TOPIC

Full Legalization

In today's political climate, we believe the only realistic way to pass federal legalization is through the STATES 2.0 (only 15 pages) proposal or a similar plan.

A much larger bill, such as the Cannabis Administration and Opportunity Act (CAOA), is unlikely to come close to the 60 votes needed to pass the Senate. At nearly 300 pages, the bill includes many provisions on social equity and taxes that make it difficult to build broad political support.

Social equity is an important goal. But the first step toward social equity is legalization itself. Ending federal criminal penalties, giving cannabis businesses access to banks, and allowing them to use programs offered by the Small Business Administration would all create meaningful opportunities for small businesses and communities that have been harmed by marijuana prohibition.

Taxes are also important. Federal taxes should be low enough that states can impose their own taxes without making legal marijuana too expensive. High taxes lead to an expansion of the black market. We believe a balanced approach makes the most sense—no more than a 10% federal tax (5% would be best) and a 10% state tax (again, 5% would be best). If taxes become too high, many consumers will continue buying from the illegal market because the prices are lower.

The CAOA proposes to increase the federal tax to 25% after five years. In our view, that tax rate is too high and shows that the policy makers are not serious about reform. That tax rate leaves no room for state taxes and will make it harder for legal businesses to compete with the illegal market.

Partial Fixes

If Democrats control the White House, the House of Representatives, and the Senate in 2029, Congress should immediately pass the SAFE Banking Act.

Some lawmakers, including Senator Schumer (a co-sponsor of the CAOA) have argued that cannabis banking reform should wait until Congress passes full legalization. We disagree. The SAFE Banking Act would provide important social equity benefits on its own.

Large cannabis companies often have the resources to find banking services despite federal restrictions. Smaller businesses and many social equity license holders do not. Giving those businesses access to banks would make it easier to grow, hire employees, and compete in the legal market. For that reason, we believe SAFE Banking is itself an important social equity reform.