July 7, 2010
If recreational marijuana is legalized in California, prices of the
drug could plummet 80 percent and the number of dope-smokers would
rise, but the amount of money the state would bring in through taxes
and fees is a big question mark, according to a study released Wednesday.
What's more, while the state could save more than $300 million a year
by not enforcing laws outlawing weed, it may lose that much or more
in federal funding if Washington decides to punish California's
defiance of the U.S. prohibition of dope, the study found.
The upshot of the six-month study by the nonpartisan Rand Drug Policy
Research Center is this: It's anybody's guess as to whether the state
will suffer or prosper if voters approve Proposition 19 on the
November ballot. The measure would allow local governments to
regulate and tax pot sales and controlled cultivation, and to let
adults over 21 possess as much as an ounce.
"There is just so much uncertainty, that while we could look at the
data and create a scenario that could be very good from an economic
standpoint, we could also create a very bad one," said Rosalie
Liccardo Pacula, co-director of the Rand center in Santa Monica. "The
overall effect is a bit of a mystery."
Foes of the ballot measure say legalizing casual cannabis use will
lead to pot farms everywhere, rampant drug use and dangerous dopers
on the highway. Proponents say cannabis is no more dangerous than
alcohol, and that bringing California's biggest cash crop - an
estimated $14 billion a year - out of the shadows of illegality will
create jobs and inject millions of dollars into governmental coffers.
Pacula and her four fellow researchers, who included UC Berkeley law
Professor Robert MacCoun, wrote that it is entirely possible that the
state Board of Equalization was right when it estimated the state
could reap $1.4 billion in taxes if a now-stalled bill in the
Legislature to legalize pot is passed.
But given that the industry is largely still illegal, despite the
decriminalized medical marijuana trade, fully assessing whether that
figure is realistic is not possible, they said.
It's even tougher to predict Proposition 19's economic effects, the
study said, because each of the state's 478 cities and 58 counties
would be allowed to decide for themselves whether to tax or ban pot.
On one hand, the researchers said, a Wine Country-style tourism trade
could be a bonanza to a marijuana-growing area such as Mendocino, and
the craft of making pot-infused food could thrive. Legality would
also bring social acceptance, driving up use, which in turn would
drive up sales and tax revenue.
At the same time, however, the very act of legalizing pot would drive
down the price of high-grade marijuana from about $375 per ounce to
as little as $38 per ounce, Pacula said. That would depress the
expected tax revenue, unless demand goes up astronomically.
The Rand study said marijuana consumption could rise by 50 percent or
more if pot is cheaper and more readily available.
Pacula added that if local jurisdictions tax marijuana heavily,
growers might be driven back underground - again, undercutting tax revenue.
"There is no place in the world where the wholesale production of
marijuana is legal," Pacula said. "So the economic literature that
exists about marijuana usage in relation to prices and changes in law
is all about small changes, not the wholesale changes like what is
E-mail Kevin Fagan at firstname.lastname@example.org.