U.S. Can Make, Save Money By Legalizing, Taxing Marijuana

[Ganjarden]

Marijuana should be legalized in the United States, some say.

The harmless plant is not addictive, its illegal distribution sparks a bloody, failed drug war, and taxing it would stimulate the economy, a former law enforcement officer said.

Terry Nelson is a 60-year-old former law enforcement officer. He worked for the U.S. Border Patrol and the Department of Homeland Security.

Today he's a member of Law Enforcement Against Prohibition, a group of retired police, prosecutors and judges who think all narcotics should be legalized and regulated.

"Scientifically, it's proven marijuana is not addictive," Nelson said. "Yet, addictive drugs like nicotine and alcohol are sold legally."

Nelson spoke from his cell phone outside of El Paso. Across the river there, a bloody Juarez battle between warring drug cartels killed thousands of gang members and innocents last year.

"Until you remove the criminal element, you can't get control of the violence," he said. "We've got to stop the crime and violence associated with it. It's killing people all over the world."

By legalizing and regulating marijuana, drug cartels and violence would wither. You don't see Coors and Anheuser Busch fighting with machine guns in the streets of Golden, Colo., he said

Tim Felger is a former U.S. military member who moved to Canada. He's organizing the 2009 Worldwide Marijuana March, a civic movement Saturday aimed at legalizing marijuana.

"When you take drugs off the market, you get an increase in crime and violence," Felger said.

By giving Americans free choice, the U.S. government could also use the billions of dollars, spent each year in fighting drug use and jailing offenders, for better purposes.

"By legalizing and taxing marijuana you could bring in an estimated $6 billion to $7 billion a year," Nelson said. "That doesn't include the savings you would have from the cost of jailing offenders and not having to fight the drug war."

More than 800,000 people a year are arrested and imprisoned for smoking a plant that's never killed the user, he added.

"When we don't control and regulate a commodity people want, some other group will fill that void," Nelson said. "We know these drugs are going to be used. Let's regulate it. We're not going to arrest our way out of the drug war."


News Hawk- Ganjarden 420 MAGAZINE ® - Medical Marijuana Publication & Social Networking
Source: Victoria Advocate
Contact: Victoria Advocate
Copyright: 2009 Victoria Advocate Publishing Co.
Website: U.S. Can Make, Save Money By Legalizing, Taxing Marijuana

 

[EJBubbles]

I'm 100% for legalizing Marijuana.

I find my own thoughts entertaining and valuable.

The only sure-fire way to get pot legalized is to find some irrefutable, early biblical testament to Jesus's MJ use, then have Tom Hanks light up with him during a flashback in the next installment of super bible stories.


Key points about legalization that I feel bold enough to discuss:
$$ available to the feds through taxation on legalized MJ.
Federal financial impacts of reducing the criminal population.
Legalization's potential negative financial impact on Federal Tax revenue.
Job creation/loss.


The ONDCP (Which is charged with White House Drug Policy) estimated that Americans spent a total of $11Billion on Marijuana in 2007.
Lemme start by working with that figure, and by making this series of assumptions:

The base price of MJ would not drop after legalization
Consumers would be comfortable with a 10% tax on that base price
Demand would remain constant

That series of assumptions leads to the conclusion that:
Tax revenue from MJ sales would land somewhere around $1Billion, which would be split up between states and the Fed...I'll say 50/50, leaving the Feds with only $500Million annually in direct revenue from consumer sales taxes on MJ.
Not enough to sway a debate.

A different series of assumptions:
The MJ market grows to match the current alcohol market ($100Billion)
The alcohol market isn't negatively impacted
Consumer sales tax is 10% for MJ

Under these assumptions, the total consumer sales tax revenue would be $10Billion per year, again being shared equally by states and the Fed for a Federal benefit of $5Billion annually.
I feel that $5Billion annually isn't enough to overcome the political pressure that exists against legalization, but it's getting there.

