PD Editorial: Let cannabis businesses open bank accounts
Ordinarily, Congress would respond quickly if told a group of business owners is forced to deliver hundreds of millions of dollars in tax payments in duffel bags and briefcases stuffed with cash because they lack access to financial services. But when the business owners in question are engaged in the legal sale of marijuana, lawmakers seem content to keep the signs on bank doors flipped to “closed.”
On Capitol Hill this week, California Treasurer Fiona Ma and others in government and the financial and pot industries renewed a commonsense argument for opening bank vaults to cannabis cash. It’s familiar plea that, so far, has languished in a standoff between the federal government and the growing number of states that allow the medicinal or recreational use of marijuana.
“One of the surest ways of bringing a business out of the shadows and collecting lawfully imposed taxes is to promote access to the economy’s banking and payments systems,” Ma told members of a House Financial Services subcommittee. “Yet federally regulated banks and financial institutions risk severe penalties if they inadvertently aid and abet — no matter how remotely — activities that the federal government deems illegal.”
We opposed passage of California’s Proposition 64 because there were too many unanswered questions about the effects of legalization, including how financial transactions would be handled. But now that 33 states allow medicinal use, and 10 states plus the District of Columbia allow recreational use, it’s clear Congress can’t wait to address a banking situation that’s dangerous and horribly inefficient.
The cash-only trade puts business owners and government workers at risk of robbery. California officials reported collecting $228 million in tax revenue in the first three quarters of last year, with about half arriving as cash. Arrangements must be made 21 days in advance to accept cash payments at state tax offices.
The risk of corruption is also high. Even with strict oversight, it’s not a good idea for government employees to handle that much cash. The potential for cannabis companies to engage in tax evasion should be obvious to lawmakers eager to capture as much tax revenue as possible from the marijuana trade.
Ma says the current situation handicaps the burgeoning pot industry, too. Because they deal in cash, growers and vendors have trouble establishing credit to secure a loan for their businesses. Even opening a bank account or acquiring a credit card can be a challenge. Similar problems are faced by industry employees who are paid in cash and left to trust that Social Security, state and federal taxes are being paid on their behalf.
Congress needs to establish a path for financial institutions to accept money from the pot industry, just as they do from any other legal business in the United States. It’s simply a matter of recognizing reality.
As Rep. Denny Heck, D-Washington, points out, the vast majority of Americans now live in a state where the medicinal use of marijuana is permitted, and one in four resides in one where recreational use is legal. It’s foolish to pretend the marijuana industry isn’t growing, and it’s short-sighted and irresponsible to deny it access to financial services.
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