Taxing pot

November 21st, 2013 at 4:00 pm by David Farrar

The Daily Beast reports:

In 2012, voters in Colorado and Washington passed full-on, no-hemming-or-hawing pot legalization by large majorities. Lawmakers in each state have spent the better part of the past year figuring out how to and regulate their nascent commercial pot industries, which will open for business in 2014 (until then, recreational pot is only supposed to be cultivated for personal use). The spirit behind the legalization efforts in both states was that marijuana should be treated in a “manner similar to alcohol.

Unfortunately, it’s starting to look like both states are going to treat pot in a manner similar to alcohol during Prohibition. Not only are pot taxes likely to be sky high, various sorts of restrictions on pot shops may well make it easier to buy, sell, and use black-market marijuana rather than the legal variety. That’s a bummer all around: States and municipalities will collect less revenue than expected, law-abiding residents will effectively be denied access to pot, and the crime, corruption, and violence that inevitably surrounds black markets will continue apace.

The lesson here is that is you tax something too much, then a black market prospers.

The upshot of such actions is predictable and depressing. Colorado lawmakers are banking on about $70 million a year (PDF) in taxes from pot and their Washington counterparts have projected new revenues of $1.9 billion over the first five years of legalization. There’s just no way that’s going to happen if a legal ounce of pot is double the price or more of back-alley weed. Even the most stoned pothead isn’t that easy to scam.

It will be very interesting to see what the legal and black market prices are, when the legal market starts. Also what market share each gathers. How much more will people pay for it to be a legal purchase?

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40 Responses to “Taxing pot”

  1. wikiriwhis business (3,883 comments) says:

    The Beehive can’t legalise Marijuana for revenue without losing face at this time.

    They just have to wait until it becomes officially acceptable overseas

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  2. SGA (811 comments) says:

    @DPF

    How much more will people pay for it to be a legal purchase?

    Aren’t people more likely to simply grow their own, quite legally, in a warm, sunny spot inside? Pot plants in both senses of the word.

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  3. wikiriwhis business (3,883 comments) says:

    Bludging here . If this is a govt owned business why do they have to go cap in hand to govt?

    KiwiRail is is likely to have to go cap-in-hand to the Government over its broken Cook Strait ferry.

    http://www.stuff.co.nz/business/industries/9427146/KiwiRail-substantial-hit-from-Aratere

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  4. wikiriwhis business (3,883 comments) says:

    ‘Aren’t people more likely to simply grow their own, quite legally, in a warm, sunny spot inside? Pot plants in both senses of the word.’

    I doubt personal growing will be legal

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  5. gazzmaniac (2,317 comments) says:

    wikiwhatever @4:14
    That’s not exactly relevant to the topic at hand is it?

    I doubt personal growing will be legal

    It says in DPF’s post that it is currently legal.

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  6. Griff (6,739 comments) says:

    Price point has been $20 since the days of Buddha sticks.
    It seems rational to allow pot
    Both as a commercial product and for personal supply.
    Unfortunately conservatives in national prevent the rational.
    :-)

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  7. wikiriwhis business (3,883 comments) says:

    ‘Unfortunately conservatives in national prevent the rational.’

    Actually, a lot of ignorance stems from Jim Anderton. Hemp really needs to be legalised for industrial purposes.

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  8. wikiriwhis business (3,883 comments) says:

    ‘It says in DPF’s post that it is currently legal.’

    That may be the case in the US.

    As for our pollies, they’ll work it so they can profit and no one else.

    and then watch their pay rises!

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  9. wikiriwhis business (3,883 comments) says:

    ‘wikiwhatever @4:14′

    o ya…wrong thread

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  10. Colville (2,077 comments) says:

    Reefer Men by Tony Thompson is a great read if you want some insight into the amount of dosh to be had in selling the weed.

    When a bunch of guys hire the top floor of a hotel in vegas and install 2 shrink wrapping machines to compress and pack the cash they have on hand you know they have a fair few bills laying about.

    2 pounds of used wrinkled bills per pound of weed was standard.

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  11. Griff (6,739 comments) says:

    Once the precedent that harm should drive our approach to drrrrgs has been set by the present plastic pot testing and standard of safety has been set.
    It should be possible to quantify harm compared to the conservative drug of choice : alcohol..

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  12. BR (79 comments) says:

    “How much more will people pay for it to be a legal purchase?”

    They won’t. It will be necessary for the commercial dealers to undercut the illegal dealers if they want the dope-heads to buy it in the shops.

    Bill.

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  13. burt (7,805 comments) says:

    So;

    Labour policy …. KiwiWeed
    National policy …. We need to see if our potential coalition partners will let us

    Actual current policy … Waste 10% of police & court time while the gangs profit enormously…

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  14. burt (7,805 comments) says:

    BR

    I think you have it the wrong way around. Commercial dealers will have a ‘legal price’ and the illegal dealers will either make a bigger profit by marginally undercutting it or they will still make a lot of profit if they are forced to reduce their price.

