Thanks to a decades-old law targeting drug runners, entrepreneurs in the nascent medical marijuana industry face a unique burden: an effective federal income tax rate that can soar as high as 75%.
The hefty levy is the result of a 1982 provision to the tax code, known as 280E, that stemmed from a successful attempt by a convicted drug trafficker to claim his yacht, weapons and bribes as businesses expenses, according to 280E Reform, a group working to overturn the statute.
Enacted in the wake of that PR debacle, the rule bars those selling illegal substances from deducting related expenses on their federal income taxes.
It may have been effective against cocaine dealers and smugglers of other hard drugs, but the law now means purveyors of medical marijuana in the 18 states that have legalized the drug can’t can’t take typical things like rent or payroll as a business expense. That’s taking a heavy toll on this new field.
California’s annual medical marijuana harvest is just about done, but this year brings a new revelation sweeping the nascent industry: The feel-good herb may not, in fact, be so good for the environment.
From golden Sierra foothills to forested coastal mountains, an explosion of pseudo-legal medical marijuana farms has dramatically changed the state’s landscape over the past two years.
A rush to profit from patient demand for pot has resulted in irresponsible forest clearing, illegal stream diversions, and careless pesticide and fertilizer use that has polluted waterways and killed wildlife, state and local government officials said.
The problem has become so big and so unregulated that the California Department of Fish and Game has resorted to aerial surveys to assess its scale. It has a new high-resolution, computer-controlled camera mounted in the belly of an aircraft to help pinpoint problem marijuana areas.
In a recent flight over Nevada County, game warden Jerry Karnow was “astounded” at the increase in obvious marijuana grows visible from the air. They pop out as tightly clustered patches of vivid green plants in an otherwise sunbaked landscape, usually surrounded by tall fences.
A stocky onetime mortgage broker is speeding through Costa Mesa in an old pickup with two pounds of weed in a paper bag. He wears gray cargo shorts and flip-flops and a faded cap with the image of a marijuana leaf stitched on the front. He just smoked a joint thick as a knuckle.
Cypress Hill thumps through the cab.
I’ll hit that bong and break ya off somethin’ soon
I got ta get my props,
Cops, come and try to snatch my crops
These pigs wanna blow my house down
For a man whose apartment was raided recently and now faces felony drug possession and cultivation charges, he doesn’t seem particularly worried about the mission at hand. Ricky rants about a federal and local crackdown on medical marijuana that closed various dispensaries that he ran and forced him back to the streets, where he began as a teenager in the 1970s. (Except then, he was a dealer. Now he is a “mobile dispensary.”)
“It’s too late!” he bellows. “The genie is out of the bottle. A huge demand has been created. It’s back to the underground. Anyone who is smart is just going to take it back to the streets.”
He says he knows lots of people scurrying to the shadows as the state has struggled and failed to regulate the medical cannabis industry and local law enforcement agencies and the federal government have tried to curtail it.
It’s an easy journey to the underground, as the line between the legal and illegal markets in California has always been sketchy. The medical cannabis trade did not rise from a boardroom meeting when voters passed the medical marijuana initiative Proposition 215 in 1996. It sprouted out of the marijuana networks that already existed, with largely the same growers, middlemen and customers.
I have this fantasy where I meet with my physician. “Doctor, doctor, give me the news,” I say, “I’ve got a bad case of lovin’ you.”
She brushes her hair back. “No pill’s gonna cure your ill,” she tells me, pulling out a pen. My eyes light up. I walk out with a prescription — actually, a registration card — for marijuana.
If Question 3 on the Massachusetts ballot passes as expected this November, that may soon be the scene in doctors’ offices across the state. While cannabis may not cure heartsickness, its adherents tout it as a remedy for a vast array of maladies, a modern-day version of those old-tyme tonics. Feeling poorly could prove to be a lot of fun.
The proposed law — “for the humanitarian medical use of marijuana” — is similar to measures that have passed in 17 states and Washington, D.C. It makes legal the consumption of weed by folks who suffer from a “debilitating medical condition.” Those conditions include truly awful afflictions, such as cancer, glaucoma, AIDS, and Lou Gehrig’s disease, but also a big loophole: “other conditions as determined in writing by a qualifying patient’s physician.”
