California Goes to Pot
Well, we all know things are getting pretty desperate in California, what with the $26 billion deficit, the IOUs to creditors, and Moody’s downgrading of the state’s bonds this week to within a stone’s throw of junk. But it says a lot for the resourcefulness of the Golden State’s lawmakers that they are seriously considering a tax on an industry that doesn’t even exist — at least in legal form.
The legislators have long suspected that a tax on sales of marijuana, one of California’s specialty crops, could be a good little earner for the state’s coffers. An analysis released Wednesday by the State Board of Equalization shows just how right they were.
There’s the little question of legalization to be addressed first, of course. Back in February, Democratic Assemblyman Tom Ammiano introduced a bill that would allow adults 21 and older to possess, grow, and sell pot. The state would take its cut in the form of a $50-per-ounce “fee” on all retail sales, and the funds would be dedicated to drug education, awareness, and rehabilitation programs. According to the Board of Equalization report, the fee could be expected to realize $990 million, and the state’s sales and use taxes would bring in an additional $392 million.
Not bad … $1.4 billion of the deficit down, $24.6 billion to go. But doesn’t this seem just a teensy bit like putting the fiscal cart before the public-good horse?
Look, there may be all kinds of good reasons for legalizing the recreational use of cannabis sativa, though, frankly, I can’t think of any offhand. But bailing out a failing government can’t possibly be one of them. Why not legalize crack production, too, and tax that? Or, for that matter, maybe California should encourage the development of an assassination outsourcing industry as a new source of revenue?
Legalizing an activity just so you can tax it is just about the most bizarre overreach of taxation policy I can think of. It reminds me of an old Monty Python skit in which one of the cast, John Cleese I think it was, rants on about how the British government should impose an income tax “on all foreigners living abroad.” (If you’re too young to know what Monty Python was, click here.)
But wait, it gets weirder still. Today Los Angeles councilwoman Janice Hahn proposed a tax on sales of medical marijuana, which have been permitted under California law since the passage of the Compassionate Use Act of 1996. What’s behind Hahn’s uncompassionate proposal? “In this current economic crisis, we need to get creative about how we raise funds,” she’s quoted as saying in this article in the L.A. Times. “A tax on medical marijuana could enable the city to continue by providing services we might otherwise have to cut.”
So now we have Mr. Ammiano seeking to legalize and tax recreational use of a federally controlled substance as if it’s perfectly innocuous, and Ms. Hahn wanting to impose what looks for all the world like a sin tax on the same substance when used lawfully for medical purposes!
Strange times indeed in California. Governor Schwarzenegger’s latest attempt to break through the budget logjam buckled today, but he’s confident he can nail it tomorrow. Let’s hope so. ###
July 20th, 2009 at 5:31 pm
It seems every article I read discounts the real revenue brought in by AB 390- tourism. Gambling and prostitution are legal in Las Vegas, and their entire tourism industry is heavily dependent on these two vices, and we haven’t brought about the end of the free world letting these things become legal. I need to address arguments I’m tired of hearing educated people embarrass themselves by making.
1. “Marijuana legalization is a bad idea because people shouldn’t do drugs.”
Caffeine is a drug, alcohol is a drug, and nicotine is a drug. These things are legal, but this argument seems to indicate that these also should be outlawed.
2. “Marijuana causes violence and crime.”
Because it’s illegal, and unregulated, people choose violent solutions when business goes bad. You can’t sue someone or take them to a credit agency because they didn’t give you the drugs you paid for. Remove it from the black market and you end these kind of problems by giving the consumers and distributors legal venue for restitution.
3.”People will dodge the taxes so legalizing it won’t make any money.”
People dodge taxes on cigarettes by driving to the next state to get them, and that’s hardly an option here. People are lazy. Booze and cigarettes are expensive but only a motivated minority brew their own beer and grow their own tobacco. Increased cost from the per-weight tax is offset by the overall price reduction as open-air price competition drives the price down. $50 for a $400 oz. is not much. I think the potential tax revenues are badly understated, not overstated.
4. “Legalization would be a public health disaster.”
This overlooks the most important fact, that people smoke this substance because that’s the most cost-effective way. If it were cheaper and merchandise aimed at it’s use easier to acquire, you would see an increase in eating and vaporizing it, both of which sidestep the lung associated problems. Beyond that the only ill effects are the same as those from many legal prescription drugs.
5. “Marijuana is a gateway drug and using it leads to using harder drugs like heroin and cocaine.”
