Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.
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September 5, 2013 at 10:27 AM
When news came that the U.S. Justice Department wouldn’t challenge legalization of marijuana in Washington and Colorado, some wonk tweeted that this could be a “game changer” for state and local tax revenues. For years, NORML, the pro-legalization group, has been arguing that legal pot could produce tax benefits. Let me inhale some skepticism. Good stuff, dude.
There’s no question that U.S. drug laws are insane and have been enforced unfairly. The “war on drugs” was lost long ago — ask any police officer. Washington’s I-502 is probably a sensible path out, although it won’t be without problems. One small unintended consequence already: I pass through clouds of pot smoke downtown (some of it smells like dog urine; obviously the stuff has changed since I was in college; does it smell better to the smoker?). Legalization will cut costs for enforcement. As to tax revenues, the state says estimates range from zero to $2 billion. I’m betting on the lower range. So is a consultant for the state.
Here’s why: For decades, an underground economy infrastructure has been built up to supply marijuana cheaply and easily to customers. Yes, it’s illegal, but it’s there and both efficient and resilient. The more that the states attach regulations and licensing fees to stores, much less tax pot, the less likely people will be to leave their dependable pusher and pay higher costs.