Potency Caps and THC-Based Tax Rates Attract Lawmakers, Anger Legalization Activists

The latest round of institutional intrusion into the legal weed business comes, as it typically does, in the form of concern. From Colorado to Illinois to New York, legislators and regulators are focusing on high-THC products, with plans to either tax pot sales based on potency, or institute THC caps, banning any products that test too high for the psychoactive compound.

Currently, Illinois is the only legal weed state with a tax scale that increases concurrent with product potency. As New York looks to construct its own legal weed laws, the leading proposition has included a similar tax structure, with Benzinga noting that “the bill expects to include a 13% sales tax with an excise tax of up to 3 cents per milligram of THC content.”

Breaking those numbers down to cannabis terms, a gram of weed that tests at 25% THC contains 250 milligrams of THC. For a standard eighth-ounce package, that’s 875 milligrams of THC. At 3 cents per milligram, that’s more than $25 in just excise taxes on a standard eighth. In some states, you can get the same quantity of bud for the proposed tax bill alone. Opponents of THC-based taxes argue that the rules would push consumers into the black market and make it difficult for local businesses to succeed.

“It’s pretty difficult to be able to bring high-quality products to market while cutting costs because you can’t really cut costs when it comes to taxation,” Morgan Fox, media relations director for the National Cannabis Industry Association, told Benzinga. “It’s something that they should regularly look at and listen to stakeholders involved, particularly producers and retailers.”

That disconnect between regulators and cannabis operators and users is also coming to a head in Colorado, Vermont, and Virginia, where regulators are suggesting an outright ban on cannabis products that contain high quantities of THC. A similar proposal made waves in Florida’s medical marijuana program but was not adopted into law.

In Colorado, State Representative Yadira Caraveo has written a draft of a bill that would restrict cannabis products to 15% THC or lower. Rep. Caraveo has not formally introduced the bill yet but has spoken about her reasons for crafting the proposal, namely concern for adolescent cannabis users.

“In many instances, they’re getting their hands on products they should really not be getting their hands-on,” she said. “I’m not talking about the flower or edibles. I’m talking about products such as dabbing and wax that are produced, a lot of times, with butane or other carcinogens that are very, very concentrated.”

Rep. Caraveo’s concerns about underage marijuana consumers – who are already banned by law from consuming high-THC products – simply do not match with the reality of how marijuana is produced, sold, and used.

First, high-THC cannabis has been consumed regularly for centuries. Prohibitionists routinely argue that today’s weed is “not your grandpa’s reefer” because most flower now tests at or above 20% THC. But what those critics fail to remember, is that concentrated hashish has been the most commonly used form of cannabis across the globe for hundreds and hundreds of years.

Next, the idea that you could simply outlaw high-THC cannabis and watch it disappear from your state is nothing more than a pipe dream. When some cannabis vape cartridge users developed a mysterious lung illness in 2019, the ailment was quickly tied to a cutting agent used largely by unregulated black market producers. By adding a THC percentage limit in legal dispensaries, regulators would simply push those products to the black market, where underage users are already purchasing their cannabis products.

Lastly, as federal prohibition pits state-legal cannabis programs against each other to establish thriving local industries before nationwide legalization changes the industry, any effort to restrict THC-rich products would likely cause a brain drain, with the best and brightest breeders, growers, and distributors traditionally opting for open and encouraging legal weed states like California and even Oklahoma. For states that often highlight the revenue possibilities from legal weed, pushing away growers is not a good long-term strategy.

“Prohibiting the production and sale of cannabis products above some arbitrary potency level is not an appropriate action for Colorado lawmakers to take,” Paul Armentano, the deputy director of NORML, wrote in Westword. “Consumer demand for these products is not going to go away, and re-criminalizing them will only push this consumer base to seek out similar products in the unregulated illicit market.”

Today’s cannabis may not be your grandpop’s pot, but returning to that era’s reefer madness mindset in a post-legalization world won’t magically return the marijuana industry to the days of 10% THC schwag, and the sooner regulators realize that, the better.