The Nation's Pulse

Is California Going to Pot?

Will drug legalization result in greater tax revenues?

By 7.12.10

Send to Kindle

Fiscally, yes; smoking, probably not. California marijuana enthusiasts gathered enough voter signatures this spring to put an initiative on the ballot that would, if passed, make it legal for adults to have small amounts of pot for recreational use and for counties and cities to decide if they want to license and tax commercial sales of it.

In the shadow of a recession, the big selling point is that legalization of marijuana would bring large amounts of new tax money into the depleted treasuries of counties and cities. The state government, being broke, makes matters worse for the locals by regularly failing to pay funds due them for various mandated programs.

While local jurisdictions would welcome new revenue, many are not enthusiastic about attempting to license, regulate, and tax legal marijuana sales. And, more than a few growers are downright hostile to the legalization measure (Proposition 19 on the November ballot), partly in fear it will encourage competition and partly in fear prices will plummet as a result of legalization.

A new study from the RAND Corporation's Drug Policy Research Center seems to bear out the second fear. It says that pot could drop in price from $375 an ounce to about $38, a tenth as much. Such a steep price drop would mean that dreams of large new pools of tax money would remain just dreams. 

The study notes that if California became a magnet for "marijuana tourists," who could buy it in coffee shops and drug stores, revenue would get a boost. Whoa. Regulations might also limit sales to customers who could prove they are California residents (as has been the case for several years with medical marijuana sales in the state). Worse, federal law still classifies marijuana as an illegal drug, and if a grower were to decide to go "above ground," packaging and distributing his product through retail outlets, he might find himself the recipient of a raid from the federal Drug Enforcement Agency. 

Further clouding the picture are the latest results on Proposition 19 from the Field Poll, the granddaddy of California polls. It shows 44 percent of voters in favor of the legalization measure and 48 percent opposed, with only eight percent undecided. There is a time-tested rule of thumb about election initiatives in California: If a proposal is at or barely above 50 percent at the beginning of the campaign it will almost certainly lose, since support tends to wane as the campaign goes on and many early undecided voters will end up opposing the measure on the grounds of "better the devil I know than the devil I don't." Unless Prop. 19 enthusiasts can turn history upside down, California will wake up on November 3 to news that, so far as marijuana is concerned, it is status quo ante bellum.

Like this Article

Print this Article

Print Article
About the Author
Peter Hannaford was closely associated with the late President Reagan for a number of years. He is a member of the board of the Committee on the Present Danger. His latest book is “Presidential Retreats.”