Marijuana Cash-Only Business in Colorado

 

Owing to recent legalization, recreational marijuana use is a growth industry in both Colorado and Washington State. In Colorado alone, annual turnover is projected to reach $10.2 billion by 2018. Yet owing to archaic federal banking laws, it remains a cash-only industry.

A BBC Business report gives the example of Pinkhouse Blooms. A chain of five marijuana dispensaries grossing over $100,000 a day, they remain a cash-only business. No Denver bank will give him a checking account. As Avinash Tharoor reports in the Huffington Post, the FBI is pursuing Bank of America, JP Morgan and HSBC for laundering billions of dollars of Mexican cartel money. Meanwhile they thumb their nose at legal marijuana merchants.

Relying on armored cars and armed security guards, owner Elliott Klug uses cash to pay his suppliers and employees – as well as $35,000 in monthly sales tax and $45,000 in state licensing fees.

Federal Laws Encourage Money Laundering

Although the Obama administration has directed federal attorneys not to prosecute marijuana users, growers, and distributors in states which have legalized marijuana (for recreational and/or medical use), banks that do business with marijuana producers and distributors remain in legal limbo. At present all federally insured banks that accept deposits from “drug dealers” are subject to suspension of their banking license and criminal prosecution under federal drug racketeering laws.

Both the Bank Secrecy Act and the Anti-Money Laundering Act were enacted to prevent money laundering. Ironically they do just the opposite in the eleven states with legal marijuana dispensaries. Cash-only businesses are notoriously susceptible to both tax evasion and money laundering. Without bank records, there’s no audit trail. Federal and state authorities only have the owner’s say-so for the amount of business they take in.

In February the Obama administration issued “guidance” that the Justice Department and FinCEN (under the Treasury Department) is “unlikely” to prosecute banks provided they meeting specified conditions, including reporting suspicious criminal activity to law enforcement. Unfortunately this “guidance” offers no real legal immunity, as all marijuana use is still illegal under federal law.

In 2011 Congressman Jared Polis (D-Colorado) tried to legislate immunity for banks doing business with medical marijuana dispensaries with his proposed Small Business Banking Improvement. The bill died in committee, and it doesn’t appear that similar legislation is forthcoming any time soon. Not if a myopic press release by Senators Charles Grassley and Diane Feinstein, as co-chairs of the Senate Caucus on International Narcotics Control, is anything to go by.

Their joint letter and press release castigate the Obama administration for “assisting those businesses that seek to inject the proceeds of criminal activity into the nation’s financial system.”

Makes you wonder when Feinstein was last in California, the state she supposedly represents. California was the very first state to set up legal marijuana dispensaries in 1996 when voters passed an initiative legalizing marijuana use for medical purposes.

Big Boost from State Marijuana Tax

Both Colorado and Washington have suffered major budget difficulties since the 2008 downturn. And in both states, legalizing (and taxing) recreational marijuana use promises a major cash injection for state coffers.

In Colorado, retailers pay a 10% marijuana tax in addition to 2.9% general sales tax to the state. County and city authorities may charge additional tax. In Denver, for example, the total sales tax can reach as much as 21%. This is in addition to a 15% excise tax charged on marijuana as it leaves the cultivation facility.

Washington charges a 25% excise tax on sales at each transaction level: from the producer to the processor, the processor to the retailer and the retailer to the customer. This is in addition to B&O (Business and Occupations) and sales tax all businesses pay. As of July 8, producers will be licensed by the Washington State Liquor Control Board to sell directly to consumers.

Small Local Credit Unions Do Business with Washington Dispensaries

In Washington State, two brave local (federally insured) credit unions (Salal Credit Union and Numerica Credit Union) have announced their intention to do business with marijuana dispensaries when they begin operation July 8. Unlike the big boys, they aren’t laundering money for the Mexican cartels or, presumably, speculating on derivatives and food futures

photo credit: Wikimedia Commons

Cross posted at Veterans Today

A Film About Economic Relocalization

The Economics of Happiness

Helena Norberg-Hodge (2012)

Film Review

The term “economic relocalization” describes a global movement of loosely knit grassroots networks working to strengthen local and regional economies and systems of food and energy production. Most of the last eight years of my life have been focused on grassroots relocalization activities.

What I like best about Economics of Happiness is learning I am part of a global movement. I hate the title, which suggests the film concerns some kind of airy-fairy New Age spirituality. It doesn’t.

The 2011 film, narrated by Helena Norberg Hodge, is based on her 1991 book Ancient Futures: Learning from Ladakh and her 1993 film by the same name. The book and both films draw their inspiration from the nearly forty years Norberg-Hodge spent living and working in Ladakh, a small Himalayan region in the India-controlled (and disputed) state of Jammu and Kashmir. Economics of Happiness includes local footage from the 1993 film, as well as substantial documentary footage relating to the world’s current economic crisis and impending ecological crisis (stemming from catastrophic climate change and mass extinctions).

The Psychological Devastation of Globalization

The film opens with the same narrative Norberg-Hodge recounts in her earlier Ancient Futures film. We are shown the “before” image of Ladakh, a rich thriving culture in which residents live in large spacious homes, enjoy generous leisure time and have no concept of unemployment. Then we have the “after” image where, thanks to globalization, cheap (government subsidized) food, fuel and consumer goods have flooded the region and destroyed residents’ traditional livelihoods. Previously pristine communities face rising levels of air and water pollution, while Ladakhi teenagers face continual bombardment with pro-consumption messages.

It’s heartbreaking to see the psychological effect of all this. Most young Ladakhi have come to regard themselves as backwards and poor, while the communities they live in face rising racial tensions, juvenile delinquency and epidemic levels of major depression.

The Destructive Nature of Urbanization

The film goes on to sketch the mechanics of globalization, stressing the deregulation that forces small self-contained regions like Ladakh to open their markets to foreign goods, which quickly supplant local products. Norberg-Hodge paints an even uglier picture of urbanization, an inevitable result of forcing millions of small formers off their land. She stresses that city living is vastly more resource intensive than rural lifestyles. All city residents rely on food, energy and water transported from some distant source. They burn up additional fossil fuels transferring their waste as far away as possible. She stresses that most city residents go along with the massive ecological and social devastation they produce because it occurs on the other side of the world. Thus they don’t see it.

Rebuilding Local Communities and Economies

The solutions Norberg-Hodge offers for all these problems are similar to those proposed by an increasing number of dissident (non Wall Street) economists. First and foremost we must acknowledge that humankind has exceeded the earth’s carrying capacity – that the corporate drive for continual economic growth must end. Secondly people of conscience need to opt out of the corporate economy to facilitate the creation of more efficient and environmentally accountable regional and local economies.

Norberg-Hodge also sees the process of rebuilding local communities as a remedy for what she describes as the “crisis of the human spirit.” She blames this pervasive spiritual crisis on the demise of community engagement that has accompanied globalization and urbanization.  Although the process is most striking in remote regions like Ladakh, where it occurred suddenly, nowhere in the developed or developing world has escaped it.

The film ends on an extremely optimistic note, with numerous examples of international and community organizations supporting people in reclaiming their lives from multinational corporations.

Economics of Happiness can be rented (and watched online) from the filmmakers for $5