Taxing Marijuana
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Taxing Marijuana
Posted by CN Staff on July 29, 2009 at 17:24:31 PT
By Chris Weigant
Source: Huffington Post
CA -- California voters may soon get a chance to weigh in on whether marijuana should be legalized and taxed by the state. If enacted, this may help the state's budget by providing revenue from a brand new source, while also freeing up money that previously went to enforcement efforts against marijuana growing. Of course, marijuana would still be illegal under federal law, but this may be a turning point in the legalization movement -- the point where politicians desperate for tax revenues see dollar signs instead of prison bars when looking at the cannabis plant.
And make no mistake -- this is not medical marijuana we are talking about. From the wire service report:A proposed ballot measure filed with the California attorney general's office would allow adults 21 and over to possess up to an ounce of pot. Homeowners could grow marijuana for personal use on garden plots up to 25 square feet.Now, 25 square feet sounds like a lot, but it's really only a plot five feet by five feet. Assumably, this was written into the ballot measure so marijuana (at least initially) wouldn't be sown by agribusinesses in 1,000-acre fields. But even with the land-use restriction, the initiative is remarkable for the lack of other restrictions. No mention is made of "medical" or "medicine" or any of that -- just "adults."There are even two ballot measures to choose from. The second one is even less restrictive:The Tax, Regulate and Control Cannabis Act of 2010 would set no specific limits on the amount of pot adults could possess or grow for personal use. The measure would repeal all local and state marijuana laws and clear the criminal record of anyone convicted of a pot-related offense.Bet that would save a few dollars on prisons. And even if these ballot measures fail, state legislators are introducing bills to do exactly the same thing. So, while it should not in any way be seen as inevitable, it now appears possible that California may soon legalize and tax marijuana, used for recreational purposes.While the concept of taxing marijuana is a new one for most people to consider, it actually has a long history. The very first federal law dealing with (pun intended) marijuana was the Marihuana Tax Act of 1937. Earlier laws outlawing "narcotics" had left out marijuana (or, in the spelling more common at the time, "marihuana"), so this was a more specific law dealing only with cannabis (and hemp). It ostensibly levied a tax on marijuana, which was widely used in medical products of the day. The tax was pretty low (the base rate for a doctor was one dollar for a tax stamp, per year), but the penalties for not paying the tax were the real purpose of the law. The law did not make marijuana illegal, so what the feds would clap you in prison for was not ponying up the tax. This had to be softened during World War II, when hemp was necessary for military supplies (hemp ropes, before nylon became widespread) and the planting of hemp was actually encouraged by the federal government (as in the "Hemp for Victory" movie put out by the feds in 1942).Later, in the 1950s, marijuana was flat-out made illegal at the federal level. And then, at the beginning of the 1970s, the Controlled Substances Act codified all illegal drugs, and superceded the 1937 Marihuana Tax Act.But taxing illegal drugs, including marijuana, didn't end there. The next iteration of taxing marijuana came as a result of individual states being annoyed at the federal government. I believe the first of these was Arizona, which (in the late 1970s and early 1980s) had to watch as the feds made a lot of money off the drug traffickers moving through their (border) state. In the 1980s, the big weapon used in the Drug War was property confiscation. So the federal Drug Enforcement Agency (DEA) would catch a semi truck full of bales of weed on an Arizona highway, and they would impound the truck. Later, they'd sell the truck in a government auction, and the DEA got to keep the money. Arizona was annoyed at being cut out of the profits, so they instituted a state tax on marijuana and other illegal drugs. This way, when the semi was auctioned, they could claim "unpaid taxes" on the cargo, and get their cut of the money raised. Many other states followed suit, and passed their own drug taxes for the same purpose -- forcing the feds to share the spoils. They all sold (and some still sell) drug tax stamps for this purpose (Nebraska's stamp unquestionably has the most creative design).So, once again, the purpose of the tax was disingenuous. The states had no interest in making drugs legal, they just wanted a cut from any busts the feds made in their state. But now, for the first time, California seems to be seriously considering both legalization and taxation simultaneously -- in other words, they are interested in the tax revenues themselves, rather than a back-door method of gaining windfall taxes from federal busts.But I would caution the state lawmakers -- and the people advocating for the new laws -- to be conservative in estimating the revenue gained from these taxes. This is a by-product of the 100-year history of the Drug War itself. When you read in a newspaper that "$6 million worth of drugs captured" this dollar amount is often vastly overstated. And, even taking such estimates seriously, there's a factor that most people don't even take into consideration, which shouldn't be ignored.Say you want to estimate how much money California would make off a new marijuana tax. You come up with an estimate of how much pot is sold in the state (let's call it $100 million, just for argument's sake -- since I have no idea what the actual figure is). You then estimate how much the market will grow, due to it now being legal. But then you've