Dear Esteemed Senators,
We must end the failure of prohibition, and we commend you for taking action. As we anticipate the beginning of the end of the War on Drugs with the introduction of the Cannabis Administration and Opportunity Act (CAOA), determining who is allowed to participate matters. We have been deeply invested in cannabis policy reform for 25 years, with our founders going all the way to the Supreme Court and suffering two federal raids under two different administrations for our advocacy. We are pleased you seek feedback from the community most affected by CAOA, as Oaksterdam’s mission is to provide quality education and training to the cannabis community, industry, and regulators. We at Oaksterdam University believe that to advocate and legislate effectively, one must first educate.
Congress can legalize cannabis for adult use while applying realistic taxes and regulations rather than impractical and onerous. Creating a tax regime expecting that cannabis tax revenues will be a cash cow for general government operations is a grave mistake. Over-taxation will spell doom for pulling the nascent industry out of the shadows.
While we advocate for a safe, regulated, and taxed cannabis market, we recommend keeping the federal cannabis tax rate low or nil. High taxes drive small businesses out of business and encourage more activity outside the legal market. As we have seen from the rollout of legalized cannabis in California, high state and local taxes have added 50 percent or more to the price of cannabis products in legal shops. This caused the illicit market to remain as strong or even more robust than before the passage of adult use legalization five years ago. A high federal tax rate added to state and local taxes will only exacerbate the problem nationwide.
As currently proposed, the bill would increase the already excessive barriers of regulation and taxation in legal cannabis markets. It would also impose a new federal tax, starting at 10% and rising to 25%. For example, in California’s already over-taxed market, the total tax level would end up exceeding 60%, creating unfortunate incentives for underground providers to compete with licensed businesses unfairly.
Keep the federal tax rate only in the case of interstate and international commerce transactions. Follow the blueprint for the end of alcohol prohibition. Congress should change national laws to recognize the legality of cannabis produced, bought, sold, and distributed within the state in legal accordance with local laws. This will help ensure the emerging cannabis market remains accessible to small business owners, the backbone of the American economy. In contrast, high taxes will help contribute to corporate monopolization and a booming illicit market. We believe it is a matter of social justice to level the playing field to support small businesses, often operated by those from our most marginalized communities – Black, Indigenous, People of Color, women, and veterans. Add the costs of labor, product testing, excessive packaging, and labeling requirements, and the incentives for running an unlicensed business are numerous compared to the licensed operators. The latter must adhere to permits, fees, inspections, taxation, and rigorous public health and safety standards. Rather than keeping barriers for entry so high that many are left to the illicit market, Congress can even the odds by reducing obstacles.
CAOA, as proposed, would add a whole new layer of federal regulations to those already required under California’s complex regulatory system, further driving down the incentives to join the regulated market. This seems a sure-fire way to bolster illicit activities, including those involving dangerous products that look and feel legal but are untested and often unsafe, like the illegal products that triggered the vaping crisis in late 2019, causing 2,506 cases of illness and 54 deaths. Like our current drug prohibition, alcohol prohibition in the 1920s created a large criminalized industry that often used unsafe products and practices.
The bill does have commendable provisions, including descheduling cannabis entirely, making personal possession legal under federal law, and affording amnesty for prior offenders. Unfortunately, it also continues current federal drug testing rules that discriminate against workers who use cannabis. Do not enact a softer, “gentler” prohibition – with reduced sentencing, drug testing, and forced treatment to avoid jail – supplanting genuinely needed treatment spots and denying economic opportunity to those already criminalized. Giving voice to decriminalization, expungement, and medical cannabis are all necessary and welcome but are insufficient. “Softer prohibition” is designed purely to enrich mandatory drug testing and private treatment facilities. As Joe Biden’s father said: “Don’t tell me what you value, show me your budget. I’ll tell you what you value.”
The 13th Amendment to the United States Constitution prohibited slavery and involuntary servitude – except as punishment for a crime of which one has been convicted. This observation should underline the need to ensure we do not entrench New Jim Crow into cannabis policy reforms. Cannabis and hemp require complete descheduling – with reasonable regulation and taxation. Otherwise law-abiding people should be allowed to grow their own medicine at home in modest, non-commercial gardens.
Congress has an opportunity to “Win the War” by ending what Nixon started in June of 1971 with a radical change towards a rational, science-based, capitalist approach for cannabis and hemp. New research – and our collective experience – have proven cannabis is medicine and is a successful and effective harm reduction as an exit strategy from more dangerous substances – like America’s opiate, fentanyl and methamphetamine crises.
Removing cannabis as a controlled substance would legalize research and safe access for patients and veterans and provide true innovation. Importantly, allowing the industry to access banking will enable auditors to follow the money and prevent mischief. Let’s place cannabis products in the hands of small businesses that earn permits, pay taxes, I.D. for age, and create jobs. America can hand the control to regulators and business professionals who ensure cannabis products are tested for safety, taxed, sold more safely to patients and adults. At the same time, we must legalize and facilitate research for therapeutic use. This future becomes unrealistic if the taxes are too high.
The many elected officials, regulators, and policy-makers we have educated across the country about cannabis and policy reform. Thank you for your time and attention to our recommendations.
Dale Sky Jones