Outside the Beltway

On Legalizing Marijuana in California

California has an initiative on the ballot this coming November to legalize marijuana. However, it’s not that easy.

Steven L. Taylor
24

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Mark A. R. Kleiman has an interesting piece on marijuana legalization and California’s Proposition 19:  California can’t legalize marijuana.

The basic thesis of the piece is that even if the voters of California repeal state laws against the cultivation, sale, and distribution of cannabis, there is nothing that they can do about the federal Control Substances Act.

A fascinating tidbit in the column is the following concerning the effect on the price of the black market:

According to a study issued by the RAND Corp.’s Drug Policy Research Center this month, if the initiative passes, the pretax retail price of high-grade sinsemilla marijuana sold legally in California is likely to drop to under $40 per ounce, compared with current illicit-market (or dispensary) prices of $300 an ounce and more. Yes, the counties would have authority to tax the product, but even at a tax rate of $50 an ounce — more than 100% of the pretax price — the legal California product would still be a screaming bargain by national standards, at less than one-third of current black-market prices.

At a minimum this notes the degree to which making the substance illegal makes it so lucrative and therefore appealing as a criminal enterprise.

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24 responses to “On Legalizing Marijuana in California”

  1. PD Shaw Avatar
    PD Shaw

    I rather think the point of the article is that pot sold “legally” will have to be sold at a higher price to adjust for the risk of federal prosecution.

    I assume the feds will subpoena state records to discover those paying the tax and use that information to prosecute. There may be a “self-incrimination” issue here, but the Feds aren’t requiring or coercing the pot sellers to confess that they are selling weed. It’s probably more that the State of California cannot compel retailers to pay the tax when doing so would be tantamount to confessing to a felony.

  2. J. Stephen Avatar
    J. Stephen

    Between Federal raids on large grows (quite possibly the most effective manner in which Federal law enforcement can disrupt) and massive, massive demand from those intending to resell the product out of state, I think Kleiman’s estimation of $40/ounce pricing is a pipe dream…pun intended. $40/ounce is reasonable were it legalized in a large number of states, but not just California.

    The Federal government clumsily imposing its will on the state with the truncheon of law enforcement is likely to offend a great many citizens of California, even many of those who originally voted against Prop 19. Marijuana is, rightfully so, considered by a great many people to be relatively harmless. Rigorous enforcement of the CSA could result in quite the entertaining political circus indeed.

  3. Michael Reynolds Avatar
    Michael Reynolds

    It’s damned close to legal now. Go to a clinic, tell them you suffer from depression, anxiety or about a thousand other conditions up to and including chronic flatulence (okay, I made that last one up) and you can get world class weed.

    Hmmm. Now that I think of it . . . I’m feeling a little down myself right now.

  4. JKB Avatar
    JKB

    No worries. The Walmart-ization of the marijuana market is already happening in Oakland. Once the Progressives see capitalism creeping in, they’ll be against after they were for it.

    Capitalism is likely to get a further bad name if it messes up the California buzz.

  5. Grewgills Avatar
    Grewgills

    I don’t know how Rand got to $40/oz but that doesn’t seem likely. I would guess that $200-300*, depending on grade, would be much more likely. (In the Netherlands it runs 6-12 Euro a gram or ~$200-400/oz.) That would put it in about the same monthly cost ball park as cigarettes for a regular user (joint a day/pack a day) and considerably less for a light user.
    The price could drop lower than $100/oz if the really big players got involved but with the threat of federal prosecution remaining I don’t see Phillip Morris et al getting involved soon and even if they did they would likely be putting out a low to mid grade product (sub 12% THC and not all that tasty) and that would leave plenty of room for ’boutique’ growers with higher end product.

    One of the more ridiculous facts about federal marijuana law is its classification as a schedule 1 controlled substance leading to higher federal legal consequences for marijuana than for cocaine, opium, and a variety of hard drugs. Max federal sentence for distribution of marijuana is life in prison, for powder cocaine or opium 5 years. At the very least on a federal level it needs to be reclassified as a schedule III. That should be relatively politically painless at this point and free the feds from prosecuting medical use.

    * As it stands now a $100 and a good story will get you a prescription with which you can buy or grow and then you would generally pay between $300 and $500/oz.

  6. Herb Avatar
    Herb

    Interesting stuff, from what would happen to prices to how enforcement (or lack of enforcement) would play out.

    My take:

    If cannabis were legalized, prices would not drop across the board. Oh, sure you could find an ounce for $40 –just like it’s easy to find a cheap wine– but the premium stuff will still command a premium. And while open competition might drive prices downward on some strains, it may also drive prices upward for others.

    I’m not sure it will act like any other product on the open market, with diverse levels of quality and price. I know there are some that would argue that the black market keeps prices high, a law enforcement premium, but I’d argue that the black market keeps prices stable.

    As for how the Feds would handle California’s legalization of it…they might spend their energies going medieval on west coast dope smokers, but I think it’s more likely that the Feds would go the “selective enforcement” route, saying “We won’t prosecute if you’re following state law.” It will play out that way until either the state law, or federal law, is changed.

  7. floyd Avatar
    floyd

    “”At a minimum this notes the degree to which making the substance illegal makes it so lucrative and therefore appealing as a criminal enterprise.””

