As I recently wrote, the U.S has never been closer to moving cannabis from Schedule 1 to Schedule 3, which would provide two major benefits: An elimination of the 280e tax code, and increased access for medical cannabis researchers. Both would be great, but still fall short of the preferable option of de-scheduling, aka federal legalization.
Currently, the U.S. has Adult Use cannabis programs in 24 states, two territories and the District of Columbia, while 38 states, three territories and the District of Columbia have medical cannabis programs. The percentage of U.S. adults who favor federal cannabis legalization hit a record 70% this year.
There exist numerous reasons why cannabis remains federally illegal, including well-funded resistance from the pharmaceutical, alcohol and industrial prison complex industries. But as the New Year is a time for a hopeful outlook of what could be, let's say that the feds were to fully deschedule cannabis.
Hooray!
Now what?
We can assume federal cannabis legalization would share some of the framework established when alcohol prohibition ended. From 1920 to 1933, producing, transporting and selling alcohol was federally prohibited by the 18th Amendment, which was repealed by the 21st Amendment. The feds recognized that not all states were thrilled with alcohol (re)legalization, and wrote the 21st Amendment to give them the right to oversee alcohol production, transportation and sales.
States with regulated cannabis programs currently establish and maintain such oversights, but the lifting of federal restrictions would offer a pathway for a long-held goal of creating legal sales from state to state. Oversupply issues on the West Coast could be mitigated by selling what we don't smoke to other states, boosted by the Left Coast's well-earned reputation for producing exceptional flowers.
It would allow the industry to grow, manufacture and ship products nationwide from a single state, drastically reducing the costs and efforts of establishing a nationally recognized brand. Social consumption and sampling options would be on par with alcohol, allowing lounges and events where cannabis could be enjoyed and explored. A reduction of operating costs and establishment of tax credits and deductions should result in lower prices to consumers, as well as increased profits for cannabis businesses (and their employees.) A boom in cannabis jobs would result in higher payroll taxes, and increased sales taxes from a nationwide consumer market.
The benefits would also include expanded access for patients and researchers, a reduction in the use of prescription medications and the cessation of locking people in cages for a plant. So far, so good, but not everything about federal legalization may be to everyone's liking, starting with taxes.
States with Adult Use and Medical cannabis programs collected almost $3 billion in cannabis taxes in 2022, and one study estimates nationwide legalization could result in all the states taking in a combined $8.5 billion annually. (Oregon imposes a 17% tax, with cities and counties adding another 3%, both of which are not charged on medical sales. Washington state pays 37%, so shut up.)
As there are on alcohol and tobacco, there would be federal cannabis taxes. How much remains unclear, but both growers and consumers would pay a tax. The Marijuana Revenue and Regulation Act was introduced in the Senate several times, and as recently as 2020, proposed a federal cannabis sales tax of 10% the first year and increasing over five years to 25%. For Oregonians, that's a combined 45% tax. Which may help motivate growing your own, but definitely not discourage buying from "your dude(tte)."
Get ready for cannabis brands from the same industries that brought you White Claw and the opioid epidemic. After decades of supporting prohibition efforts, Big Alcohol and Big Pharma are going to use their considerable earnings and lobbyists to establish their footprint in that which they strenuously fought against. Expect that to result in less than favorable conditions for smaller craft brands, and efforts to patent strains. Consolidation will continue.
The when and how of federal decriminalization is going to be driven in part by the engagement and actions of registered voters (hint hint). While rescheduling is inevitably the next step, we are past the tipping point for de-scheduling.
