Ballot Measure 91 and Local Taxes: Extended version

 “I tell ya I don’t get no respect. No respect at all.”

If Sections 42 and 58 of Ballot Measure 91 were able to talk during the 2014 political campaign, this is what they might have said. These Rodney Dangerfield-like provisions were not merely ignored by dozens of city councils who “preemptively” adopted ordinances that taxed recreational marijuana. The provisions were expressly acknowledged by the city councils, and then duly ignored. Ouch.

To refresh everyone’s memory, here’s what these fine provisions (which were copied verbatim from Oregon’s current liquor statutes) have to say for themselves.

Section 42. State has exclusive right to tax marijuana. No county or city of this state shall impose any fee or tax, including occupation taxes, privilege taxes and inspection fees, in connection with the purchase, sale, production, processing, transportation, and delivery of marijuana items.

Section 58. Marijuana laws supersede and repeal inconsistent charters and ordinances. Sections 3 to 70 of this Act, designed to operate uniformly throughout the state, shall be paramount and superior to and shall fully replace and supersede any and all municipal charter enactments or local ordinances inconsistent with it. Such charters and ordinances hereby are repealed.

Could these provisions be any clearer? What kind of legal analysis would cause anyone to think that a local tax might be “grandfathered in” if an ordinance was adopted before Election Day? Don’t the words “replace,” “supersede,” and “repeal” expressly contemplate preexisting ordinances?

The political analysis seemed to be just as sophisticated. As far as I could tell, it boiled down to something like this: “Well it’s probably not going to work, but everybody else is doing it, so let’s just do it too.”

But hold on. Not so fast. There are always heroes, both major and minor, to every story. And one of my favorite moments in the campaign came from the Banks City Council when they were discussing the adoption of an ordinance that would have taxed recreational marijuana. “Essentially, this is posturing?” Councilor Rob Fowler asked. “Yes,” answered city attorney Dan Kearns.

I’m a sucker for straight talk, and so that made me smile.

But all of that was yesterday. Election Day has come and gone. The campaign is over, the votes have been counted, and the time for serious thinking and implementation is here.

And so, I thought, it might be helpful if everyone fully understood the two main themes of Ballot Measure 91.

The first theme is an adherence to the eight federal enforcement priorities regarding marijuana that are specified in the US Department of Justice Memorandum dated August 29, 2013 by Deputy Attorney General James M. Cole. These eight priorities, which are set forth in Section 1 of Ballot Measure 91, are as follows: (1) preventing the distribution of marijuana to minors; (2) preventing revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels; (3) preventing the diversion of marijuana from states where it is legal under state law to other states; (4) preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal

activity; (5) preventing violence and the use of firearms in the cultivation and distribution of marijuana; (6) preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use; (7) preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and (8) preventing marijuana possession or use on federal property.

All Oregonians, regardless of how they voted on Ballot Measure 91, should be in favor of these priorities. In that sense, and with respect to those priorities, we are all on the same side.

The second theme of Ballot Measure 91 is to minimize the illegal marijuana market to the greatest extent possible. This is perhaps implied by the Cole Memo, but I think it deserves its own special emphasis, as minimizing the illegal market is, in my opinion, one of the primary means by which Oregon can accomplish the goals in the Cole Memo. (Note that it could be that said that Washington’s Initiative 502 adheres to the enforcement priorities in the Cole Memo. However, I think few would say that Initiative 502 was drafted in a way to minimize the illegal market to the greatest extent possible.)

To minimize the illegal market, private businesses should be incentivized to enter, and remain in, the regulated market. Likewise, adult consumers should be incentivized to purchase marijuana from licensed retailers rather than from an illegal non-taxpaying dealer.

Now, it should go without saying that the tax structure in any marijuana regulatory scheme will play a vital role in minimizing the illegal market. After consulting with national tax policy experts, and after examining different hypothetical tax models for marijuana, we adopted five tax philosophies for Ballot Measure 91: (A) tax as early as possible in the distribution channel; (B) tax by weight rather than by price; (C) remain watchful with respect to how the illegal market responds to the legal market; (D) remain flexible in responding to the illegal market; and (E) ensure that the State is the sole taxing authority.

A cohesive tax policy that can compete with and respond to the illegal market will be virtually impossible if dozens of local jurisdictions are able to continually and sporadically impose different and uneven taxes.

There may come a time at some point in the future when matters stabilize to such a degree that the illegal market is no longer of any practical consequence. However, until then, the Oregon legislature and the various city councils that adopted marijuana tax ordinances should respect the will of the majority of Oregon voters by not amending, and by following, the clear language and intent of Sections 42 and 58 of Ballot Measure 91.

Specifically, the Oregon legislature should resist amending these sections during the 2015 and 2016 legislative sessions. The city councils that adopted the ordinances should repeal them, or at least suspend them while Ballot Measure 91 is given a chance to be implemented in accordance with its terms. A city council that seeks to impose a marijuana tax in clear violation of Sections 42 and 58 of Ballot Measure 91 will collect nothing and will simply waste time, money, and energy defending a lawsuit that cannot be won.

Naturally, the desire to raise tax revenues from a new source is tempting. However, Ballot Measure 91 already distributes tax revenues to cities, counties, schools, law enforcement, and mental health, alcoholism, and drug services. Let’s call that good enough for now. Because in the long run, minimizing the illegal market sooner rather than later will result in more tax revenues for everyone.

Ballot Measure 91 provides the State of Oregon and every local government with a unique opportunity to implement a new policy and to create something of lasting value, while at the same time promoting public safety and a more sophisticated dialogue concerning the subject of marijuana. Imagine the pleasant surprise and pride that current and future Oregonians might feel if all areas of state and local government are able to cooperate, execute, and perform in a constructive manner and successfully implement Ballot Measure 91. If such a thing were to happen, more than one future Oregon voter might have reason to say: “I gotta tell ya. You earned my respect.”

You can read the published version in the Oregonian.