

Many don't know that since cannabis is a Schedule I drug, legitimate
cannabis-selling businesses and heroin dealers alike cannot deduct
operating expenses, extraordinarily inflating the effective tax rate
on cannabis companies. Dropping Schedule I designation, following the
1933 5% excise-tax model for cannabis and later pegging cannabis taxes
to equal the alcohol-related tax rates would economically eliminate
the cartel involvement today as the mob was undercut back then.

Chet Billingsley

Chairman & CEO

Mentor Capital, Inc.

Ramona, Calif.
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MAP posted-by: Matt