Calif tax officials: Legal pot would rake in $1.4B | Hacker News Reader

Calif tax officials: Legal pot would rake in $1.4B

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48 pointsedw51946 comments

Probably the most sweeping impact of legalizing marijuana would be that doing so would greatly dis-empower foreign drug lords and criminal organizations.

Very quickly Billions of dollars would be redirected into the legitimate economy, and there would be far less need for American soldiers all over central and south America.

That is quite optimistic.

Until the early 1990s, the import of gold into India was restricted by the government and there was a large delta in the price of gold within India compared to the rest of the world. As a result smuggling of gold was very profitable and most of the Bombay underworld dons were gold smugglers.

One fine day the government lifted this restriction bringing the price delta to near zero and rendering the smuggling of gold, rather a waste of time. You'd think all the baddies would now be dis-empowered. No, they just switched to extortion and whatnot and are just as powerful and rich today as they were before - just doing different things.

It's like the Willie Sutton story. Q: Why do you rob banks? A: Because that's where the money is.

These drug lords are not in the drug business because they have a particular fondness for the trade but because that's where presumably the easiest money is. If that avenue is gone, they'll try and do other things - extortion, smuggling, counterfeiting etc.

that seems a little optimistic. There's a lot more money and traffic in cocaine from down south than in marijuana, which is bulky and grows perfectly well in more northerly climes. I don't see much chance of legal cocaine any time soon.

That may be so, but the legalization of marijuana would still be a huge blow to organized crime around the world and in the US.

The problem with decriminalizing it is that the government would not get anywhere near the amount that they think they would. It is so simple to grow marijuana that a large majority would grow their own. Marijuana did not get the nickname by chance, it got it because it is a hearty plant.

Though I do agree with you that it would dis-empower some of the drug lords of South America, I disagree that it would have as great an impact on the economy.

Fair point. Although I'd argue that it's trivial to grow tomatoes and yet few people bother to do so at home.

As for the economic impact, I guess it would depend, but I'm inclined to think there would be lots of government revenues in it, if tobacco is any indication.

If tomatoes sold for $150 an ounce more people would grow their own.

And if MJ were legal, the price would drop dramatically. You can only charge so much for an easily grown weed. It's only expensive because it's illegal.

It depends what the distribution of consumption is. My guess is that 90% of marijuana users consume less than a quarter ounce a year. There's no question that there are people who consume close to an ounce a week that will grow their own, but I'm sure 95% of people would much rather prefer to buy it in stores. This will be especially true once the store-bought product is properly regulated and required to be tested for dangerous chemicals, excessive mold levels, mycotoxins, etc.

Good point, but you can play a politician and legalize consumption and regulate production Win-Win.

true... better than a dysfunctional black market that doesn't prevent consumption while enriching drug lords and criminal organizations around the world.

no, the most sweeping impact of legalizing marijuana, is that it would leave the pot heads with nothing to talk about

Sounds like that figure only includes the revenue from sales taxes and retail fees. What about the savings from not having to enforce existing pot laws (not sure how much this is really a big deal in CA), and the increase in jobs and economic activity for all the agriculture and distribution businesses that would jump into the market. I'm guessing the overall economic impact on the state would be huge...like creating several Googles overnight.

Supposedly, ending the entire drug war would save the country $77 billion a year.

http://www.cato-at-liberty.org/2009/03/12/end-drug-war-and-s...

El reg threw this one about a few months ago too. Apparently, legalising would save the UK a packet.

http://www.theregister.co.uk/2009/04/07/legalising_drugs_rep...

On the other hand, I think a lot of estimates on what marijuana taxes would take in are overestimated.

In any case, enforcement savings would long before taxes. Possibly alone. Outright legalisation is rarely really on the table. It's decriminalisation of personal use, reducing it to rarely enforced minor infringement or something along those lines.

You can't expect the full suite of benefits from that. You save quite a lot on enforcement and incarceration. Mostly, the proponents want that to go into treatment.

But you still have associated crime, Criminals still control the industry. You don't get any taxes.

Pot is decriminalised in the Netherlands but the coffee shops where it is sold are in a quasi-legal gray area. Nevertheless this seems to have worked out OK for the dutch in terms of both permit revenue and taxes.

As pot smoking is a fairly social activity, I think many people would happily buy it over a counter - although ironically, California's strict anti-smoking laws might be a bigger barrier to the spread of such establishments. Personally, I much preferred the Dutch model - same way I can buy beer at the supermarket, and it's better value, but oftentimes it's nice to go to a bar and get it on tap. Bars don't seem to be limited by the existence of liquor stores.

