The Diminishing Returns of Legalization
At a recent event, I had the chance to interview Rob Kampia, the head of the Marijuana Policy Project. I asked him about the four states – Arizona, Nevada, Maine, and Massachusetts – in which MPP has successfully promoted marijuana legalization for the ballot, and generally about the direction of legalization.
“In the progression of states that passed medical marijuana, we started with California, that lets just about anybody use medical marijuana, to most of the Western states that have condition lists, but still let people grow marijuana, to later states that then took away the home grow rights, to now a few states that won’t even let patients have actual marijuana,” I asked Kampia. “Are we going to see the same progression for marijuana legalization, where each successive wave of states becomes more restrictive than the previous?”
Kampia didn’t seem pleased by the question and responded that it was important to remember that the first states to pass medical marijuana were by initiative, while the later states had to pass through state legislatures.
The implication is that sacrifices have to be made for political reasons in a legislature to convince politicians to support it. Conversely, the people voting on initiatives will support greater liberties with marijuana than the legislatures will.
That doesn’t explain why MPP felt the need to add no-home-grow zones around medical dispensaries in Arizona in a 2010 citizen’s initiative and similar zones around pot shops in Nevada’s 2016 citizen initiative, but I let it slide, because Kampia indirectly answered the question in the affirmative.
Just as the initial medical marijuana states were more progressive because they sprang from citizen initiatives, so it shall be for the progression of legalized marijuana states. After this election, when it is likely California will legalize and at least two other states will, too, I can see other states reacting by trying to forestall the inevitable legalization through minor reforms.
Think California in 2010. Prop 19 was poised to legalize marijuana, so to undercut its support, then-Gov. Schwarzenegger signed a decriminalization measure. With the threat of arrest gone for minor possession, one of the talking points for legalization was off the table and Prop 19 lost. Look for other states with the initiative process moving to decriminalize possession and offer more treatment-not-incarceration alternatives for greater “crimes” like cultivation and distribution.
Those states may also see more lobbying for commercial legalization alternatives, suggested by the folks at RAND Corporation and pressed by the anti-pot Project SAM. Think Washington State-style legalization with no home grow. Think Washington DC-style legalization with no pot shops. Think of other options like state-run grows and stores (like state liquor stores, if the state distilled the liquor), non-commercial collectives (like Spain), decriminalized possession and retail with criminal production (like Holland’s coffee houses), quota-based distribution systems with consumer-level tracking, and so on.
The other factor affecting the progression of legalization nationwide will be the diminishing price and allure of legalized marijuana. Part of what attracts support for legalization is the monetary angle. For the initiative states, the people can dream of forming their own successful pot business or their current business benefitting from the economic boost of legalization. For the legislators in non-initiative states, it is the promise of increasing tax revenue without losing votes.
But the allure of legalization fades as it becomes more commonplace. In 2013, if you were an American pot smoker looking to experience freed weed, you booked a flight to Denver or Seattle. In 2015, you might add Portland and Anchorage to that list of destinations. But by 2017, if you’re east of the Mississippi, you’ll head to Boston or Portland, Maine, for your weed experience. If you’re in the freezing Midwest in winter, Phoenix or Las Vegas is more attractive than cold, rainy Seattle or Portland and snowy Denver.
Think of casino gambling. It used to be you could only go to Nevada or Atlantic City, New Jersey. Then your local Indian reservation or riverboat got a casino. Las Vegas had the entertainment and attractions to survive the spread of casinos nationwide, but have you seen Atlantic City lately? The more states that add legalization, the less weed tourism there will be.
Then there are the returns. Most of the states legalizing marijuana add a price-based tax, from Massachusetts’ proposed 3.75 percent to Washington State’s current 37 percent. We sell the idea of legalization to the legislatures and the people by promising how much tax money that will raise for schools, law enforcement, and whatever. That works pretty well when the state is taking an x-percent cut off of a $300 ounce. Will the tax argument work so well when the increased volume of production in more and more legal states drops that price down to $30 an ounce?
If taxed by price, as price falls, revenues fall. The only way to increase revenue would be to increase consumption, and I don’t see governments getting behind the “smoke more weed, we need taxes” campaign. So an alternative would be to tax marijuana by weight, such as California’s additional proposed $9.75 per ounce tax on flower.
But if you tax by weight, that tax becomes increasingly burdensome as the price of marijuana falls. A $9.75 tax on a $300 ounce works out to a 3.25 percent tax. But when that ounce drops to $30, now the tax is almost a third of the price. The greater the tax is as a proportion of the price, the more opportunity we create for the black market to undercut the tax. The more likely that is to happen, the less likely the legislators are going to support legalization in the first place.
If we are going to continue the forward progress of legalization, we are going to have to shift away from these economic arguments that will become decreasingly effective as legalization spreads and prices drop. Instead, we should be focusing on the injustice of locking people up for a substance safer than alcohol and the people’s right to do with their bodies and minds what they choose so long as they harm no others. Whether legalization raises money, breaks even, or costs money is irrelevant.