got to subtract anyone who grows their own at home, since they won't be selling it to anyone (the tax is usually levied on point of sale, but I guess if it was a production tax they'd theoretically tax peoples' back gardens as well). Finally, you come up with a figure.But the big factor most people will miss is that the price of something which was previously illegal will go down if it is made legal. The price of moonshine during Prohibition was about ten times what hard alcohol sold for afterwards. Meaning, overnight, that "$100 million" market becomes "$10 million." When something is illegal, most of the price is for the risk involved in producing it and getting it to the customer. Remove the risk, the price always drops. Always. Especially if a law passes without a "25 square foot" restriction, because then farmers out in California's Central Valley will start growing massive amounts of marijuana (and as every economist knows, when the supply goes up, the price goes down).So California should be careful when estimating what effect a (legal) marijuana tax would have on the state's coffers. An easy way to avoid some of this problem would be to design the tax on "weight" rather than as a sales tax (percent of purchase price, in other words). Then the projections for anticipated revenue might be a little easier to make, because the price per ounce to the customer wouldn't really matter, as the state would be guaranteed a certain dollar amount no matter how low it went.A recent poll showed that 56% of California voters already approve of the concept of legalizing and taxing marijuana for personal, recreational use. Meaning that a ballot initiative has a fairly good chance of passing. I would just caution everyone to be realistic when making estimates as to how much tax revenue would be raised by doing so. California has such massive budget problems right now that a marijuana tax certainly couldn't hurt the state's cash flow. And, with the voters apparently ready to approve such a scheme, it looks entirely possible that it could happen. But overestimating the revenues expected could actually undermine the case for doing so. The advocates for legalization and taxation should be careful when drawing up their estimates, and keep their promises of tax revenue realistic, to better convince voters of the practicality of the idea.Source: Huffington Post (NY)Author: Chris WeigantPublished: July 29, 2009Copyright: 2009, LLC Contact: scoop huffingtonpost.comURL: -- Cannabis Archives
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Comment #32 posted by rchandar on August 03, 2009 at 17:27:46 PT:
Yes, It Is...
...this is exactly what the Dutch did. 
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Comment #31 posted by FoM on August 02, 2009 at 16:04:29 PT
Pot Tax Has $1.4B Potential in California
August 2, 2009URL:***Is it Time To Tax Medical Pot? August 2, 2009 URL:
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Comment #30 posted by FoM on July 30, 2009 at 19:59:05 PT
I don't like terms like the ones you mentioned either. I am not liberal about everything and I am not conservative about everything. I am me. Life has taught me to think the way I do and for me it is the right way to think. That's what our country should be about. We can be different and respect each others differences and not jeopardize our own values at the same time. We learn that way. We grow that way I think.
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Comment #29 posted by Hope on July 30, 2009 at 19:57:08 PT
Oh yeah...
And I agree with what FoM said.For real. No way is any generation all the same, nor is it even possible because of their individual experiences. My main goal when I was young was trying to raise my children to adulthood.... alive and all. Except when I occasionally lost my mind over a man and my eyes got wickedly averted from what was good and true for me. Raising my children was always the most important thing in my life, after my faith... which held my weak self together... even though I occasionally, to my deep chagrin, lost sight of what I was supposed to be doing, a little, or maybe from time to time, a lot. Distracted, I guess. My faith, my family, and my sense of social justice have been extremely important to me all my life. More or less in that order. They still are.It seems to me, mostly, I've not lost sight of that, yet... and, of course, I've been having a serious amount of concern in the past few years... decades, actually, about some social justice issues that certainly seem to have run amok and that need to be reconsidered, by society and government.... very carefully.
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Comment #28 posted by Hope on July 30, 2009 at 19:36:08 PT
some words I don't like
and usually choose to not engage with anyone that chooses to use them. Conservative.Liberal. Lefty. Right. Far right. Neocon. Idiot.hmmmm.Pothead.A few more that hit some buttons and I choose to back off and practice the self control that I need to practice when I see or hear them.For everybody's good as well as my own.:0)But carry on. It's interesting.By the way, Vincent, as a believer in spiritual matters I think the guy you're perturbed with is indeed following spiritually after his personal spiritual father.... "The Accuser".brrr... it gives me spiritual chills.
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Comment #27 posted by FoM on July 30, 2009 at 17:41:49 PT
Not everyone that is a boomer believed what the 60s and early 70s was about. I was involved in church in my life and I have been far removed from that life for years. Some folks are jealous of people that aren't so hung up about what others do. As far as why a libertarian would do that I have no idea but the religious right is a very scary group. They get what they want by literally freaking people out. It doesn't seem to matter if it's true or not. 
