Senate Majority Leader Chuck Schumer (D., N.Y.), Sen. Ron Wyden (D., Oreg.) and Sen. Cory Booker (D., N.J.) are unveiling a discussion draft of their legislation to end the federal prohibition of marijuana. The senators detailed their plan at a press conference on July 14.

The proposal— known as the Cannabis Administration and Opportunity Act — calls for removing cannabis from the federal list of controlled substances, allowing states to make their own decisions on cannabis. Many states have already moved to legalize recreational or medicinal marijuana use, but it still remains illegal under federal law.

"By ending the failed federal prohibition of cannabis, the Cannabis Administration and Opportunity Act will ensure that Americans – especially Black and Brown Americans – no longer have to fear arrest or be barred from public housing or federal financial aid for higher education for using cannabis in states where it’s legal," reads the discussion draft. "State-compliant cannabis businesses will finally be treated like other businesses and allowed access to essential financial services, like bank accounts and loans. Medical research will no longer be stifled."

The proposal establishes 21 as the minimum age to purchase cannabis and limits retail sales to no more than 10 ounces of cannabis. It calls for federal agencies to research the impacts of cannabis use, legalization and cannabis-impaired driving — including research to establish an impairment standard for driving under the influence of cannabis.

The Democratic trio has been working on the legislation for months. In an interview with Yahoo Finance shortly after they announced their plan to work on the proposal, Sen. Wyden said Congress should "finally recognize that the War on Drugs has failed."

The plan would require expungement of federal non-violent cannabis convictions and encourage state and local governments to do the same. It would keep people from being denied federal benefits — such as housing or federal financial aid — because of cannabis use or possession. People who are not U.S. citizens could not be denied benefits or protection under immigration laws.

The plan would also create new grant programs to fund nonprofits that help people who have been "adversely impacted by the War on Drugs." It would make loans available to small businesses in the cannabis industry and help states and localities implement cannabis licensing programs.

Excise taxes

The plan would impose an excise tax on cannabis products, similar to how the government taxes alcohol and tobacco. The general tax rate would be 10% for the year it's enacted and the full year after. It would gradually rise each year to 25%. Starting in the fifth year, the Treasury Secretary would set a rate based on quantity sold or milligrams of THC. Rates would be based on prevailing price of cannabis sold in the U.S. the prior year.

Cannabis producers with less than $20 million in sales annually would be eligible for a tax credit to reduce their rate by 50%.

"When you can legalize something like this — where millions of millions of Americans have already voted that way — that can be a real plus for the economy. Certainly it can be a real plus for small businesses, for communities of color," said Wyden in an interview with Yahoo Finance in February.

President Joe Biden backed decriminalization of marijuana on the campaign trail, but the White House has not backed legalization efforts. In December, the House passed the MORE Act — which would remove marijuana from the controlled substance list and create restorative justice programs. Earlier this year, Rep. Jerry Nadler (D., N.Y.) reintroduced the legislation.

The senators are asking for input on the proposal by Sept. 1, so they can consider feedback before crafting the final bill. The proposal faces a difficult vote in the evenly-divided Senate.

Jessica Smith is chief political correspondent for Yahoo Finance, based in Washington, D.C.

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