Last year I was in Los Angeles walking the Venice Beach boardwalk with my wife and daughter. Interspersed among the tattoo and T-shirt shops were the kush doctors (“kush”— originally a kind of marijuana and increasingly a synonym). Hawkers stood outside with placards detailing the wondrous benefits of weed, including “back pain” (who doesn’t have that?), “constipation” (oatmeal’s not enough), “headaches” (aspirin never seems to work), “impotence” (maybe it wasn’t just that six-pack of beer), “insomnia” (and I thought the pillow was just too hard), and “obesity” (that’s 26 percent of us, right?).
Medical marijuana advocates on Tuesday vowed to overturn Los Angeles City Council’s decision to close down all of the city’s more than 850 medical marijuana dispensaries.
“This is an outrage that the city council would think a reasonable solution to the distribution of medical marijuana would be to simply outlaw it altogether,” said Don Duncan, California Director with Americans for Safe Access (ASA). “The tens of thousands of patients harmed by this vote will not take it sitting down. We will campaign forcefully to overturn this poor decision by the council.”
The council on Tuesday voted 13-1 to ban the sale of medical marijuana in the city, but patients and caregivers will still be allowed to grow limited amounts of the drug. A spokesperson told the Huffington Post that Mayor Antonio Villaraigosa planned to sign the ban into law next week.
Proponents of the ban said that it was necessary because the city had failed to regulate the dispensaries. The city had required dispensaries to be at least 1000 feet away from schools and parks, but many pot shops flaunted those regulations.
“We need to start with a clean slate,” Councilman Mitchell Englander said. “Los Angeles has experimented with marijuana and has failed.”
The council also voted 9-5 to draft a new ordinance that would allow about 180 marijuana dispensaries to continue operating under new regulations.
Mr. Mackey - South Park Elementary
Michele Leonhart is a holdover from the Bush administration who was then deputy administrator for the DEA.
Also see: Top DEA agent won’t admit heroin more harmful than marijuana
By Eric W. Dolan - Raw Story
June 20, 2012
“Is crack worse for a person than marijuana?” Polis, who has called for an end to marijuana prohibition, asked.
“I believe all illegal drugs are bad,” Leonhart responded.
“Is methamphetamine worse for somebody’s health than marijuana?” Polis continued. “Is heroin worse for somebody’s health than marijuana?”
“Again, all drugs,” Leonhart began to say, only to be cut off by Polis.
“Yes, no, or I don’t know?” Polis said. “If you don’t know this, you can look this up. You should know this, as the chief administrator for the Drug Enforcement Agency. I’m asking a very straightforward question.”
In the first raid, Orange County sheriff’s detectives hit a Dana Point marijuana storefront, the San Clemente home of its director and a “stash house” he allegedly maintained nearby.
In the two homes, they found cash stuffed everywhere: in buckets in the garage and attic, in an Igloo cooler in a bedroom, under a mattress, on an ironing board, in a dresser. According to a search warrant affidavit filed in November, they recovered more than $700,000.
At the shop, investigators found spreadsheets showing sales over 10 months totaled $3.17 million, according to the affidavit, with $2.47 million “cash on hand.” Paperwork indicated that a silent partner, a convicted drug dealer named John M. Walker, controlled the shop and six others in Orange and Los Angeles counties.
A subsequent raid of one of Walker’s properties recovered a Beretta handgun, a shotgun, a Chinese AK-47 with a bayonet and grocery bags filled with four dozen rubber-banded bundles of cash; one of the bags contained a note with calculations totaling $99,324.
The discoveries and many others like them across California are starkly at odds with the image presented by medical marijuana providers, who label themselves as “compassionate caregivers” and say they work on slim margins, give away cannabis to the poor and comply with the law.
Many medical marijuana dispensaries have been making huge sums of money even as they claim to be nonprofit, according to court and law enforcement records, industry insiders, police and federal agents. The Times found a cash-infused retail world unlike the one pitched to voters who passed the Compassionate Use Act for “seriously ill Californians” in 1996.
As the debate over medical marijuana continues in New York and the rest of the U.S., there’s bound to be a lot of conflicting information out there.
Opponents of medical marijuana tend to argue that it is dangerous and has no therapeutic qualities. We’re not medical experts, so we’re not going to debate the intricacies of cannabis’ curative properties. But we have to wonder: Is weed really as dangerous as authorities make it out to be, since it seems a lot safer than common prescription and over-the-counter drugs?
For background, the American Council for Drug Education tells us that pot causes: “impaired perception, diminished short-term memory, loss of concentration and coordination, impaired judgement, increased risk of accidents, loss of motivation, diminished inhibitions, increased heart rate, anxiety, panic attacks, paranoia, hallucinations, damage to the respiratory, reproductive, and immune systems, increased risk of cancer, psychological dependency.”
