Saturday, September 25, 2010

Revenue Implications of Marijuana Legalization Prop Unclear to State Analysts

The California State Board of Equalization, which is in charge of taxing various products and currently taxes medical marijuana, is uncertain as to the tax revenue that might result from the adoption of Proposition 19 (legalization of marijuana). Previous testimony by Robert Ingenito, Chief of the BOE Research and Statistics Section, specified that some state revenue was to be expected, but its exact amount would be difficult to estimate. According to the Sac Bee,

[i]n its previous analysis, the BOE heavily based its tax revenues estimate on a $50 per ounce pot tax proposed in state legislation by Assemblyman Tom Ammiano. But no such tax is proposed in Proposition 19.

The initiative leaves it up to local governments to tax and regulate retail marijuana operations. Ammiano, D-San Francisco, has introduced a bill to regulate the sale of recreational pot, but he says he'll likely pick up his push in the Legislature for a statewide pot tax if Proposition 19 is approved.

But until then, BOE officials say, don't expect them to come up with a state pot revenues estimate.

It is, of course, not surprising that the amount of tax revenue is incalculable if we do not know the amount of tax. For various political reasons, the proposition leaves the taxation issue to local jurisdictions. Voters who are inclined to vote for Prop 19 for revenue-enhancement reasons might want to remain active and interested after the election, to guarantee that the proposal actually delivers the tax benefits that were an important part of Ammiano's original proposal.

But, as my colleague Jonathan Simon argues in a brilliant blog post, there are many other excellent reasons to consider voting for Prop 19, including undoing unnecessary criminalization and battling a lethal and unscrupulous cartel. While not oblivious to the costs of the proposition in terms of increased usage, Simon writes:

The best way to prevent and remedy addiction, is through outreach, education, and counseling to the user community. The current state of illegality makes that harder in countless ways. Once legalized, local regulation could require marijuana stores to provide all of those services to their clients, and creative regulators could celebrate innovations and circulate best practices widely.

And this is precisely where marijuana legalization could do the most good. By demonstrating, through empirically tested regulations, that civil governance can remedy the negative consequences of recreational drug use, the legal marijuana regime could help wean us from our dependence on criminal law as a way to govern America.

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