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Comment #26 posted by Vincent on July 30, 2009 at 17:21:52 PT:
Social Conservatives
Hello everyone. I want to discuss Social Conservatism by activists in general, and Religious activists in particular. I sometimes have arguments when I post on Craig's List politics section. But, yesterday some dude that calls himself "libertarian" stated that he has pictures of Florida's Moderate Republican Gov. Charlie Crist snorting coke in the 1980s. He wants to give it to the Marco Rubio campaign because Rubio is a "true" Republican.(Marco Rubio is a born-again, Bible-banging Christian) It's not that I like Crist. He is a phony, acting moderate only when it suits him. But, he is the lesser evil.Now, what is it with these Religious extremists? Throughout history religious leaders and other tyrants have demonized opponents, and their lifestyles, to stay in power by manipulating ignorance.The Emporer Justinian was given to sexual extremes, so he punished any form of free expression in what was left of the Roman Empire in the 500s AD. In the 800s, Charlemagne questioned his own faith, so he executed anyone that questioned their faith. The Crusades were a great example of religious intolerance. In the 1920s, some do-gooders outlawed Alcohol and, when that didn't work, in the 1930s, they outlawed Marijuana and pornography. There are many other examples.It puzzles me when someone who is a Baby-boomer, as I am, could betray everything that they believed during the 1960s and 70s. That guy that put up that annoying post is "libertarian" only when it comes to making money, and not paying tax.
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Comment #25 posted by FoM on July 30, 2009 at 15:43:38 PT
I can't imagine anyone thinking that having cartels with guns growing marijuana where people might walk up on them if vacationing and hiking in the area as something good or acceptable. If marijuana wasn't against the law the price would fall and the profit incentive would be gone and they would stop growing in areas that they shouldn't in my opinion.
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Comment #24 posted by Hope on July 30, 2009 at 15:03:57 PT
That's probably true, FoM.
This in the NYT.Cartels Turn U.S. Forests Into Marijuana Plantations, Creating Toxic Mess
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Comment #23 posted by FoM on July 30, 2009 at 14:55:14 PT
My opinion is they don't want us to give up because they won't get as much money from us if we do give up.
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Comment #22 posted by Hope on July 30, 2009 at 14:52:06 PT
Comment 20
I'm glad my choice was correct. Thank you.There is more than even the prosecution and persecution thing. ""One of our biggest concerns is that the United States doesn't give up, and that it increases persecutions of crimes related to the trafficking of marijuana from Mexico to the United States," Medina Mora said.""That's pretty mind bending, too.It concerns me, too... that they... the prohibitionists don't give up... and that they keep bringing down all this mayhem on everyone, year after year and decade after decade. The "Insanity is..." thing?It's just a very odd article. 
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Comment #21 posted by FoM on July 30, 2009 at 14:24:31 PT
I took it that he mean prosecute but someone put in the wrong word. It still didn't make sense to me though.
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Comment #20 posted by museman on July 30, 2009 at 14:22:43 PT
Your 'choice' is correct. I just found that incredibly funny. 
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Comment #19 posted by Hope on July 30, 2009 at 13:17:08 PT
Pete... over at DrugWarRant
I like what he said about that AFP article. "U.S. Drug Czar Gil Kerlikowske merely nodded with incomprehension due to his limited vocabulary.":0)Trouble is... I can kind of understand Gil's sense of incomptehension this time. That's about the most double edged piece of work I ever saw. It could mean exactly what it looks like it means.
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Comment #18 posted by Hope on July 30, 2009 at 12:48:53 PT
I'm so confused from my rubber chicken "Whupping"... I don't know whether you're making fun of me or not!I'll choose "Not". I'm glad it made you laugh.
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Comment #17 posted by museman on July 30, 2009 at 12:19:22 PT
a vocabulary rubber chicken."LOL" just doesn't express it!That is classic! Worth putting in the Hall Of Fame of Wit!
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Comment #16 posted by FoM on July 30, 2009 at 12:16:53 PT
It didn't connect anything. Maybe the writer was trying to do a story about something he really knew nothing about.
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Comment #15 posted by Hope on July 30, 2009 at 12:16:45 PT
the answer to the dilemna of that article...
Maybe I can stalk it down ... like this little fella.(Don't watch if your phobic of cats) this one either....which very much illustrates how I feel about that AFP article...
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Comment #14 posted by Hope on July 30, 2009 at 12:08:06 PT
Makes me wish
I'd just skipped that one.I'm kind of disturbed by it... but not exactly sure, why.
