Opposition to cannabis legalization typically comes from the conservative side. When Republican politicians decide to push the barrier and push for legal weed, they support their case with the business side of things. Ultimately, legal cannabis can be a big boost to state economies, most notably when it comes to tax revenue. However, federal prohibition puts extra pressure on state-legal marijuana businesses, which is why one GOP congressman wants to help business sell marijuana.
On his Facebook page, Representative Mark Sanford, a republican representing the First District of South Carolina since 2013, announce he had co-sponsored the Small Busniess Tax Equity Act of 2017. The act is a major piece of legislation that would significantly impact marijuana sales in states with legal weed businesses. So what does the Tax Equity Act entail? And how will it help marijuana businesses make a profit?
In 1982, Congress passed a measure which added Section 280E to the U.S tax code. The law prohibited any business that “trafficked in controlled substances” from taking advantage of the many deduction and credits available to every other business. Said deductions would include anything from overhead costs, employee-related expenses, and usual business activity. The breaks were designed to support a small business owner, any typical company would expect to pay roughly 30 percent tax rate.
However, state-legal weed businesses traffic in what the federal government considers a “Schedule I” controlled substance, so they are not eligible for the benefits. As a result, weed businesses can pay effective tax rates that are as high as 70 percent. These high tax rates make it difficult to keep a legal cannabis company afloat.
Rep. Mark Sanford’s goal is to cut taxes for businesses and reduce federal overreach, a mantra he has embraced on behalf of legal weed businesses. 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. Sanford is rallying for other congresspeople to support the Tax Equity Act, whether or not they support legal cannabis. Sanford feels as though a person’s view on weed, should not distract from the GOP’s commitment to shrinking the federal government.
Sanford Stated, “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.”
Giving marijuana businesses access to crucial tax breaks can help them stay in the black. Through his actions, Rep. Sanford will help sell businesses sell weed.