This argument is actually one from the original scare campaign by Harry Anslinger almost a century ago. It has repeatedly been shown that tobacco and alcohol use are more reliable indicators than marijuana use. But let’s not forget the most important effect observed: In order to obtain marijuana you have to enter the world of illicit drug dealing, where anything goes. Dealers profit more from coke, methamphetamines and opiates because they are substantially more addictive. By forcing people to go underground to get pot, you force them to deal with people who want them to use something more profitable. Ironically, prohibition itself becomes the gateway.
6. “People will smoke and drive, and we will need to find a way to test for recent marijuana consumption and intoxication to enforce DUI laws.”
I am good friends with a couple police officers, one retired and one active. They both scoff at this question because both tests already exist and are already used. When you get pulled over, you may notice the officer does not immediately test your breath for the presence of alcohol. First they make you prove you are impaired, by performing several simple tests to established that you are intoxicated. They do things this way because it’s important to establish that the driver was intoxicated and that intoxication impaired their ability to safely operate the vehicle. You can go to jail after only having one beer, if that one beer impaired you. Many of the same impairment tests already employed can be used to detect an operator impaired by marijuana, including testing for horizontal nystagmus (jerky movements of the eyes,) backward alphabet recitation and several others. If the driver fails, you can perform a saliva test to determine if they smoked in the last 4-6 hours.
7. “Large outdoor grow operations cause a significant environmental impact.”
In a country that freely manufactures petroleum products, barely recycles and still drinks bottled water, I am almost surprised to see this argument. The fact is that most of the pollution occurs now as a result of illegal operations in California’s state parks. Legalize this operation and you give people who are growing an incentive to protect the environment- staying out of jail. Like any other business, agricultural or otherwise, this behavior is controlled by the EPA through fines and penalties or jail time.
8. “Marijuana can be laced with other substances like crack, methamphetamines, PCP, and even embalming fluid.”
Once again, this happens because marijuana is running with a bad crowd. Because law enforcement treats it as the same or similar, it winds up being sold by the same kind of people (people who have no qualms about contaminating a largely non-addictive product with one that is more addictive.) Legalized, you can prevent this- competition would motivate businesses to sell a product free of contaminants. Many marijuana users are purists, too- products contaminated with pesticides and additives are unlikely to do well, especially with the majority of California having an infatuation with organic products.
9. “People will make stupid mistakes while under the influence of marijuana.” Really? I’ve seen this one posted often enough to warrant replying to it, even though I find it laughable that anyone would make it. Listen up, all of you people who get drunk and stoned and do stupid things you regret: [b]you are still responsible for the things you do because you made the decision to impair yourself.[/b] I am beyond sick of hearing people sidestep responsibility for the things they regret doing. If you know that you have poor decision making ability when you drink or smoke, don’t put yourself in a position where you might have to think. If you know you tend to drive after having a six pack, hide the keys or don’t buy the beer. Don’t tell people alcohol should be illegal because you have no self-control.
10. “Legalize marijuana and what’s next? Crack? Prostitution? Murder?”
Now the argument has taken a truly desperate turn. This is what’s known as the slippery slope argument. It evades the question at hand and sets up “straw men” (points that are impossible to argue against but are not related to the argument.) Not very many Americans want to legalize crack. But the debate is not about crack, the debate is about marijuana. Do you really think they’re both the same? Nobody breaks into a car to get the two bucks in change so they can get a hit of weed. The only withdrawal is psychological, not physical. People get psychologically addicted to World of Warcraft, eating, and shopping for heaven’s sake.
I’m sure I’ll think of more later, but this kind of thing really bugs me. I think there are some very good reasons to legalize and some reasons might not want to. But people please- think about whether your argument is valid before you trumpet it from the mountaintops- don’t contribute to the prevailing ignorance.
July 27th, 2009 at 1:13 pm
Paul, thank you for your comments. As I said, there may be good reasons for wanting to legalize (though frankly there are plenty of reasons not to - see this link for a good account of the very real health hazards which you gloss over:)
http://www.timesonline.co.uk/tol/life_and_style/health/article5720180.ece
But my point is that in tax law and policy precedent is everything, and the precedent here would be bad, bad, bad. Do you really want California to take this momentous step purely because of budgetary considerations? And would you want to extend the debate to prostitution and gambling, as you seem to suggest, for the same reason? Depends what kind of state you want to live in, I guess…
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