The rush to tax marijuana

It’s a curious spectacle: Local governments are hurrying to tax marijuana, a drug that is still illegal. In the run-up to the Nov. 4 vote on Measure 91, which would legalize recreational marijuana, the pot users who are criminals today could be revenue sources tomorrow.

What may look like an unseemly eagerness to tap a new revenue source, however, has a solid rationale. Measure 91 reserves marijuana taxes for the state. After Nov. 4, the option to tax marijuana at the local level will be gone, and it’s reasonable for jurisdictions such as Springfield, Lane County and others to act in a way that may keep that option alive.

Local marijuana taxes could serve a couple of purposes. One would be to raise money. While local governments would be entitled to a share of the state’s revenue from marijuana taxes if Measure 91 passes, cities and counties may want to supplement that amount with taxes of their own. No one really knows how much revenue pot taxes would generate — and there’s a danger that if the aggregate level of taxation is too high, the marijuana economy would remain underground and untaxed. But when revenue-raising options are limited and unpopular, local governments can’t be faulted for doing what they must to keep a new one open.

A second purpose of a local pot tax, running counter to the first, would be to discourage marijuana retail operations in a particular area. Cities or counties that tax marijuana at a high rate would push legal commerce in the drug into neighboring jurisdictions. Some city councilors or county commissioners may want to see what the marijuana economy looks like before inviting it into their communities.

It’s far from certain that local marijuana taxes will survive if Measure 91 is approved. Eugene’s city attorney doubts they would, which is one reason the Eugene City Council decided against enacting a tax. But others believe that local taxes would be grandfathered in, which explains why a few dozen cities and counties around Oregon have adopted marijuana taxes. A circuit court judge in Josephine County recently ruled that state law does not pre-empt municipal bans on medical marijuana dispensaries, which could suggest that arguments for local control would prevail in an inevitable lawsuit over city and county pot taxes.

Jurisdictions that move to adopt pot taxes can adjust the tax rates later, or rescind them altogether. If Measure 91 passes, the one thing they won’t be able to do after Nov. 4 is adopt a new marijuana tax. Cities and counties are rushing to get through a door that’s about to close.

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The rush to tax marijuana