The crime is only there due the high markups on the product, given its difficulty to obtain. You could produce the product much cheaper legally.

In the case of the most addictive substances that tend to drive a lot of petty crime it's probably better to give the stuff away free.

The crime is there because the only way to get marijuana is illegally. A market exists. Profits exist. Anyone serving that market is by definition criminal.

Decriminalising personal use (but not sale, import, cultivation, etc.) doesn't fundamentally change that.

Link to the entire, original article:

http://www.google.com/hostednews/ap/article/ALeqM5j9P7paNzS3...

A $50 per ounce fee is nothing, especially considering that the price would plummet as the market would be flooded with suppliers. The likely scenario is that an ounce after legalization, with the fee, would still be cheaper than a pre-legalization ounce.

And about being able to grow your own: if legalization happens, there's no way they'd rescind that right. Distributing what you grow is another issue altogether, an issue that I, and many others I assume, don't really care about.

$50 per ounce seems high enough to drive lots of potential consumers to the black market.

EDIT: And either way, you're trying to levy taxes on things people can already grow and distribute themselves. So it turns out that out of tax enforcement they'd have to shut down illegal grow operations anyway, just so some corporation can sell green cigarettes to the mass market. This isn't the legalization we're looking for.

They levy taxes on things people can already make at home now (beer for one). It works. Most people are lazy enough to let the market do it for them. Look at all the medical marijuana stores--those people could grow their own but they decide to buy instead.

Worst case scenario and everyone grows their own we still aren't spending billions of dollars hunting down, prosecuting and imprisoning people for weed.

Very few recreational potheads grow their own. But they buy from networks of friends, all of which go back to some illicit grow op. That grow op will continue to exist if taxes are too high. It doesn't need any startup costs or anything, because the black market is already running.

With cigarettes there is also a black market, but growing tobacco is harder, the black market is recently established, and it's easy enough to steal cigarettes (e.g. by robbing a cigarette truck).

From http://en.wikipedia.org/wiki/Marijuana :

The United Nations Office on Drugs and Crime claims in its 2008 World Drug Report that typical US retail prices are 10-15 dollars per gram (approximately $430 per ounce).[76]

So $50/oz doesn't seem very high (ha) when the legalization would bring the price down more than $50.

$50 for something that passes quality control is more than fair.

+ chances are the stuff will be better than what is out there right now, since corporations who'll make pot their business would need to compete between each other to gain customers.

uh, $50 dollars an ounce is not an unreasonable price - at all.

The "$50 per ounce" is a hypothetical tax on legal marijuana, not the hypothetical price of legal marijuana.

According to wiki answers 1 ounce of marijuana ranges from 110$ to 500$. In mass production you could probably grow marijuana at something like 1$ a pound, so like cigarettes you would mostly be paying the cost of tax. My guess is it would be a little cheaper than it is now say 65$ an ounce which would limit it's value on the black market.

For comparison 1 ounce is around 2 packs cigarettes which is and ~8$, but I think marijuana has a lower active dose.

FYI, an ounce is a lot of pot. I don't smoke all the time, but when I do I'd class myself as a bit of a heavy user, eg I prefer to get stoned every evening.

An ounce would last me about 2 months, that'd be about $350-400 (based on buying a smaller bag once a week). In the Netherlands, a similar/quantity/buying pattern would have been about $250. This unscientific analysis (but with a very large sample size...cough...) suggests the black market premium is about 30-40%.

Well, first of all, most people don't smoke marijuana by the ounce lol. An eighth of pot is currently around $60 on the black market, and legal sellers would probably keep the price around the same to compete. Which means, even with a $50 an ounce tax, assuming prices stay the same, there are huge profits for sellers.

At the same time, pot is much cheaper than cigarettes for the user, since an ounce would probably last a casual smoker weeks or months.

it's 6.25 bucks an eighth. I'd happily pay that as a tax, and I think a lot of other people would too.

What's a reasonable price?

I don't think it's all that high; it's equivalent to about 12.5% of the current BM retail price. I could grow (and have) but it takes months and a commitment to gardening. A legal outlet will be able to make larger wholesale purchases and get a better price on them from growers, more than offsetting the tax.

I think your idea of corporate green cigarettes is deeply misplaced, BTW.

Especially since:

- Such a lively market already exists.

- People can grow their own.

The government thinks they'll receive $990M at $50/oz in tax revenue. That means they've projected to sell 19.8 million ounces, which is equivalent to about 561 metric tonnes. That's a lot of weed...

