Pot Could Be Tax Windfall, But Skeptics Abound
DENVER - A catchy pro-marijuana jingle for Colorado voters considering legalizing the drug goes like this: "Jobs for our people. Money for schools. Who could ask for more?"
It’s a bit more complicated than that in the three states - Colorado, Oregon and Washington - that could become the first to legalize marijuana this fall.
The debate over how much tax money recreational marijuana laws could produce is playing an outsize role in the campaigns for and against legalization - and both sides concede they’re not really sure what would happen.
At one extreme, pro-pot campaigners say it could prove a windfall for cash-strapped states with new taxes on pot and reduced criminal justice costs.
At the other, state government skeptics warn legalization would lead to costly legal battles and expensive new bureaucracies to regulate marijuana.
In all three states asking voters to decide whether residents can smoke pot, the proponents promise big rewards, though estimates of tax revenue vary widely:
- Colorado’s campaign touts money for school construction. Ads promote the measure with the tag line, "Strict Regulation. Fund Education." State analysts project somewhere between $5 million and $22 million a year. An economist whose study was funded by a pro-pot group projects a $60 million boost by 2017.
- Washington’s campaign promises to devote more than half of marijuana taxes to substance-abuse prevention, research, education and health care. Washington state analysts have produced the most generous estimate of how much tax revenue legal pot could produce, at nearly $2 billion over five years.
- Oregon’s measure, known as the Cannabis Tax Act, would devote 90 percent of recreational marijuana profits to the state’s general fund. Oregon’s fiscal analysts haven’t even guessed at the total revenue, citing the many uncertainties inherent in a new marijuana market. They have projected prison savings between $1.4 million and $2.4 million a year if marijuana use was legal without a doctor’s recommendation.
"We all know there’s a market for marijuana, but right now the profits are all going to drug cartels or underground," said Brian Vicente, a lawyer working for Colorado’s Campaign To Regulate Marijuana Like Alcohol.
But there are numerous questions about the projections, and since no state has legalized marijuana for anything but medical purposes, the actual result is anyone’s guess.
Among the problems: No one knows for certain how many people are buying black-market weed. No one knows how demand would change if marijuana were legal. No one knows how much prices would drop, or even what black-market pot smokers are paying now, though economists generally use a national estimate of $225 an ounce based on self-reported prices compiled online.
"It’s difficult to size up a market even if it’s legal, certainly if it’s illegal," said Jeffrey Miron, a Harvard University economist who has studied the national tax implications of the legalization of several drugs.
In Colorado, the $60 million figure comes from Christopher Stiffler, an economist for the nonpartisan Colorado Center on Law & Policy. He looked at the state’s potential marijuana market in a study funded by the pro-legalization Drug Policy Alliance. The figure comes from a combination of state and local taxes and projected savings to law enforcement.