On the idea that legalized marijuana would cost more than it would reap

WASHINGTON (AFP) — Amid grim news of record deficits unveiled in the US budget, marijuana advocates are welcoming legislation in US states they say could blossom into billions of dollars in tax revenue.

San Francisco state lawmaker Tom Ammiano introduced a bill last Monday projecting a 14-billion-dollar tax base for the full retail treatment — buying, selling and growing cannabis.

The leading legalization advocacy group behind Ammiano’s bill, Washington-based National Organization for the Reform of Marijuana Laws (NORML), says recession is prompting otherwise skeptical state houses to revisit the ban on marijuana.

Over the last few months NORML has been drafted to work with state lawmakers — even in conservative locales like Texas — on budgetary analysis and review how legalization may enable governments fill yawning deficits.

But legalization opponent Eric Voth is worried “the number of people who will start using or worsen their habit because of the lack of legal constraints is going to cost the system far more than what might be generated through taxation.”

Voth, chairman of the Institute on Global Drug Policy, contends marijuana advocates are “happy to lie to the public” about the gains of their proposals, with an end goal of cannabis legalization “at any cost.”

via AFP: US states mull weed to ease deficit pain.

Uh, Eric?  We’re using the government’s own numbers.  You are quick to call people liars, for example, the sick, disabled, and sense-threatened people you refer to as the “medical excuse movement”.  I think anyone who writes that:

• “Pathologic behavior such as psychosis is also associated with marijuana use” and 
• “Despite arguments from the marijuana advocates to the contrary, marijuana is a dependence-producing drug” and
• “The gateway effect of marijuana along with tobacco and alcohol is also well established in research” and
• “One must then realize that with marijuana the patient is exposed to a veritable “witches brew” of substances, most of which have never been examined for harmful effects.”

…ought to think about putting the rocks down and getting some Windex for that glass house they’re living in.

But let’s take your argument at face value and try to maintain a straight face doing it.  You propose that the legalization of marijuana would end up costing more in social costs through new users and increased use among current users than it would reap in law enforcement savings and direct taxation, plus indirect taxation on the payroll of new employees in this new industry and the economic benefits on ancillary industries that would support the new industry, plus the 800lb. gorilla of legalized industrial hemp farming that would be automatically created (if the marijuana that gets you high is legal, the stuff that doesn’t is going to be, too.)

OK, let’s start with the baseline of right now.  Right now there are about 14M people using marijuana monthly, 25M annually, and 100M lifetime.  Good round figures, close enough for the argument – the survey is for “12 and older”, but legal marijuana would be for adults, so the real number might be smaller, but this is people who are willing to tell a surveyer they do something illegal, so the number might be bigger.  Now, there must be some social cost for this use – TANSTAAFL – and that will be our baseline dollar figure of what marijuana costs society – let’s call it X.

Right now, all the people using marijuana cost society $X per year for the roughly 25 million using it annually.  Now the conservative estimates on taxed and regulated marijuana nationally project $10-$14B annually.  Some project as high as $50B – $300B when you start talking about industrial hemp and ancillary industries and taxable revenue streams.  Let’s lowball it for the sake of easy math – $10 billion a year from legalized marijuana.

Then by your premise there will be enough increase in annual users and usage to generate $10 billion a year in societal costs, offsetting the gains from legalization.  And that has to be new costs, because we already started with a baseline of the existing users and we’ve been absorbing that societal cost, whatever it is, during prohibition.

Now it gets dicey, because we really don’t know what our original $X is.  How do you measure how much it costs society when one person smokes marijuana?  That one person could be me, working sixty-eighty hours a week and running a small business… am I costing you anything?  Is that person a disabled medical patient, who’s actually saving us money by reducing the need for pharmaceuticals that we taxpayers cover through Medicaid?  Is that one person a lawyer who just puffed a joint as it passed by on vacation last summer?  Or is that person one of the 9% who become clinically dependent and he is costing us, somehow?

Anyway, let’s throw a number down: $50 billion a year.  (Hold on, readers, I know it’s ridiculous, but for the sake of argument let’s say 25 million annual tokers cost society $50 billion a year.)  That’s $2,000 per toker, per year, in costs for lost productivity, under employment, social welfare, non-drug crime, cleaning up parks after jam band festivals, whatever nebulous dangers you conceive of in your reefer mad nightmares.  (Again, readers, a ludicrous claim, especially when these same drug warriors tell us breathlessly that “75% of all illegal drug users are employed!”  But roll with me…)

So for there to be an additional $10 billion in costs, you need five million new annual tokers.  Who are they?  There are already 25 million people who smoke annually despite the threat of arrest and incarceration.  There are roughly 200 million adults in the US.  Half of them have never smoked marijuana.  So to get from 25 million to the new figure of 30 million annual tokers (an increase of 20%), 5 million of the 100 million who never smoked pot and the 75 million who “experimented” but don’t smoke now need to start smoking annually, or one new annual smoker out of the 35 who aren’t smoking now.  Who is this person who doesn’t smoke pot now but really wants to – if only it were legal?

The other way to generate your additional $10 billion in costs would be to assume that increased usage among existing users would lead to greater costs.  OK, fair enough.  That would implicitly mean that the annual smoker is less costly than the monthly smoker, who is less costly than the weekly or even daily user.  If an annual user costs Y, then a monthly user should cost 12Y and a daily user should cost 365Y, right?  Maybe not; maybe daily users are 1000x more costly, but whatever, we need some numbers to crunch.  By my reckoning, that means the daily users account for 88% of the societal costs, monthly users 11%, and annual users 1%.  (3M * 365 + 11M * 12 + 11M – remember, a daily smoker is also a monthly and an annual, so you can’t count them twice.)

The government tells me there are about 3 million daily users.   So that $50 billion we talked about earlier, 88% is their fault, or about $44 billion.  That’s about $15,000 per daily user in costs, so to generate that extra $10 billion in costs, you would get it with two-thirds of a million new daily users.  But again, who are they?  You’d need about one out of fifteen of your monthly users to begin using daily to generate that cost, because I don’t really see any of the 25 million annuals, 75 million experimenters, or 100 million never-users to suddenly become daily users.

So, starting with the most conservative estimate of only $10 billion generated from revenue and savings from legalized marijuana and working with absurdly high estimates of the cost of marijuana users to society, you need probably a million people to shift along the never-used | experimented | annual-user | monthly-user | daily-user axis for the costs to outweigh the benefits.  If marijuana really brings in $50-$300B, now you need 5-30 million new smokers to shift.  Either way, who are these people?  Right now with the threat of arrest, 1 out of 8 adults smokes pot annually.  Which one of the other seven isn’t smoking now solely because it is illegal?