Without the need to discuss finer points about the balance between price and demand, nor the balance between tax gained from MJ and tax lost to Alcohol: I feel confident that the range of total available Consumer Sales Tax Revenue to the Feds from legalized MJ lands between $500Million and $5Billion, neither of which are all that huge. ((My "arbitrary" pick for a likely real tax revenue increase from legalization is $2.75Billion annually; which wouldn't kick in immediately, more like after a few years if things go very well very quickly))


Now onto the savings from a reduction in criminal population:
Pulling from some Bureau of Justice Statistics releases:
In 2007, there were about 2.3 Million incarcerated individuals, total, in state and federal jails and prisons.
From the BJS, and other sources, you can find that 20% of those incarcerated in 2007 were there for drug offenses, and that 20% of those incarcerated for drug offenses were there for MJ offenses...in the end, a good estimate for the population of individuals who are incarcerated for MJ crimes is 4% of all those incarcerated, or about 92,000 people on any given day. ((Perhaps it's more correct to state that there were 92,000 people years spent incarcerated for MJ crimes in 2007))
Assuming it costs the gov't $30Thousand per inmate per year, the governments would save $2.76Billion due to a reduction in criminal population...a number that I believe to be a high estimate considering that prisons are so overpopulated already that a 4% reduction in inmates won't likely lead to a 4% reduction in guards, or of the bulk of the overhead costs like lighting and general upkeep etc associated with the $30k annual estimate.

Another direct cost to the government from housing inmates is the loss of federal tax revenue due to the unemployed status of each inmate. Assuming $15K annual income per MJ inmate, and 10% tax on that income, $0.14Billion each year is withheld from the feds by non-earning inmates.
Arguments about the negative impacts on earning potential from MJ based criminal records aren't likely to increase my loose $0.14Billion estimate of tax revenue loss by more than a factor of 2...meaning that this cost to the government is small enough to ignore in financial discussions about legalization.

Consider potential productivity loss as seen in the GDP...in the US, the GDP is about $10Trillion annually. I'll assume that the Feds take in 10% of that through various layers of taxation, giving them $1Trillion to work with every year.
Assume a noticeable productivity loss after legalization, say 1%. This productivity loss would yield a tax loss of $9Billion...which is larger than the sum of the extra tax revenue and the inmate population reduction combined.
Here too, if you throw in the unemployment factor, no appreciable difference is made: 92,000 people times $20,000 per year (I chose a larger income for the heck of it) the GDP would rise by $1.8Billion, bringing in another $0.18Billion in tax revenue...not significant to the Feds.

What about exportation? Well, anywhere where it becomes legal is likely to be able to grow their own, and we won't be able to legally export to anywhere where it isn't legal. Plus, the US is generally a larger consumer than exporter, so it's reasonable to assume that we'd be importing more than we were exporting...for an overall negative effect on the US economy...
albeit another small effect.

Job creation/loss.
Growers, distributors, etc etc; let's say that we could create 100Thousand new jobs...I take that number from the market estimate of $11billion considering that about 1/3 of the market cost would pay employees who each made $30Thousand/year.
100Thousand jobs would fill 500 head shops per state with 4 well paid employees each...certainly a large estimate for how many shops could open up within a couple of years! Allow overestimates of pay rates to counteract pay for supporting employees/growers...or don't and double the number to 200Thousand new jobs if you like!
100Thousand jobs wouldn't have a statistically noticeable impact on employment rates considering that we have around 200Million working people. We'd be increasing the total number of employed people by about 0.05%.

As a general rule, every branch of our Criminal Justice System is overburdened meaning that no CJS jobs would need to be lost if MJ were legalized. 4% is a tiny decrease in inmates and the only outcome I see for CJS employees is that the CJS employees' jobs would become slightly more manageable.
The drug monitoring industry would likely take a hit... and though I haven't a clue how many people would be impacted by that hit on the monitoring industry, I assume that it isn't greater than 100Thousand.

Overall, I believe that there would be an increase in employable positions after the legalization of MJ, albeit an insignificant increase.


My Best Case Guess:
Legalizing MJ Could bring in $5Billion/Year worth of federal tax revenue within 3 years.

My Worst Case Guess:
Legalizing MJ would cost the feds $4Billion/Year worth of tax revenue.


I would love to be shown some flaws in my numbers which would convince me that there's a lot of money to be made by the feds from legalization...but of course, if there was all that much money in it for them, I figure that they'd have legalized a long time ago.