EDIT: from http://www.canorml.org/background/CA_legalization.html:

"Over 1.6 million Californians have smoked marijuana within the past 30 days, according to the most recent National Household Survey on Drug Abuse, which found 5.6% of all Americans over age 12 are current marijuana users. Insofar as these figures are based on self-reporting of illicit activity, they are undoubtedly on the low side.

According to the survey, one-third of this population, or 530,000 Californians, are daily users.

The bulk of consumption is accounted for by "regular" users, who consume marijuana at least several times per week. Included is a small minority of very heavy smokers (10 or more joints per day), who push the average consumption figures upwards. According to a British survey by the Independent Drug Monitoring Unit [1], "regular" users average 2 oz of cannabis per month or about 2 grams per day (a gram yields one or two joints). The population of regular users is somewhat larger than that of daily users. Assuming 600,000 - 700,000 "regular users" in California averaging 2 grams per day, consumption by this group accounts for 1.2 to 1.4 million grams per day. Assuming the remaining 1 million monthly users average one joint every 10 days, this adds another 100,000 grams per day. Total marijuana consumption by Californians may therefore be reasonably estimated at 1.3 to 1.5 million grams per day, or about 1 to 1.2 million pounds per year."

Regardless of anyone's personal stance on the subject, I think it's fair to say that it would require a miracle for pot to actually get legalized in the next 3 years.

Politicians may personally agree that legalization is a good idea, but there are very few who are willing to risk being called out for being weak on anything, the "war on drugs" included.

I think the miracle is "the state of California has no more fucking money".

Do you really think that it will be enough to put their political lives on the line? Right now everyone can point fingers, but votes are pretty black and white.

Arnold Schwarzenegger is being termed out of office, though. Unless he's considering a run as US senator against Barbara Boxer in 2010 (probably a losing proposition), it won't really cost him much in the way of political capital. He has already publicly expressed some interest in the idea...and as the other commenter says, we need the money.

http://news.ycombinator.com/item?id=554166

Regarding most points made on this thread - I really don't think it's that simple. Steve Yegge's post on the subject is by far my favorite on the complexities of the subject, and not surprisingly, something I share with the majority of my smoker friends.

To make this vaguely hackerish, I think stevey nailed the stickiness of this problem: http://steve-yegge.blogspot.com/2009/04/have-you-ever-legali...

(skip to 'What exactly do you mean... "legalization"?' for the portion salient to this article)

I've read that article before and I don't find it particularly convincing.

Implementing any complex piece of legislation is hard. Luckily there are people who specialize in that sort of thing -- we wouldn't be hiring computer programmers to do it, any more than we'd hire policy wonks to code something in C++.

If the political will existed to legalize and tax, the actual implementation details, codifying the regulations, wouldn't be trivial but would be significantly less of a hurdle than getting the legislative votes in the first place.

What it would probably involve is standing up a new government agency (either at the state or Federal level), or increasing the scope of an existing one, to administer and perform the regulation. That's not exactly black magic; there are actually consultants you can hire who work exclusively in the public sector, managing "stand ups" of new agencies.

Lots of things look like impossible tasks, if you're not familiar with them. Imagine what a complex piece of software, or the whole software-development lifecycle, the process of building a major piece of software, is like for someone who's totally unfamiliar with it. You could forgive them for thinking that building anything more complex than Minesweeper is totally impossible. But it's not, and there's a huge body of knowledge within the industry on how to do it right, and how to do it wrong.

The same thing exists within the 'industry' (and it really is an industry) of public policy. It's good to appreciate complexity, but not a reason to run screaming away from it. Marijuana legalization is an eminently tractable problem.

Growing more marijuana will help with global warming too!

The more important question is, given California's current fiscal situation, will the funds from this bill be collected in time (assuming it passes this year)?

Unfortunately our current veto-happy governor would sooner see benefits for children, the needy, and the poor cut to absolute zero before allowing past any policy that isn't staunchly conservative. If we're $26 billion in debt and he's striking down tax increases, this has absolutely no chance of ever becoming law.

That's absolutely false. He's veto happy because raising taxes during a recession is the dumbest possible thing a government attemping to restart the economy could do. The government has to cut spending along with the rest of us.

In response to your issue, I see no reason why he would be opposed to legalizing weed, especially when it provides extra tax money which could be used to close the budget deficit. He's a lame duck - it's not like he's afraid of getting flak from righteous social conservatives who are opposed at this point in time.

He even says here that a debate is needed: http://www.upi.com/Top_News/2009/05/06/Schwarzenegger-Mariju...

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