See Me, Feel Me, Touch Me, Tax Me

In a post on Wednesday, When Taxpayers Welcome Taxes, Steven
Levitt discussed this CNN report
on Oakland’s new “pot tax”:

OAKLAND, California (CNN) — Oakland's
bid to become the first U.S. city to tax proceeds on medical marijuana passed
Tuesday by a landslide vote. About 80 percent of voters chose to impose the tax
on Oakland's medical marijuana facilities, according to the Alameda County
Registrar of Voters.

Interestingly, Steve DeAngelo, a leader of one of the city's
cannabis clubs, helped lead the effort to get the tax approved, despite the
fact that his business will now have to pay more than $350,000 from the new tax
next year. Oakland's City Council supported the tax.  Says councilwoman Rebecca Kaplan, “Given that the medical
cannabis dispensaries are something that was legalized in California, why not
have revenue from it?”  There was
no formal opposition to the new tax, although some anti-drug groups believe
“that the tax sends the wrong message.”

Levitt asks (and answers):

Why is DeAngelo so eager to pay these
taxes? I’m almost certain it is not because he is an altruist.

The real answer, I suspect, is that he
is generating $19 million a year in revenues selling in a market (medical
marijuana) that is barely legal. And DeAngelo probably suspects that taxation
will increase the likelihood that his business remains legal, for two reasons.

The first reason is that taxing a good
implicitly says that the government acknowledges the legitimacy of the
activity; we tax legitimate goods, and we fine and imprison those who sell
illegitimate goods. Second, while experts suggest that marijuana itself is not
very addictive, new sources of tax revenue surely are addictive! So once the
revenues start coming, government won’t want to turn off the spigot.

Although Al
Roth beat me to the punch, I was immediately reminded of Nevada SB369,
which would have imposed a tax on the legal Nevada brothel industry.  Unlike the Oakland pot tax, SB 369 died this
spring after a 3-4
vote in the state’s Senate Taxation Committee, despite support from many
sex workers and the brothel industry. 

The arguments on both sides were similar to those raised in
connection with Oakland’s pot tax. 
Noting the state’s desperate fiscal situation, Senate Taxation Committee
Chairman Bob Coffin supported
the tax.  Coffin argued that,
although the brothel industry welcomed the tax and the idea of generating tax
revenue from the brothels had been discussed for years, “people weren’t willing
to get their hand’s dirty.”  “I
don't know why people won't recognize that we have a legal industry,” said
Coffin.  “I'm willing to go in and
do the dirty work if no one else will.”

As reported by MSNBC:

The bordellos are practically begging
the state of Nevada to tax them, hoping the extra revenue for schools, parks
and health care will endear them to the public and give them more political
security and, ultimately, more business.

But the politicians are not interested.

The costs of societal and legal pretense surrounding the
existence of many markets in which women are the primary suppliers is a topic
about which I’ve written before (see here, here, and
here) and
to which I’ll return again this fall for a symposium in the North Carolina Law
Review – assuming that I can stop blogging long enough to finish this draft . .
.

For those needing a reminder on
the source of this post’s title:  Download 10 See Me, Feel Me