If the Drug Enforcement Administration (DEA) decides not to move forward with marijuana rescheduling, many small and minority-owned cannabis businesses will face closures, resulting in significant economic losses and unemployment, according to a new industry report. However, enacting the reform could grow the sector, potentially adding more than 50,000 jobs by 2030.
The Minority Cannabis Business Association (MCBA) included data from a report conducted by Whitney Economics in a public comment submitted to DEA. The submission was made ahead of Monday’s deadline for stakeholders to weigh in on cannabis rescheduling, providing a detailed economic analysis as requested by the agency.
The MCBA survey of 206 marijuana licensees across 32 states revealed troubling trends in the cannabis industry. Only 27 percent of respondents reported profitability, while 41 percent were breaking even and 36 percent were losing money. More than 80 percent of businesses cited finances and tax issues as major problems.
MCBA explained that rescheduling marijuana from Schedule I to Schedule III of the Controlled Substances Act (CSA), as proposed by the Justice Department, would alleviate many financial challenges. This change would allow the cannabis sector to take federal tax deductions currently barred under an IRS code known as 280E. The report states that the reform would positively impact all 42,125 state-issued marijuana licenses, especially benefiting small and minority-owned businesses by allowing them to deduct ordinary business expenses.
The report emphasized that without tax reform, many small and minority cannabis licensees will go out of business, resulting in economic losses and unemployment. While descheduling marijuana entirely would offer the fullest economic and criminal justice benefits, the MCBA highlighted the substantial benefits of even a modest rescheduling move.
With the 280E restriction, the marijuana industry has paid an estimated $2.2 billion in tax overpayments compared to other sectors. Rescheduling would lead to significant tax savings and increased profitability for marijuana businesses, including small and minority-owned ones. It would also enable regulated businesses to compete more effectively with the unregulated market.
Moving cannabis to Schedule III could increase employment opportunities, adding 55,500 jobs by 2030. This growth would contribute up to $2.7 billion in additional wages and $5.6 billion in new economic activity by that time.
The public comment directly responds to the Justice Department’s request in the Federal Register for input on the “unique economic impacts” of marijuana rescheduling, considering the multi-billion dollar industry created by state-level legalization.
In another public comment on the proposed rule, a group representing state-level cannabis regulators called on the Biden administration and DEA Administrator Anne Milgram to clarify how rescheduling would affect federal enforcement priorities and interactions with jurisdictions regulating cannabis products.
Meanwhile, Sen. Bill Cassidy (R-LA) criticized the Biden administration for allegedly refusing to brief Congress on its plans and justification for rescheduling marijuana, suggesting the policy change is politically motivated. Additionally, 25 GOP congressional lawmakers opposed the rescheduling plan, claiming the recommendation was based on politics rather than science.
Bipartisan lawmakers are also seeking to remove a section of a spending bill that would block the Justice Department from rescheduling marijuana. GOP senators have separately attempted to block the administration from rescheduling cannabis through a standalone bill, which has not received a hearing or vote.
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