Cannabis Administration Act
Cannabis Administration Act

25% Federal Marijuana Tax, Not Enough Votes, Blocking the Safe Banking Act - Schumer's Legalization Stumbles Out of the Gate

The Cannabis Administration and Opportunity Act falls flat with the marijuana industry

Posted by:
Thom Baccus on Friday Jul 16, 2021

25% Federal Marijuana Tax, Interstate Commerce, Booker is Going to Block the Safe Banking Act, and Schumer Does Not Have Enough Votes

caoa bill review

What we learned on the first real attempt to federally legalize marijuana in America


Senator Shumer and Senator Booker have released their first attempt at Federal marijuana legalization called the Cannabis Administration and Opportunity Act, weighing in at 163 pages.  After reading the reviews and the document, I wanted to give the biggest 4 takeaways that you should be thinking about and discussing online.  Marijuana Moment does a great job breaking the bill down here, so you don’t have to read the full 163 pages.


25% Federal Tax Rate in Addition to Your State Taxes

Well, so much for killing the black market. I often wonder if anyone who writes these bills talk to anyone actually in the industry about what they are putting on paper.  By introducing a 15% tax rate that rises to 25% in 5 years you are guaranteeing a robust national black market for weed. That Federal tax is in addition to your state taxes, which range anywhere from 20% to 50% right now. Granted there are some tax credit breaks for sellers that have revenue under $20 million as a way to protect small businesses, but still, imagine going in to buy $100 in edibles and paying $42 to the state of California and $25 to the Federal government?  So, in 2026 you will be shelling out $167 for your $100 edibles? Hello, black market!

One guess as to why Schumer and Booker put these tax numbers in the bill was to attract Republicans and moderate Democrats.  With those numbers baked in they can now try to get enough votes to pass the bill with spreadsheets and charts showing billions upon billions in tax revenue coming in by 2026.  No one really thinks consumers are going to pay a cumulative 60% tax rate on their cannabis. Start high to create big tax revenue numbers in order to get the bill passed, then work on lowering them or extending out the time frame by 10 years.  How much margin do they think there is in cannabis, anyway?  Yes, margins are big and fat now with limited licenses and Federal prohibition, but what do you think happens to margins with Federal legalization?  As Jeff Bezos ironically said, “Your margins are my opportunity.”  Hello Amazon and hello Black Market!


Interstate Commerce is Allowed

As frequent readers of know, we have been saying any Federal law would have to “grandfather” in state licenses that are in good standing and would have to allow business in one legal state to be able to ship and sell to another legal state. We also predicted that you would not be able to ship from a legal state to a non-legal state, only common sense on that one.  The bill does include this detail, as it would allow cannabis businesses to now ship and sell products to legal retail stores around the country.

As Marijuana Moment says:

But it’s important to keep in mind that this legislation—like other federal legalization bills moving through Congress—would not make it so marijuana is legal in every state. The proposal specifically preserves the right of states to maintain prohibition if they way. It stipulates, for example, that shipping marijuana into a state where the plant is prohibited would still be federally illegal.

However, the measure would make it clear that states can’t stop businesses from transporting cannabis products across their borders to other states where the plant is permitted.

That is huge GOOD news for the industry as this, as well as banking, has been holding back the industry like dam holding a flood back. If companies can ship products and wholesale around to other legal states, it will create a much more efficient market, lower prices, hurt black markets, and allow the consumer better choices.


Senator Booker, Co-Sponsor of the Bill, says he will block the Safe Banking Act Until This Bill is Passed

This is bad news for the marijuana industry.  Senator Booker has vowed to block the Safe Banking Act, until this bill, or some form of it, is passed. Why on earth would Senator Booker block a helpful marijuana bill Co-Sponsored by his Vice President? Booker is worried that the Safe Banking Act will just increase market share for the large, rich, and mostly White, cannabis corporations that are publicly traded and privately held. Booker wants to see social justice in the form of social equity agreements and social empowerment applicants and companies get help first, not just the big money corporations.  While we totally agree that social equity and economic empowerment need to be a big part of the future of legal marijuana, blocking one good bill while you wait for a long shot to come in is “winning the battle, but losing the war”.

For one, the end customer doesn’t really care deep down whether dispensaries can have bank accounts and run credit cards.  They know they just have to pay in cash for weed, inconvenient, but it is what it is. Blocking all cannabis companies from having bank accounts, credit card machines, and access to the US wire system hurts all cannabis companies, not just the big ones. This is just one of the many factors holding back SE and EE applicants for marijuana licenses in many states. Sometimes you have to swallow a little vinegar with you water, and yes, banking would be opened up for big corporations, it would also be open up for thousands of small cannabis businesses.  States have SE and EE programs, let them implement them as they are doing now.  Win the war, get legalization, SE and EE are already happening and will continue to happen with the Safe Banking Act.  Don’t cut off your nose despite your face. Support Safe Banking 100% and support this bill 100%.  By not supporting the Safe Banking Act you are hurting 5 big companies and trying to hold them hostage?  By holding up the Safe Banking Act, who is Booker turning the cannabis into for a fight? Itself?

With this CAOA not having enough votes to pass, not supporting the actual one that might pass is a bad idea and could push cannabis legalization backwards if both fail.

Senator Schumer introduced the Bill knowing he does not have the votes to pass it

Senator Schumer knows he does not have the votes to get the Bill passed, and the President has been lukewarm at best in his response to this piece of legislation.  So why would Senator Schumer introduce a bill that he knows he can’t get passed right now?  One, he has openly said he is looking to negotiate with “the other side” on what they like and don’t like, about the bill.  He is penning this bill as an open letter to the 10 Republican votes he needs, and some hesitant Democratic Senators. Second, it pushes pressure on the “No” voters.  Over 70% of the American public support some form of marijuana legalization and over 40 states now get tax money from the sale of cannabis, so Schumer knows he has the people on his side.  He is going to ramp up public pressure to call and write the “No” votes to change their vote. Third, he gets all the credit for trying to legalize cannabis and gets to paint the Republican as the bad guys who are against legal medicine, social equity, and economic empowerment. Is a “No” vote now akin to supporting the failed War on Drugs and not wanting to support minority communities?  You can see how this can be framed as an anti-capitalist, racist, stuck in 1954 White America, thing if you don’t vote for the Cannabis Administration and Opportunity Act, right?



While not a perfect legalization bill by far, it is a FEDERAL LEGALIZATION BILL, so let’s take our own advice and win the war and lose a few battles. This is great news and it is the first time a majority speaker of the House has ever introduced a cannabis legalization bill. He may not get it passed, but he did put it out there.  The Safe Banking Act, while it does not legalize cannabis, gives legal businesses access to banks and credit cards.  Both bills are extremely important and should get the cannabis industries full support. Will the Cannabis Administration and Opportunity Act pass? Probably not, but it will set the groundwork and lay a plan for Federal legalization. It will also create a rallying point in the next elections for the Senate and House as to “he/she voted against cannabis legalization last year, vote for me, instead!”.  Right now, Senator Schumer would basically need ten Republicans and one Democrat who said they would not support this bill if it was introduced to magically change their mind.  Not completely nuts, but a major longshot to say the least.  The fact that the President does not support this bill or Federal legalization is not helping the Democrats or the cannabis cause right now.  Strong support from the White House would help change a few minds and maybe get enough business pressure on Republicans to get them to vote for some form of this bill.



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