A House vote is expected this month on the Marijuana Opportunity Reinvestment and Expungement (MORE) Act, which would de-schedule marijuana, expunge prior convictions, impose a federal excise tax on marijuana sales, provide access to capital for small marijuana businesses, and allocate revenue to people impacted by prior drug enforcement policies. While it is unlikely to become law in the short term, it would be the most significant federal legislative development on marijuana policy in 50 years.
Federal legalization would have a massive impact on the marijuana markets in the states that currently allow sales and consumption—particularly on prices. Because legalization opens the way for interstate trade, it could revolutionize the business as brands become available nationwide and companies apply economies of scale. Currently, products must be grown, processed, sold, and consumed within state borders due to federal prohibition.
In addition, de-scheduling would grant marijuana companies access to regular banking services and end the unfair tax treatment under IRC § 280E. 280E was enacted in 1982 to deny the deduction of business expenses for illicit operators selling drugs on Schedules I and II of the Controlled Substances Act. Combined, these factors could drive down prices—according to one estimate, federal legalization could drive prices down to between $5 and $18 per ounce from approximately $250 per ounce today. Existing businesses, designed to operate under the current legal framework in states, could find it hard to compete in the event of federal legalization.
The MORE Act would impose a federal excise tax on marijuana at a rate of 5 percent. The tax would be levied ad valorem as a percentage of the retail selling price. Taxing based on retail prices means there is a taxable event with a transaction, allowing for simple valuation. Yet, while it may be simpler to levy the