In addition, marijuana is the main fuel for the prison industrial system and financially supports the DEA and other federal agencies, policemen, lawyers, judges and courts. Finally, the strict tax laws for marijuana businesses in legal states would go away if marijuana is legalized at the federal level. In other words, the government would have to tax marijuana businesses at the same rate they tax alcohol and tobacco companies, instead of the current rate of 70%. Section 280E of the tax code states, “businesses who are “trafficking in controlled substances that are prohibited by federal law may not utilize many tax deductions and credits available to other businesses,” (e.g. deducting rent and employee-related expenses). That means a marijuana business owner can pay an effective tax rate as high as 70%, as opposed to the more typical 30%.
It may be difficult to ignore the fact that the federal government may have a financial incentive to keep marijuana listed as Schedule I on the Controlled Substances Act. We may not see federal legalization for 4 – 8 years, unless the legal marijuana industry can show the federal government it can financially benefit more so than from the illegal marijuana industry. Although this scenario may be too late,since companies in Canada and other countries are becoming global leaders in the marijuana industry and may be too big to compete with.
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