The disconnect between state-level legalization and federal prohibition has left the cannabis industry pretty much “unbanked,” and there are potentially billions of dollars in play, from small business loans to retail banking services to tax payments. In California, the question of what to do with this money is one of the drivers behind a growing interest in public banks, especially at the municipal level.
But federal prohibition also represents a little windfall for the US Treasury, as Ellen Brown points out in this post on the Web of Debt blog. Businesses that are legal at all levels of government are allowed to deduct costs when filing taxes. The bar owner who buys $2000 worth of little fake Tiffany table lamps can claim a business expense; the grower who buys $2000 worth of grow lights cannot. As a result, writes Ellen, “The government makes a massive profit off the deal, snatching up to 70 percent of the proceeds of the reporting businesses, as opposed to the more typical rate of 30 percent.”
Banks that take cannabis industry money can currently be accused of money laundering, which became a crime only in 1986, and probably shouldn’t be a crime in the first place, since, as Brown writes, it hasn’t been a deterrent, and its prevention leads to “reporting requirements [that] are so burdensome and expensive that they have caused many smaller banks to sell out to larger banks or close their doors.” A decriminalization bill in Congress, H.R. 1227, the Ending Federal Marijuana Prohibition Act, sponsored by Virginia Republican Thomas Garrett and 32 cosponsors, is one fix (so far the only Massachusetts cosponsor is Rep. Michael Capuano) Another is the Secure and Fair Enforcement (SAFE) Banking Act (HR 2215 in the House, with our Reps McGovern, Capuano and Moulton co-sponsoring, S1152 in the Senate with both our Senators signed on) to “provide a safe harbor” for banks that provide financial products or services to state-legal marijuana businesses.