I am holding onto hope that civil liberties and common sense will one day matter enough to bring about MJ legalization regardless of the seemingly meaningless financial debate.


All good things,
EJBubbles

 

[Jim Finnel]

now thats an impressive first post. welcome to boards.

 

[EJBubbles]

Thanks a lot...I'm all about big first impressions, and I've got some time on my hands!

 

[medMUser]

Is there a down side to RE-legalization?

Is Marijuana Legalization a Big Government Plot?

This article got me to wondering...whatcha think?

As we go forward we may want to try to limit how burro-crates control taxation & so on. As I understand it, Cali wants to impose a $50 tax per Z. To me $50 a Z is just a bit high. Pun optional.

mM

 

[EJBubbles]

Is there a down side to RE-legalization?

Is Marijuana Legalization a Big Government Plot?

This article got me to wondering...whatcha think?

As we go forward we may want to try to limit how burro-crates control taxation & so on. As I understand it, Cali wants to impose a $50 tax per Z. To me $50 a Z is just a bit high. Pun optional.

mM

Terribly sorry about the delayed reply... and for not re-reading the case against legalization.

It's my hope that when MJ gets legalized, it gets cheaper. It's my belief that a $50/ounce tax on legal weed would be less than the indirect "taxes" associated with its illegality... having to replace a raided grow-house and support a legal team is expensive.
It's my hope that upon legalization, the cost of pot comes in line with the cost of booze... a shot of good liquor at a good bar runs around the $6 range, which I think would be fair for the cost of a tasty snapper-load at a decent "coffee shop."
An OZ should be like a 1.75 of decent booze (somewhere around the $25 mark).
A dime bag of the good stuff should cost the same as a 6-pack of micro-brew.
Perhaps it's just me dreaming, but it seems reasonable to me!

Back to the bureaucracy issues... Even though I've seen the feds in action...I cannot fathom that the pains associated with government intervention on legalized herb would be worse than sending someone to jail for 25 years over an ounce!

 

[medMUser]

EJ, I was thinking of the price to the consumer. I thought that is what was meant by the $50 tax. What I thought they meant was that the $50 would be added to the cost of purchasing a Z, which would make a Cali Z pretty high. (Pun? You betcha! )

I may be mistaken but as I under stand the legal MJ price at the shops is already pretty large. But as you observe, it's cheaper than jail.

Have a hempy summer!!

mM

 

[EJBubbles]

We're on the same page about the currently proposed CA bud tax value.

I believe that the cost of ganj remains high at the medical marijuana dispensaries for at least these four reasons:

1. It's considered medicine; a product arena that's generally accepted to be expensive.

2. Growers and dispensaries are still getting busted; creating direct losses, rebuilding costs, and legal costs... plus the risk factor associated with losses of freedom.

3. High dispensary prices are in line with the broader, illegal market. This ensures that nobody is stepping on anyone's toes, reducing the impetus to rob dispensaries. Also, if prices were much lower at dispensaries, more people would try and fake ailments to save a buck.

4. The scales of MM grow operations are still far from industrial; nowhere near the sizes of the operations that will spring up when corn-fields etc are replaced by acres and acres of legally grown green.


Once weed is legalized, market price will drop as the leading causes for those expenses disappear...at that time, I believe that $50/ounce in tax will seem exorbitant, and be voted down.
Another reason for the price drop will be direct consumer competition via in-home legal growing.

And so it was spoken...

 

[medMUser]

Yo EJB, I think you had some good points on why Cali MJ is expensive for the medical users. Makes sense to me.

If the gov finally gets enough brain cells activated & RE-legalizes hemp along with MMJ, how would the hemp fields impact the MMJ fields? And all out door growers?

How far apart would the fields have to be before the threat from hemp pollen would cease to affect MMJ grows? Does not seem like a heavily seeded (by hemp) med field would be a welcome sight. Would indoor growers need filters on incoming air?

Ahhh! The plot thickens! But in a good way. I would rather have to wrestle with the above problems than the ones we have been inflicted & infected with via prohibition.

mM