A Toke and a TaxIf governments legalize marijuana, how much revenue can they raise from it?
Posted Wednesday, June 10, 2009, at 6:31 PM ET
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StumbleUponJeffrey Miron, a Harvard economist and proponent of broad drug decriminalization, suggests that we look to alcohol and cigarette taxes as a model for a potential cannabis tax. Even with so-called "sin taxes" of up to 90 percent of the total price, illegal markets, once widespread, account for a tiny fraction of total sales. Miron warns that initial marijuana taxes at such a level "would just be a total mess" due to the expansiveness of the black market and ease of growing marijuana at home. Instead he recommends starting with a low tax—perhaps at 25 percent of the total price—and then gradually increasing it.
Of course, these relative numbers beg the question: What will the initial, untaxed price be? According to Lee, marijuana averages about $300 per ounce in the Bay Area (and the bill currently under consideration in the slate Legislature would tax pot at $50 per ounce—far higher than Oakland's dispensaries are paying now). A few reform advocates have tried to crunch the numbers. Dale Gieringer, who coordinates NORML's California branch, estimated in 1994 that free-market, untaxed pot would cost just 5 cents to 10 cents per joint, a potency-constant measure. Even adjusted for inflation, that's still at least 100 times cheaper than today's marijuana prices, according to Gieringer.
But if history and the proposed soda tax are any guide, marijuana may end up among the most expensive intoxicants. Federal and state health departments have been "nudging" the public for decades to reduce the demand for tobacco, which has decreased roughly 4 percent for every 10 percent increase in price. Politicians and economists defend these Pigovian taxes as balancing the public health costs of cigarettes, as they would for marijuana. (Much of this argument would depend on whether legalizing marijuana causes a rise or a decline in alcohol consumption.)
A steep excise tax would particularly infuriate libertarians, a critical constituency of the reform movement. The general tenet that "the government shouldn't be meddling with our minds, shouldn't be trying to nurture our behavior" extends to marijuana, says David Boaz, executive vice president of the Cato Institute and a former NORML board member.
Whatever they do, governments that tax marijuana will have to balance a trio of related goals—reducing budget deficits, eradicating the black market, and improving public health. Inevitably, one goal will get the short end of the spliff. Harvard's Miron predicts that governments will give priority to reducing deficits in the current round of pot-reform debates. It's not the best argument for legalization, says Miron, who has estimated that U.S. governments could save almost $13 billion annually if they no longer arrested, prosecuted, or imprisoned marijuana buyers or sellers. But in an era of falling tax revenue, it may be the most effective one.
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Marijuana may be less physically harmful than alcohol and tobacco, but it certainly impairs judgment and motor skills as much as alcohol and more than tobacco. Won't legalization result in exponentially more impaired motorists? Impaired parents (hence, child neglect)? Impaired professionals and students? I have no moral problem with legalizing weed. I've just always thought it seems so completely impractical. Any money governments made taxing it would just be spent dealing with the social results of increased use.....right? I would love to get sensible and balanced feedback on this position (not just impassioned rejection of the whole notion).
-- live4ward
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Actually all the studies and evidence I have seen indicate that in jurisdictions where laws criminalizing marijuana are not enforced (e.g. Santa Clara County in the early '90s) teenage deaths from driving drop precipitously (they are at home playing video games) and murder rates go down slightly (less alcohol abuse, fewer fights between dealers). Pot criminalization began because White constituencies and their representatives were concerned that their kids were visiting Black neighborhoods to get the stuff. Watch Reefer Madness to see all the code images and refer to excellent research by Stanford law professor Lawrence Friedman. Criminalization enraged NYC mayor Fiorello LaGuardia who supported studies that showed that marijuana caused insignificant public health problems. There are many studies that show that pot smokers (who should not be on the road stoned) are far less dangerous than cell phone users or, of course, drinkers. I am a criminal defense attorney, and, as I mentioned in another post, I would lose a lot of my income if legalization happened (please wait 'til I retire). But I have to say after years of consideration and many conversations with judges and cops, even if there were not the huge tax profits and savings on jail costs and court costs and police costs, not to mention social service costs when breadwinners are imprisoned, the net result would be a social benefit. Add the blow to some really nasty criminals who would go out of business and the addicts of really harmful substances who might switch to this relatively benign alternative... and I have long concluded that criminalization of pot is ridiculously stupid. Oh yeah, if you are arrested in western NC, mention this post and I'll give you a discount.
-- malyoung
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If pot is legalized, you can grow your own in your back yard or in your basement with some gro-lights. Then the government gets no tax money.
And that is why they won't legalize it. Sure, you can make your own wine and moonshine, but it's easier to grow some dope. They don't call it 'weed' for nothing.
-- Guylinder
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Creating high fines for growing marijuana without a license will be another revenue stream. Really though, since the Carter administration made it legal to make your own beer, still not that many people actually do this at home. Many of those who do start out making beer at home end up opening a microbrewery and doing so professionally. A similar trend may develop in marijuana growing.
-- here2help
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