Marijuana Could Be a Gusher of Cash If We Treated It Like a Crop, Not a Crime

Marijuana Could Be a Gusher of Cash If We Treated It Like a Crop, Not a Crime | DrugReporter | AlterNet
If marijuana were legal but taxed like alcohol and tobacco, how much money could it bring in to cash-strapped state governments?

One 2006 study called cannabis the top cash crop in the nation, worth more than corn and wheat combined. It was the leading crop in 12 states, outstripping grapes in California and tobacco in North Carolina, and one of the top three in 18 others, coming in just behind apples in Washington and cotton in Georgia. So with states facing massive deficits, could reefer revenues help?

The answer is unclear, but it could be lucrative for governments, especially when combined with the savings from ending prohibition. As the U.S. marijuana market is illegal, there are no sales figures. Estimates of its size range from $10.5 billion a year to $113 billion. But three studies done by economists and policy analysts say ganja taxes could bring in anywhere from $2.4 billion to $31.1 billion in revenue, depending on how big the sales really are. About one-third of that would go to the states.

“The Budgetary Implications of Marijuana Prohibition,” a 2005 study by Harvard economics professor Jeffrey A. Miron, makes the most conservative projections of the three studies. It calculates possible pot tax revenues at $2.4 billion. That’s assuming that prices would drop about 25 percent under legalization, that pot-related economic activities were taxed at the national average of 30 percent, and that the federal Office of National Drug Control Policy’s estimate that the domestic cannabis market is worth $10.5 billion is accurate. If herb were taxed more heavily, as alcohol and cigarettes are, that could bring in as much as $9.5 billion — although excessive “sin taxes” could cause pot smokers to cut down or grow their own, diminishing revenues.

However, others in the field believe that the government’s $10.5 billion figure is absurdly low. Dan Hamburg, a former congressman from Northern California’s sinsemilla belt, says the Mendocino County Board of Supervisors estimates bud production in that county alone at between $1 billion and $1.5 billion, worth far more than timber and grapes. California’s medical marijuana dispensary owners claim they pay $100 million a year in state sales taxes.

While we can argue about the numbers, one thing is clear: marijuana could be a huge boon to cash-strapped state budgets.  We’ve got to be the only group of people, millions strong, who are begging the government to tax us!

However, when I read these economic forecasts of legal weed, I wonder who’s considering the negative economic effects of legalization.  For example, selling weed is often the only decent employment in many inner cities and rural areas.  What job is the former quarter-ounce weed dealer going to get?  Who’s going to employ all the cops and prison guards laid off when we don’t need to warehouse non-violent drug offenders anymore?  Where will most the DEA and ONDCP staff go to work when they are no longer needed?

That’s not me arguing for continuing the status quo.  I won’t shed many tears for the out-of-work cops, bureaucrats, and prison guards; maybe they could all be kept on and used to fight real crime.  I worry a bit about the poor youth with no weed business, but maybe they can grow and sell in a regulated market.  Just a couple of things to think about regarding the economics of legalization.