At its core, the crime of money laundering occurs when illegally obtained money is combined with legally obtained “clean” money in order to disguise its origins and allow it to enter the legal economy. . If there is a more precise definition of what happens when tax revenue from illegal cannabis sales at the federal level is combined with state coffers, I would love to hear it. Cannabis sales are taxed at around 30% in many regulated markets. These taxes are collected and used by states to fund a range of public services, from education to transportation to public safety. So while the cannabis industry is crippled due to IRS 280E tax code and lack of access to federal banking, traditional debt instruments or US stock markets, state governors are essentially laundering regulated sales of cannabis. How is it possible?
When you consider current law, state governments taxing these regulated markets are no different than a cartel conducting money laundering on a scale that has never been seen – let alone endorsed – by any government entity. in this country. This is what is patently ridiculous about the current system and why very little makes sense.
Consider the scale of the crime: According to data analytics firm Headset, cannabis sales are expected to top $30 billion in 2022. As new markets come online, that number will continue to multiply, so that the amount of annual cannabis tax revenue laundered by the state coffers is in the billions of dollars per year, every year. Moreover, it is tax revenue generated by businesses that the federal government does not recognize as legal and does not allow to operate alongside their “legitimate” counterparts who enjoy access to banking and financial services, as well as many tax advantages.
The current system is not sustainable in the long term. It also helps to perpetuate the disparities of the failed Drug War, where rules and enforcement only apply to some, while a privileged class benefits. The lack of federal banking and tax reform also contributes to maintaining and growing the illicit market in many states. And as cannabis tax revenues grow, many states are becoming dependent on a seriously flawed revenue stream to fund essential government services. Remember that many of these same states were operating in the red before the cannabis cash cow arrived.
As states trumpet the tax gains they are enjoying due to record cannabis sales the previous year, governors should take heed. No industry can survive under conditions that maintain ridiculous levels of inequity and inconsistency.
Now more than ever, heads of state must end the hypocrisy and push for safe banking reforms.
Joe Caltabiano is CEO of Choice Consolidation in Chicago. Prior to starting Choice, Caltabiano co-founded Chicago-based Cresco Laboratories and was previously senior vice president of mortgage banking at Chicago-based Guaranteed Rate.