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Comment #13 posted by Hope on July 30, 2009 at 12:06:32 PT
Me either...
I've never read anything quite like it.I thought maybe I was on one of those joke sites... but I don't know. The rest of the news there at the AFP site looks pretty serious. Weird.Dazing and confusing! 
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Comment #12 posted by FoM on July 30, 2009 at 12:03:35 PT
I didn't get it. 
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Comment #11 posted by Hope on July 30, 2009 at 11:59:18 PT
Article in Comment 10
That article leaves me feeling kind of dinghy. It's sort of like being beaten with a vocabulary rubber chicken.
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Comment #10 posted by Hope on July 30, 2009 at 11:43:48 PT
Mexico criticizes US on marijuana traffic
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Comment #9 posted by FoM on July 30, 2009 at 11:10:46 PT
Los Angeles Times: Pruning Pot Spots
July 30, 2009URL:,0,5752313.story
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Comment #8 posted by FoM on July 30, 2009 at 09:53:35 PT
Had Enough
Thank you. Very interesting.
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Comment #7 posted by Had Enough on July 30, 2009 at 09:50:10 PT
Drug Penalties: Tennessee Appeals Court Finds Drug Tax UnconstitutionalIn a September 6 opinion, the Tennessee Court of Appeals ruled the state's tax on illegal drugs, widely known as the crack tax, is unconstitutional. The state cannot impose a tax on items it considers illegal, such as illicit drugs or moonshine, the court held.Under the law, which went into effect in 2005, Tennessee has collected more than $6 million from drug suspects. Much of the money came from confiscated property.more...************Tax FounationJudge Strikes Down Tennessee Illegal Drug Tax as UnconstitutionalIn the past we've blogged about the spread of illegal drug taxes on things like marijuana and cocaine (see here and here). Although law enforcement officials adamantly insist that the sole purpose of these taxes is to raise revenue, as an economist it's easy to see a more plausible rationale for them. By taxing illicit substances, law enforcement authorities are provided with another tool to crack down on illegal drug use and distribution—even when suspects are able to avoid criminal conviction. Despite the public statements of law enforcement officials, the claim that the only purpose of these taxes is to raise revenue for programs like any other sales, property or income tax is highly implausible.In the past, courts have overturned these taxes in many states on grounds that they force suspects to self-incriminate—after all, paying a "marijuana tax" is essentially an admission of guilt—and they subject suspects to double jeopardy, once through the criminal code and again through the civil code governing tax evasion. more...
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Comment #6 posted by josephlacerenza on July 30, 2009 at 09:22:27 PT
Hi C-News!!!
I found this, thought I should share!!
Marijuana’s Impact On Brain Function “Minimal,” New Study Says
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Comment #5 posted by FoM on July 30, 2009 at 05:38:45 PT
Just a Note
I hope everyone is enjoying the summer. News is really slow. People are reading but there just isn't much to say these days. Maybe we will see news that isn't about taxing or California. So many states need reform and I'm keeping my fingers crossed that soon we will get on with it.
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Comment #4 posted by The GCW on July 30, 2009 at 05:36:12 PT
Medical marijuana dispensary opens in Frisco , CO
US CO: Medical marijuana dispensary opens in Frisco amid discourse 
 Webpage: 30 July 2009Source: Summit Daily News (CO)Author: Robert AllenSUMMIT COUNTY — As Summit County's first bona fide medical marijuana business prepares to open this weekend in Frisco, local municipalities are mulling options to regulate the budding trade.“I'd like to model off pharmacies,” Breckenridge Mayor John Warner said at a recent town work session. Breckenridge and Frisco have both set 90-day moratoriums on medical marijuana dispensaries while regulations are drafted; Dillon and Silverthorne officials are discussing the matter.Meanwhile a business permit has already been approved for Medical Marijuana of the Rockies to open in Frisco's Crossroads shopping center. At least two other parties want to open local dispensaries. CONT.
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Comment #3 posted by Mark702 on July 29, 2009 at 20:04:11 PT
Oregon Cannabis Tax Act 2010
It's not just Cali. either. Oregon has the "Oregon Cannabis Tax Act" of 2010. Also on the table is Initiative-28, a separate Medical Dispensary System bill. Learn more here:
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Comment #2 posted by FoM on July 29, 2009 at 19:27:34 PT
Taxing cannabis won't even make cannabis legal. 
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Comment #1 posted by tintala on July 29, 2009 at 19:03:08 PT:
Not enuf being said about INDUSTRIAL HEMP! WE need hemp , we need it badly and we need it NOW! If cannabis is taxed will that make HEMP legal to farm by default?
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