Time for a Sales Tax on Sinsemilla?

Will states let marijuana revenue go up in smoke?

As California State Assembly member Tom Ammiano put it: “What if California could raise hundreds of millions of dollars in new revenue to preserve vital state services without any tax increase?”

That question is likely to hook any state legislature’s attention these days. When times are tough, you go with your strengths. In California, one of those strengths is the nation’s most robust homegrown marijuana industry—virtually all of it off the books at present.

Reeling from a $42 billion budget deficit, the California government has been slashing deeply into state spending. The marijuana industry, variously estimated at anywhere between $4 and $14 billion per year, is the state’s largest cash crop.

Is this any time to be turning down a couple of billion dollars a year in potential state revenue? The question of marijuana decriminalization may begin to be seen under a different light, as cash-strapped states look in every corner for ways to add revenue.

The Marijuana Control, Regulation and Education Act, introduced in the California legislature last week, would legalize the possession and sale of marijuana for people over 21—with a hefty sales tax similar to the taxes imposed on the sale of alcohol and cigarettes. The bill would prohibit open street sales or sales near schools. Marijuana wholesalers would be charged several thousand dollars up front to distribute the crop, and an individual sales fee of $50 per ounce at the retail level would be applied.

Proponents of the bill claimed it would generate more than $1 billion annually, according to a report by Stu Woo in the Wall Street Journal. The California chapter of NORML estimates that the take for the Golden State could be as high as $2.5 billion a year, when excise taxes, savings in law enforcement expenditures, and spinoff industries like coffee houses are taken into account.

Ammiano, the Democrat from San Francisco who introduced the bill, told Salon: “I do have support from a lot of colleagues, who say, ‘Oh my God, I think this is great, but I don’t think I can vote for it.’” In an opinion piece for the San Francisco Chronicle, Ammiano wrote that his reason for introducing the bill was to begin “a rational public policy discussion about how best to regulate the state’s largest cash crop, estimated to be worth roughly $14 billion annually. Placing marijuana under the same regulatory system that now applies to alcohol represents the natural evolution...” In addition, Ammiano suggests, “Regulation allows common-sense controls and takes the marijuana industry out of the hands of unregulated criminals.”

A lobbyist for California police groups told the Wall Street Journal that the bill was “based on a fallacious assumption that if we could only legalize marijuana, that we will have fiscal and social Shangri-La.”

Nonetheless, more than a dozen states have signaled a willingness to move toward more liberal marijuana enforcement policies recently. All of these efforts eventually collide with competing federal statutes, making the possession and sale of marijuana potentially a federal crime. As with the issue of gay marriage, it is possible that states will continue to push back, resisting federal efforts to nullify state changes in marijuana enforcement policy.

Photo Credit: Forest Service Drug Control Program

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