Some believe that the legalization and taxation of marijuana is a common-sense step towards eliminating the illegal cannabis trade and, at the same time, an excellent way to generate mega-revenue for state governments.
While this business philosophy may sound appealing, recent calculations indicate that the legal cannabis industry could be set up to fail, being out priced by the black market by so much that there exists the question: “What if nobody buys the legal stuff?”
That’s because high taxes could get in the way of the newly established legitimate marijuana trade, specifically in Washington where in addition to a standard sales tax of 8.75%, a triple-threat excise tax on legal marijuana has been introduced that will undoubtedly drive prices through the roof.
Shockingly, recent statistics by the BOTEC Analysis Corporation show that Washington’s three-way marijuana tax plan unwittingly makes the pot smoker the pivot man, screwing them all the way to the bank with a retail price that is 58% higher than it can be purchased from shadier sources -- 37% of that cost being shelled out by the consumer.
Some projections indicate it will cost anywhere between $17 to $25.50 per gram, or up to $723 per ounce, to purchase legal weed in Washington, which is more than triple what it costs to buy high-grade pot in city’s streets.
UCLA drug policy expert Mark Kleiman, an adviser to Washington’s marijuana controllers says that selling legal retail weed at two to three times the cost of the black market dealers spells trouble.
“That’s a big problem,” says Kleiman. “The legal market is going to have a hard time competing with the illegal market, but a particularly hard time competing with the untaxed, unregulated sort-of-legal market.”
The fate of Colorado’s legal marijuana racket lies in the hands of it citizens, who must decide at the polls next month whether it will be Proposition AA, which will authorize a 15% excise tax in addition to a special sales tax of 15% along with the standard state sales tax, or vote "No" on Proposition AA, an initiative that believes that over-taxation on cannabis will undoubtedly perpetuate the black market.
The trick here appears be in the ability to find a way to balance greed with a desire to extinguish the illegal market. Something tells us that lawmakers have found a clever way to capitalize on marijuana legalization without running the risk of losing out on revenue generated by the booming illegal market.
Mike Adams writes for Playboy's The Smoking Jacket, BroBible and Hustler Magazine. Follow him: @adamssoup; facebook.com/mikeadams73.