Legalizing Pot Makes Lots of Cents for Our Cash-Starved Government

By Paul Armentano, AlterNet. Posted April 14, 2009.

Using standard tax percentages obtained from the Office of Management and Budget, he calculates that the diversion of this market from the taxable economy deprives taxpayers of $31.1 billion annually.

For local and state governments, taxing and regulating pot could help reduce growing deficits. For instance, in Oakland, Calif., the City Council gave preliminary approval last week to a proposal to raise the business tax paid by city-licensed medical-marijuana dispensary operators. Councilmembers estimate that the new tax will raise from $400,000 to a "couple million" dollars annually.

Likewise, lawmakers in Massachusetts and California are debating statewide measures to tax and regulate the production and sale of cannabis to adults. Both state proposals would impose a fixed excise tax on the retail production of marijuana -- non-retail cultivation would remain untaxed -- as well as sales taxes on the commercial sale of the drug to anyone 21 years and older.

"The revenue effect of the proposed Act is an estimated annual revenue gain of $1.339 billion," says the California State Board of Equalization and Taxation, which is backing the measure. A more liberal economic assessment performed by California NORML's Dale Gieringer estimates that the annual revenues raised via the advent of a legal cannabis industry in California could be far higher.

"A comparable example would be California's wine industry," Gieringer wrote in a 2009 report. "With $12.3 billion in retail sales, the wine industry generates 309,000 jobs, $10.1 billion in wages and $2 billion in tourist expenditures. Extrapolating these figures to a legal marijuana market … one might expect $12 billion to $18 billion in total economic activity, with 60,000 to 110,000 new jobs created, and $2.5 billion to $3.5 billion in legal wages, which would generate additional income and business taxes for the state."

Finally, taxing and regulating cannabis would have the added bonus of taking the production and trafficking of pot out of the hands of criminal enterprises and, increasingly, drug gangs.

According to the Associated Press, marijuana is the "biggest source of income" for Mexican drug cartels. Legalizing pot would eliminate this primary income source for these cartels and, in turn, eliminate much of the growing violence and turf battles that currently surround the drug's illegal importation from Mexico.

Any way you look at it, legalizing cannabis just makes sense. So why aren't we doing it?

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Paul Armentano is the deputy director of the National Organization for the Reform of Marijuana Laws. He is the co-author of the forthcoming book, Marijuana is Safer: So Why Are We Driving People to Drink? (Chelsea Green, 2009).

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