Opposition to cannabis legalization often comes from the Republican side of the aisle. And when Republican politicians decide to break ranks and advocate for legal weed, they usually make their case from the business side of things. After all, legal cannabis can be a serious boost to state economies, particularly when it comes to tax revenue. But federal prohibition puts extra pressure on state-legal marijuana businesses. And that’s why one GOP congressman wants to help businesses sell weed.
In a recent Facebook post, Representative Mark Sanford, a Republican representing the First District of South Carolina since 2013, announced that he had co-sponsored the Small Business Tax Equity Act of 2017.
The bill is a major piece of legislation that would significantly impact marijuana sales in states with legal weed businesses.
So what exactly does the Tax Equity Act propose to change? And how will it help weed businesses turn a profit?
Back in 1982, Congress easily passed a measure adding Section 280E to the U.S. tax code. Essentially, the law prohibited any business that “trafficked in controlled substances” from taking advantage of the many deductions and credits available to every other business.
These deductions include things like overhead costs, employee-related expenses and usual business stuff.
As a result of all those breaks, designed to support small business owners, a typical company could expect to pay a roughly 30 percent tax rate.
But state-legal weed businesses do indeed traffic in what the federal government still considers a “Schedule I” controlled substance. So they can’t claim those deductions.
As a result, weed businesses can pay effective tax rates that are as high as 70 percent.
Suffice to say, these sky-high tax rates make it difficult to keep a legal cannabis company afloat.
Cut taxes for businesses and reduce federal overreach—a mantra for the GOP if there ever was one. And one that Rep. Mark Sanford (SC–R) has embraced on behalf of legal weed businesses.
Indeed, the crux of Sanford’s co-sponsored bill, the Small Business Tax Equity Act of 2017, is to make weed businesses eligible for the same deductions offered to all other legal businesses, regardless of federal laws pertaining to the products.
“The principle here is simple,” Sanford wrote in his Monday Facebook announcement. “If a state makes something legal […], it ought to be treated in par and equally with other legal businesses in the state.”
Furthermore, Sanford is asking other congresspeople to support the Tax Equity Act, whether or not they support legal cannabis. One’s views on weed, he feels, shouldn’t distract from the GOP’s commitment to shrinking the federal government.
“Whether you’re for or against the medical use of marijuana matters less than whether we really subscribe and adhere to the founders’ belief in federalism,” Sanford went on to explain. “In short, even with ideas we may not like, it’s important to adhere to federalism if you believe in limiting the size of our federal government.”
It is certainly true that giving weed businesses access to crucial tax deductions can help them stay in the black. Sanford’s bill would also address the apparent hypocrisy of a federal government collecting extra tax revenue from the sales of a substance it prohibits.
And that’s how this GOP congressman is working to help small businesses sell weed.
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