    What seems to have got lost in this debate is that the current policies allow the illegal dealers to make truck loads of money – surely legalising pot is also being done to disempower the illegal growers as well as provide taxes to government ????

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  15. nasska (10,649 comments) says:

    Just got off the phone to a mate who’s still in the scene. Going price at harvest in April/May, about $1500/lb to the grower so say $100/oz = 30 tinnies @ $20. Someone (usually gang affiliated or backed) has made 600% profit for the risk & very little effort. Slightly different story for dope grown indoors….it’s stronger & is usually bought at about $250/oz & sold at $25/tinnie.

    Unless the Government creates a 500 strong Ministry of Marijuana to administer sales there seems to me to be plenty of room for taxes/duties to do their bit for the Consolidated Fund.

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  16. Monique Angel (251 comments) says:

    What Nasska said. 28 grams in an Oz. A gram or tinnie is $20. Hasn’t changed since I was at varsity. Just add sakes tax.

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  17. SPC (5,392 comments) says:

    Simple … . People have to either have a ration card, or a license to grow their own, to possess it legally. They pay a license fee or they buy off their card – their card contains evidence of their legal purchase (sales tax included). Those in possession at levels for personal use otherwise pay a fine. If in possession at levels for supply, they get audited for unpaid taxes on their undeclared dealing income, a fine and … a criminal court date for running an illegal unlicensed business.

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  18. Monique Angel (251 comments) says:

    I mean ‘sales’ tax, not sakes tax.

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  19. burt (7,805 comments) says:

    SPC

    I think you lost me at ration card….

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  20. Nukuleka (209 comments) says:

    And what will society ‘pay’ in terms of the destructive impact of such drug use on its young people? The comparison with the prohibition of alcohol in the States is a wholly spurious one. People advocating the decriminalisation and/ or legalisation of drugs are fruit loops.

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  21. burt (7,805 comments) says:

    Nukuleka

    Yes agree. Insane people that let us consume alcohol, nicotine, caffeine…

    Of course the comparison with alcohol prohibition is ridiculous. I mean to say with alcohol prohibition the gangs ran black market liquor outlets. People brewed their own. Generally people still consumed alcohol and the gangs got rich. Pot in NZ is nothing like that.

    Are you Jim Anderton by any chance ?

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  22. big bruv (13,271 comments) says:

    Instead of taxing those who sell drugs or worrying about the cost of incarcerating those who are convicted of possession or supply we should just shoot the fuckers.

    Problem solved.

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  23. Manolo (13,355 comments) says:

    Labour policy …. KiwiWeed
    National policy …. We need to see if our potential coalition partners will let us

    UnitedFuture’s policy…Whatever the election winner says as long it establishes a Commission for Pot.

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  24. SPC (5,392 comments) says:

    burt, a ration card is one way to ensure

    1. verify a trail back to a legal seller
    2. constrain harmful use levels
    3. restrict supply to minors (anyone distributing supply to minors loses their ration card)

    My main point was to enable tax collection on all 3 means of supply (as to the American story) – legal at point of purchase (sales tax), grow your own after paying a license fee to do so and illegal sales (fine paid by the consumer and auditing of the seller for unpaid tax on their dealing income and otherwise punitive sanctions for running an illegal business – financial and custodial).

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  25. Yogibear (286 comments) says:

    I want to know what will happen to the regional economic development indicators.

    Northland and East Coast, last to mid table?

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  26. burt (7,805 comments) says:

    SPC

    then surely we need ration cards for booze and tobacco.

    You seem to trying to solve problems which are almost entirely cased by prohibitive legislation by complicated registration. What size army of ration card checkers do you propose we might need ? What do you plan to do to stop people holding multiple ( and fraudulent ) ration cards ? Who specifies what each card holder is entitled to ( how much and why ). Is this a one size fits all system or can each card holder have their individual circumstances taken into account. Can cards be revoked, and on what grounds….

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  27. KevinH (1,131 comments) says:

    Legislation relating to the sale and distribution of alcohol are transferrable to cannabis i.e. age restriction, point of sale, driving under the influence, work place safety. In addition to that tax payable at the point of sale, GST, at the current rate is an effective way of collecting revenue from sales.
    The New Zealand government already has experience in the sale of psychoactive substances through the recent experience with legal highs therefore going that extra step to cannabis would not be difficult. It would be interesting to know how much tax in dollar terms the government collected during that period.
    Secondly sales of legal highs proved to be a boon to retailers proving that consumers would purchase their recreational drugs from an authorised dealer as opposed to the black market.

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  28. SPC (5,392 comments) says:

    Kevin H, but why some party pills such as E/XTC/ecstasy were banned is inexplicable – especially when synthetic cannabis drugs are being sold.