    It also seems that it notes the degree to which making the substance “legal” makes it so lucrative and therefore appealing “to” another a criminal enterprise…..

  8. floyd Avatar
    floyd

    Are we going to legalize weed in the workplace or just give all the new legal users a welfare check?

  9. matt Avatar
    matt

    Just a heads up but good commercial weed with few to no seeds can be purchased here for 50 bucks an ounce already and it’s completely illegal and far from any medical states…Like Herb was saying though the really good stuff goes for much more though 🙂

  10. matt Avatar
    matt

    Floyd : We going to legalize booze for the work place or just give all the new legal users a welfare check?

  11. Grewgills Avatar
    Grewgills

    Are we going to legalize weed in the workplace or just give all the new legal users a welfare check?

    Are we going to legalize whiskey in the workplace or just give all the legal users a welfare check?

  12. Grewgills Avatar
    Grewgills

    Matt,
    You were too quick for me.

  13. Steven L. Taylor Avatar
    Steven L. Taylor

    Matt/Grewgills: you were both too fast for me, as I had the same reaction.

  14. floyd Avatar
    floyd

    Matt;
    As it stands, under the influence for alcohol is lost at about an once an hour, weed can get you fired several days after partaking.
    I couldn’t care less about any priviledge for drinkers either since only a drunk can stand to be in the presence of a drunk.
    Your point is valid, poisoned is poisoned.

  15. floyd Avatar
    floyd

    Grewgills;
    Being impaired can slow your reaction time! [lol]
    No matter, same response to you.

  16. floyd Avatar
    floyd

    Steve too… Ditto,
    Grate (sic) minds think alike?[lol]

  17. Grewgills Avatar
    Grewgills

    <blockquote

    As it stands, under the influence for alcohol is lost at about an once an hour, weed can get you fired several days after partaking.

    Apples and oranges. Detection time for alcohol in urine tests is as much as a day. Urine tests for nicotine detect usage for 2-4 days. So?
    The high for 6 pack of beer and a 0.5 gram joint are similar. Neither should be done on the job. There are effective saliva tests for both that can determine recent usage.

  18. matt Avatar
    matt

    Look up cannabinoid deficiency syndrome sometime if you’re bored..

  19. floyd Avatar
    floyd

    Apples and oranges,….. Tell that to the man who loses a sixty thousand dollar a year job after flunking a drug test , five days after his last joint. The test being administered by a man who was drunk the night before, on a zero tolerance workplace.
    The question is valid

  20. Max Lybbert Avatar
    Max Lybbert

    Funny thing is that nearly all states already tax Marijuana and other illegal drugs (Google for “marijuana stamp taxes”). The idea is that people caught with illegal drugs in their possession can also be charged with tax evasion.

    While I’ve never understood the argument “if you legalize it, then you can tax it” (show me a study that shows that people who have spent years illegally producing, transporting and selling marijuana will comply with new tax laws) the whole house of cards comes down when you realize that the two issues are entirely separate. Drugs can be taxed without being legalized; and in fact they already are.

  21. matt Avatar
    matt

    Wow Max wow… I wonder why someone wouldn’t want to report their illegal weed sales to the authorities… I’d be more then happy to pay a tax if it means I could have a legal stash of weed for those nights after a long hard day at work…You know as well as anyone that they only “tax” it as a way to trump up the charges to get a plea bargain..

  22. Grewgills Avatar
    Grewgills

    Tell that to the man who loses a sixty thousand dollar a year job after flunking a drug test

    That is not an argument for why marijuana should be illegal or why jobs should have draconian drug policies.

  23. Max Lybbert Avatar
    Max Lybbert

    Wow Max wow… I wonder why someone wouldn’t want to report their illegal weed sales to the authorities… I’d be more then happy to pay a tax if it means I could have a legal stash of weed for those nights after a long hard day at work…

    Because of that 5th Amendment thing, the tax laws already on the books are set up in a way that paying the tax does not become self incrimination. This is usually done via a stamp tax: the person paying the tax doesn’t need fill out any contact information. Instead they purchase stamps and place them on the contraband.

    The underlying question remains: what evidence exists that drug dealers who have spent decades skirting the law will suddenly remit taxes correctly, timely and fairly?

    You know as well as anyone that they only “tax” it as a way to trump up the charges to get a plea bargain..

    I know that this is how the law ends up being enforced. Because, well, drug dealers have never been worried about whether they were skirting any tax laws. And there is absolutely no evidence that they would suddenly become respected tax payers if drugs were legalized. Instead you can dig up some kind of study.

    Or how about this: what if California legalized and taxed drugs for one year. If the taxes collected during that year are less than 80% of the projected take, then the experiment is declared a failure, the drug laws return, and anybody arguing that taxing drugs is the Yellow Brick Road to a balanced state budget become the laughing stock of politics (or, more of a laughing stock than they already are)?

  24. Steven L. Taylor Avatar
    Steven L. Taylor

    The underlying question remains: what evidence exists that drug dealers who have spent decades skirting the law will suddenly remit taxes correctly, timely and fairly?

    We have a model for this: the end of alcohol prohibition. We went from an underground economy dealing in booze to a totally (or at least almost–there still a handful of moonshiners) above-board one.

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