Compare this to the listed side and overdose effects for these popular meds.
In Northern California, where the drug laws can change with the mile markers, a supplier of medical marijuana risks going one toke over the (county) line.
In California, annual retail sales of medical marijuana may be as high as $1.3 billion. But to use it, people have to grow it, and deliver it, and the laws governing the substance are anything but clear. What’s more, the feds’ official position is: no marijuana is legal. And they’re cracking down. Writer David Freed takes us on a road trip through the medical marijuana morass as part of the “Medicine on the Front Lines” report in the January-February 2012 issue of Miller-McCune magazine.
We’re riding south out of Northern California’s Humboldt County, pushing 75 miles an hour along the 101 freeway in a tomato-red Toyota Matrix hatchback with a tiny quartz figurine of Guanyin, the Chinese goddess of compassion, glued to the dashboard. Stashed in the trunk, in a cheap plastic gym bag, are two pounds of what many would say is some of the best marijuana in America.
The Toyota’s owner and driver is “Mr. X.” (His wife asked that his real name not be used for fear that federal authorities, who recently began cracking down on the medical cannabis industry, might target him.) He’s a bespectacled, sandals-wearing 57-year-old college graduate whose day job is inspecting properties for insurance and mortgage brokers. He also heads the Tea House Collective, an Internet-based nonprofit comprising 20 small-scale, environmentally conscious Humboldt County marijuana farmers who proudly grow their pot organically and outdoors, unlike many farmers whose crops are cultivated indoors, under high-intensity lamps that burn 24/7.
EVEN IF I wanted to get marijuana, I wouldn’t know where to start looking. That predicament should not be true for the terminally ill. But the legal limbo regarding medical marijuana has left many state governments deciding between promoting patient care and exposing people to prosecution. Finally, the states are pushing back.
The debate over medical marijuana isn’t about the drug war. It is about where the issue fits in the federal bureaucracy. Location is as important for government agencies as for real estate. The Forestry Service is in the Department of Agriculture, not Interior; the Immigration and Customs Enforcement agency is within the Department of Homeland Security, not Commerce. Where an issue is handled is a reflection of the government’s priorities and policies.
Decisions about marijuana’s medical benefits are made by the Justice Department’s Drug Enforcement Agency; decisions about whether to prosecute those who violate federal law against marijuana use reside with local US attorneys’ offices; decisions about whether there can be more medical studies are made by the National Institute on Drug Abuse, whose name gives you a sense of its priorities.
Medical marjiuana is governed by drug enforcers and prosecutors. This simple fact has created a legal fight over legitimate state attempts to administer this different kind of pain relief - the only one that, some cancer patients say, relieves their suffering.
Any column praising a marijuana effort should include the usual caveats about not inhaling or “I was once at a party where I saw it.” But, this is no reefer madness. The state legislative effort to promote medical marijuana was backed by George Soros’s Open Society Institute. Presently, 16 states and the District of Columbia allow medical marijuana; another 10 are considering it. Close to one-third of all Americans live in states that authorize its use. Such crazy partiers as the American Medical Association, the National Academy of Sciences Institute of Medicine, and the American College of Physicians recognize the medical benefits of marijuana or, more cautiously, cannabis.
Nonetheless, even in the states that allow medical marijuana, federal authorities keep bringing cases against medical marijuana distributors, their clients, and the landlords that lease to them. Some may deserve it and just be fronts for recreational use. But because federal and state laws overlap, the only assurance the Justice Department can give to state supporters of medical marijuana is a promise that prosecutions against caregivers or patients are a low priority. That sentiment was reiterated by Attorney General Eric Holder just last week.
Assurances are not legally binding. This leaves governors in a terrible quandary about how, and whether, to proceed with laws allowing the distribution of marijuana for medical use. In Rhode Island, before Governor Lincoln Chafee ever enforced a law allowing distribution by “compassion centers,” he received a letter from the state’s US attorney to “ensure that there is no confusion.” With a passing reference to Holder’s priorities, the letter warns that Justice will vigorously enforce laws against the manufacture, distribution, and possession of marijuana “even if such activities are permitted under state law.”
Chafee and Washington Governor Christine Gregoire, who received a similar letter, are now asking the federal government to change marijuana from a Schedule I drug, a status it shares with heroin, LSD, and mescaline, to Schedule II. Schedule II drugs, such as cocaine, morphine, and opium, are equally addictive but can also be dispensed for medical use.