Home News & Analysis Why Legalising - And Taxing - Marijuana Is Great Economics

Why Legalising - And Taxing - Marijuana Is Great Economics

By: CaraTan Date: 1 August 2009

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Oakland, California, USA, 1 August 2009. One of the problems with drugs is they usually cost a lot and are addictive. But what if we could put that money to good use and get the government addicted? This is part of the strategy being used by those who want marijuana not only legal, but taxed.

One of Many Brands of Cannabis

Marijuana

With Oakland, California passing a law approving marijuana tax, opponents warn of heavier crime, more drug use, and only marginal revenues. Supporters claim it will raise much-needed funds in a city that has a massive deficit.

The July 21 election was passed by a huge margin. 80 percent voted in favor of Measure F: "Shall City of Oakland's business tax, which currently imposes a taxrate of $1.20 per $1,000 on 'cannabis business' gross receipts, be amended to establish a new tax rate of $18 per $1,000 of gross receipts?"

A projected $294,000 in additional taxes is expected in 2010. The city currently has a deficit of $83 million.

Sam Singer, a PR consultant in Berkeley said, "The public is more interested in having money to preserve social services and fight more important crimes."

Much of the push to have higher tax on the green stuff came from the very people that are selling it. Why would they want it to cost more for their customers to buy?

There are a few reasons. First of all, it makes the drug look more legitimate, like tobacco or alcohol. By being taxed, it's almost like it has a government endorsement or approval.

Second, it creates a guaranteed stream of revenue for the city. At one time the strategy was to get people hooked on drugs and have them depend on you forever - now it's hooking the city on the revenue. It will be very hard for the city to give up this much-needed source of income in the future once they get addicted.

On a state level, a campaign called Tax Cannabis 2010 is designed to introduce this tax (and of course legalization) to the entire state. California has a major budget problem now, and this new tax would bring in $4 billion per year.

The big question is whether or not these new fiscal revenues are worth it. The arguments against it are obvious: Crime will increase, overall drug use and abuse will worsen, and the weed will just accelerate the adoptoin of much worse narcotics.

But the other side of the story contends that people are already smoking it, and a regulated marijuana market might not be such a bad thing. It would mean people would not have to buy it through criminals and street-dealers, and that law enforcement effort could go to much more critical areas. And who knows? Maybe some of the bad guys would get put out of business.

Even US Attorney General Eric Holder seems to support legalization and taxation of marijuana, "It takes a lot of time, attention, and money to bust, prosecute, and then incarcerate marijuana users. Given the economy, this is a move that will be welcomed not just in Oakland, but most likely in major urban cities across the nation."

Yet a third side of the story is those who have been working for years fighting for medical marijuana.

According to Kevin Reed, President of The Green Cross, "This frantic, 'we need money, legalize now' movement may totally derail what we have been tirelessly working for during the last thirteen years. Proponents of legalization run the risk that people may not like what they see, the legalization-for-all social experiment might fail, and bring the medical cannabis movement down with it."

Bjorn Borgisky, EconomyWatch.com