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Solving Revenue Woes by Legalizing Marijuana

April 14, 2010

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The voters of trendsetting California may well decide this November to legalize marijuana — there’s a ballot referendum, and 56 percent of Californians are in favor — and no doubt this would be great news for the munchie industry, the bootleggers of Grateful Dead music, and the millions of stoners who have long yearned for an era of reefer gladness.

Seriously, this is a story about how desperate times require desperate measures.

Legalization advocates, including many ex-cops and ex-prosecutors, have long contended that it’s nuts to keep criminalizing otherwise law-abiding citizens while wasting $8 billion a year in law enforcement costs.  That argument has never worked.  But the new argument, cleverly synced to the recession mind-set, may well herald a new chapter in the history of pot prohibition.

It’s simple, really: State governments awash in red ink can solve some of their revenue woes by legalizing marijuana for adults and slapping it with a sin tax.

So much of the marijuana debate used to be about morality; now it’s mostly about economics and practicality — which is why New Hampshire, Massachusetts and Rhode Island are also floating measures to legalize and tax; why similar voter referendums are in the works in Washington state and Oregon; why 14 states ( including, most recently, New Jersey ) have legalized medical marijuana, and why even Pennsylvania, hardly a pacesetting state, is weighing the sanction of medical pot, complete with 6 percent sales tax.

But California is the likeliest lab for a massive toke tax, given its dire financial straits and the fact that marijuana is the state’s top cash crop, racking up an estimated $14 billion in annual sales — twice as much as the No.  2 agricultural commodity, milk and cream.

State tax collectors say that pot could put $1.4 billion a year into the depleted California coffers, which helps explain why 56 percent of Californians like the legalization option, and find it preferable to the ongoing layoffs of teachers and other public servants.

Indeed, marijuana is reportedly the top cash crop in a dozen states, and one of the top five in 39 states — valued annually at anywhere from $36 billion to $100 billion.  That’s a lot of money left on the table for the black market.  In fact, five years ago, a Harvard economist concluded in a report that legal weed nationwide would yield at least $6 billion in revenue if it were sin-taxed at rates comparable to alcohol and tobacco.

Actually, I doubt most stoners see themselves as sinners — what’s immoral about seeing “Avatar three times, or strip-mining a tray of brownies, or punctuating the conversation with lines like, “I’m sorry, what was I just talking about?” — but most would probably be willing to pay a “sin tax” in exchange for the opportunity to imbibe, hassle-free, with no fear that they might join the 765,000 Americans who were reportedly busted last year for possession.

Pot smokers have long been bugged by the stigma.  When I covered a marijuana reform convention in Washington way back in 1977 ( OK, yes, I’m old ), a delegate from Illinois named Paul Kuhn spoke for many when he complained to me: “You can get rip-roaring, toilet-hugging, puking drunk in public, and that’s OK.  But if you pass a joint in public to a friend, you’re a pusher.” But even the reformers of ‘77 said it was “naive” to believe that Americans would ever buy legalization.

Today’s generation is more shrewd; the word “legalization doesn’t even appear in the California ballot proposal.  The proponents, including a retired Superior Court judge who got fed up with handling pot cases, are calling it the “Regulate, Control and Tax Cannabis Act.”

Frankly, California and other cash-strapped states don’t have a whole lot of sin-tax options.  Cigarettes and booze are already taxed to the max, and ( as Philadelphia is discovering ) any attempts to slap special levies on sugared water are fiercely resisted by soda companies that fear any curbs on their freedom to rot kids’ teeth.

By contrast, stoners crave the respectability of being taxed; the fiercest tax opponents are probably the Mexican drug cartels, which would lose market share just as the mob lost out on liquor when Prohibition ended in ‘33.

Granted, nobody quite knows whether or how the California pot plan would fly in practice.  Pot use would still be illegal under federal law — the director of the National Drug Control Policy has said that “legalization is not in the president’s vocabulary” — and the U.S.  Constitution decrees that federal law trumps state law.  On the other hand, the Obama team has stated that it has no interest in hassling the medical-marijuana states.

The big question is how such a sin tax would be structured.  Would all sellers be licensed? Would it be a point-of-sale excise tax on top of the sales tax? It’s worth pondering, because some state is bound to take the plunge, even if California’s voters balk in November — which could happen because, favorable pot polls notwithstanding, conservatives riled up by health reform seem most energized to turn out in disproportionate numbers this year.

The bottom line is that public support for legalizing the crop has been building for a very long time.  Gallup found only 12 percent of Americans in favor back in 1969, but 31 percent said yes in 2000, 36 percent said yes in 2005, and 44 percent said yes in 2009.

The economic crisis has put wind behind the sentiment, and it seems inevitable that there will come a day — perhaps in the next major recession — when a presidential candidate will find it perfectly politic to speechify about the audacity of dope.

Article originally available at: http://www.cannabisnews.org/united-states-cannabis-news/solving-revenue-woes-by-legalizing-marijuana/

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