The first thing we should say about Senate Majority Leader Chuck Schumer’s marijuana legalization bill, which the New York Democrat finally filed today, more than a year after sharing a discussion draft, is that it will not pass. With the Senate evenly divided, Schumer needs Republican support to overcome a filibuster, which he has done little to attract. He can’t even count on unanimous support from his fellow Democrats, at least a few of whom are apt to be leery of his specific approach, if not altogether opposed to repealing the federal ban on marijuana.
What is Schumer’s approach? Last July, I criticized his 163-page discussion draft as excessively complicated, burdensome, and prescriptive. I said it was “larded with new taxes, regulations, and spending programs that seem designed to alienate Republicans who might be inclined to support a cleaner bill on federalist grounds.” The same is true of the new, supposedly improved version, but more so.
Schumer’s Cannabis Administration and Opportunity Act, which is cosponsored by Sens. Cory Booker (D–N.J.) and Ron Wyden (D–Ore.), now weighs in at 296 pages, nearly twice as long as the initial version. Whatever this is, it is not a serious attempt to build a bipartisan coalition in favor of eliminating the untenable conflict between federal marijuana prohibition and the laws of the 37 states that allow medical or recreational use of cannabis.
Start with taxes, which have been a formidable barrier to the displacement of the black market in states that set them too high. Those levies are one of the main reasons why unlicensed dealers in states like California still account for most marijuana sales. Given a decade of experience with that problem, the most prudent federal tax on cannabis products would be zero. Yet Schumer’s first draft called for a federal excise tax starting at 10 percent and rising to 25 percent by the fifth year, which would be in addition to frequently hefty state and local taxes. After a year of consultation and consideration, Schumer has retained that provision, although the rates would be half as high for manufacturers with proceeds below specified levels.*
Regulation is another factor that has made it difficult for state-licensed marijuana suppliers to compete with black-market dealers. The Cannabis Administration and Opportunity Act devotes 71 pages to new federal regulations of marijuana businesses that are already regulated by state and local governments, on top of the 52 pages dealing with taxation. In addition to giving the Treasury Department and the Bureau of Alcohol, Tobacco, Firearms, and Explosives authority over the cannabis industry, the bill would establish a Center for Cannabis Products within the Food and Drug Administration (FDA). The FDA would be charged with registering marijuana businesses, setting product standards, establishing labeling requirements, policing “adulterated” and “misbranded” products, regulating advertising and promotion, and imposing “restrictions on sale and distribution.”
In addition to mandating specific rules, such as a nationwide minimum purchase age of 21 and a ban on added flavors in cannabis vaping products, Schumer’s bill would give the FDA carte blanche to impose any regulations it deems appropriate. It says the FDA may “impose other restrictions on the sale and distribution of cannabis products, including restrictions on the access to, and the advertising and promotion of, the cannabis product,” if it “determines that such regulation would be appropriate for the protection of the public health.”
Given the FDA’s dubious sense of what protecting public health means in other areas, such as regulation of tobacco and nicotine vaping products, that is a pretty scary clause. As in those contexts, whatever arbitrary rules the agency comes up with are bound to restrict consumer choice and help perpetuate the black market.
The new version of Schumer’s bill also retains “social equity” spending programs that are apt to turn off Republicans. The Community Reinvestment Grant Program would “provide eligible entities with funds to administer services for individuals adversely impacted by the War on Drugs,” including job training, reentry services, legal aid, literacy programs, “youth recreation or mentoring programs,” and “health education programs.” The Cannabis Restorative Opportunity Program would “provide loans and technical assistance” to “assist small business concerns owned and controlled by socially and economically disadvantaged individuals.” The Equitable Licensing Grant Program would provide funds to “develop and implement equitable cannabis licensing programs that minimize barriers to cannabis licensing and employment for individuals adversely impacted by the War on Drugs.”
These programs resemble the ones described in the 91-page Marijuana Opportunity Reinvestment and Expungement (MORE) Act, the comparatively slim bill that the House passed in April. The MORE Act managed to attract just three Republicans, two fewer than voted for an earlier version of the bill that the House approved in December 2020. One of those GOP votes was cast by Rep. Matt Gaetz (R–Fla.), the MORE Act’s lone Republican cosponsor, and even he objected to the “social equity” stuff.
These programs ostensibly are aimed at ameliorating the damage done by the war on drugs. But they would be funded by taxes on cannabis consumers, who seem like the least likely group to blame for the harm caused by the federal government’s 85-year war on weed. My preference would be to make the politicians who supported that morally and empirically bankrupt crusade, who until four years ago included Schumer, pay for the reparations. Short of that, the money should come out of the general fund, on the theory that the voters who kept reelecting drug warriors like Schumer and Joe Biden deserve to foot the bill for the resulting wreckage.
Better still, rather than trying to help “small business concerns owned and controlled by socially and economically disadvantaged individuals” and entrepreneurs “adversely impacted by the War on Drugs” by throwing around taxpayer money, the government should get out of their way by reducing or eliminating the daunting obstacles created by licensing requirements, heavy regulation, and high taxes. Instead, Schumer has decided to toss more obstacles in their path, then use the proceeds raised by his new taxes to help some of them overcome those obstacles.
Having seen the meager and waning Republican support for the MORE Act, knowing that Democrats are apt to lose control of one or both houses of Congress this fall, and after thinking about it for more than year, Schumer seems to have concluded that a bill three times as long is the key to success. I guess that depends on how you define success. If the goal is to appease progressive Democrats, signal Schumer et al.’s virtue, and blame Republicans for the inevitable failure of his supposedly good-faith effort to end marijuana prohibition, he probably has the right recipe. But if the goal is to repeal unjust laws, make up for some of the harm they caused, and resolve the risk and uncertainty that plague the cannabis industry, a different approach might be better.
There are other options. The Common Sense Cannabis Reform Act, sponsored by Rep. Dave Joyce (R–Ohio), is one-twentieth as long as Schumer’s monstrosity. The States Reform Act, which Rep. Nancy Mace (R–S.C.) unveiled last fall, is more deferential to state policy choices and imposes a much lower tax that would be locked in place for 10 years, which would facilitate the transition to a legal market. The Respect State Marijuana Laws Act of 2017, sponsored by then-Rep. Dana Rohrabacher (R–Calif.), consisted of a single sentence that said the federal marijuana ban would not apply to conduct authorized by state law.
All of those bills have attracted more Republican support than the MORE Act did. Rohrabacher’s bill had 46 cosponsors, including 14 Republicans. Joyce’s bill has nine cosponsors, including five Republicans. Mace’s bill has just four cosponsors, all of them Republicans (one of whom died last March). This is hardly a GOP stampede, but it’s a start. Democrats like Schumer, by contrast, are acting like they do not care whether anyone across the aisle joins the legalization effort, even though that effort cannot succeed without cooperation from at least some Republicans.
There is some good stuff in Schumer’s bill. Descheduling marijuana would be good. So would expunging the records of marijuana offenders, freeing those who are still behind bars, banning discrimination against cannabis consumers in immigration and the distribution of public benefits, and restoring their Second Amendment rights, which would be a byproduct of descheduling marijuana. Likewise for eliminating barriers to marijuana banking and scrapping IRS rules that dramatically boost the income taxes that marijuana businesses have to pay. But you have to wonder whether at least some of this could have been accomplished by legislation that had a chance of passing in the shrinking time that Democrats still have control of Congress.
Actually, you don’t have to wonder. Legislation that would allow financial institutions to serve marijuana businesses without fear of criminal or regulatory penalties has been repeatedly approved by the House with broad, bipartisan support. But it has languished in the Senate, where Schumer has insisted that his own legislation take priority. The SAFE Banking Act, which would address a potentially lethal barrier that forces marijuana merchants to rely heavily on cash, making them ripe targets for robbery, would already be law but for Schumer’s opposition.
I would say this is a classic example of making the perfect the enemy of the good, except that Schumer’s bill, in addition to being doomed, is woefully misguided. In the name of legitimizing marijuana businesses, it hits them and their customers with new taxes and makes them subject to the whims of an agency that cannot be trusted to properly weigh costs and benefits, let alone protect the interests of consumers. In the name of replacing unauthorized dealers with licensed suppliers, it aggravates the factors that give the former an advantage over the latter.
“By failing to act,” Wyden says in a press release, “the federal government is empowering the illicit cannabis market.” That’s exactly what this bill’s taxes and regulations would do.
It may be impossible to get any sort of legalization bill, even a narrow one focused on repealing the federal marijuana ban and expunging the records of its victims, through the Senate anytime soon. Even if it passed, President Biden, given his continuing support for federal prohibition, might well veto it. But Democrats had an opportunity to pass more-modest marijuana reforms that would do some good right now, and they seem determined to squander it.
*CORRECTION: This post has been revised to note the reduced excise-tax rates for small-to-medium-sized manufacturers.
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