    As to similar rules, I would only sell outdoor grown pot (lower THC level) to those 18 and 19 and only sell in rationed amounts. Smaller caps for those 18 and 19.

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  29. F E Smith (3,302 comments) says:

    Seeing that cannabis is generally consumed via inhaling carcinogen bearing smoke from burning plant matter into the lungs, surely the pricing of legal cannabis should be set high enough, via the medium of taxation, to discourage people from partaking in it, like with tobacco?

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  30. SPC (5,392 comments) says:

    burt, modern smart cards enable rationing without bureaucracy, there would be inbuilt ID – one card per person etc. Yes a lower cap for those 18 or 19 would be possible as well as only purchase of some marijuana – outdoor grown lower THC content etc.

    Good luck getting support for legalisation without a ration card type system in place. Taxes and the health advantages from harm minimisation would cover the cost.

    As per tobacco – I have problems with the supply of an addictive product (nicotine) and also with sale of a product that includes a cancer causing carcinogen (the tobacco tar). I would ban sale to anyone except current users who registered as addicts (and restrict purchase via a chemist), and no one under the age of 18 at present would be able to later register as an addict.

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  31. SPC (5,392 comments) says:

    FE Smith, that is the best argument against legalisation (also a reason to end of public sale of tobacco, as if sale of a product including an addictive substance – nicotine, was not bad enough).

    But levels of carcinogen intake are much lower than for tobacco. To the point where only heavy users are at risk, but a ration card already covers this point.

    A price to discourage use would incentivise continued illegal supply.

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  32. Weihana (4,496 comments) says:

    spc

    no it isnt a good argument. cannabis smoke does contain carcinogens but there is no evidence of any actual link to cancer. a large 2006 study found no detectable correlation even for heavy smokers. the purported link between cannabis and lung cancer appears to be a myth based on an assumption that it is the same as tobacco. many of the cannibinoids have well documented anti tumor effects in a range of cancers and is probably the reason that a link with lung cancer is undetectable.

    http://profdavidnutt.wordpress.com/2012/06/11/smoke-without-fire-scaremongering-by-the-british-lung-foundation-over-cannabis-vs-tobacco/

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  33. burt (7,805 comments) says:

    SPC

    burt, modern smart cards enable rationing without bureaucracy, there would be inbuilt ID – one card per person etc.

    Right… Of course. So if I didn’t ‘smoke’ then I could get a card and get my allowance so I could sell it to somebody “your limit” is too little for. ????

    What’s with you lefties that makes you need to regulate everything. It’s my body right … yet you think you have the right to tell me how much of [xyz-chemical] I can put into it via limiting me with a ration card.

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  34. burt (7,805 comments) says:

    Breaking news… SPC is elected PM and announces Coffee ration system because he/she only drinks 1 cup a day and it’s wrong that some people enjoy 7-10….

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  35. Yoza (1,535 comments) says:

    Media Ignored Expert’s Shocking Findings That Marijuana Helps Prevent Lung Cancer

    The National Institute on Drug Abuse supported Tashkin’s marijuana-related research over the decades and gave him a grant to conduct a large, population-based, case-controlled study that would prove definitively that heavy, long-term marijuana use increases the risk of lung and upper-airways cancers. What Tashkin and his colleagues found, however, disproved their hypothesis.

    Tashkin’s team interviewed 1,212 cancer patients from the Los Angeles County Cancer Surveillance program, matched for age, gender, and neighborhood with 1,040 cancer-free controls. Marijuana use was measured in “joint years” (number of years smoked times number of joints per day). It turned out that increased marijuana use did not result in higher rates of lung and pharyngeal cancer (whereas tobacco smokers were at greater risk the more they smoked). Tobacco smokers who also smoked marijuana were at slightly lower risk of getting lung cancer than tobacco-only smokers.

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  36. SPC (5,392 comments) says:

    burt, “it’s your body” line but why do you think regulation of what you do in your personal life is a left wing idea?

    It’s a more conservative and liberal division.

    And at the public level contention whether prohibition or regulation is the better management option, should there be any management.

    By your logic total prohibition would be the right wing position, because the pro life movement, those wanting to impose restraint of the sex industry, the prohibition movement (Republican dominated DC in 1920′s launched it, ended by Democrats in the 1930′s), opposition to same sex marriage and the former lack of tolerance for same sex activity is of the political right.

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  37. SPC (5,392 comments) says:

    burt, if those arguing for the right to buy and use marijuana legally, make an issue of being able to use whatever level they want part of their campaign so be it. But it is not a strategy I would recommend as one to win the hearts and minds of those who will decide the issue.

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  38. burt (7,805 comments) says:

    SPC

    That’s a fair call, both. Conservative restraint ( which failed ) and that completely liberalising would be a poor campaign strategy.

    My point is, the concept of rationing something which is already pretty much readily available seems like no more than blatant tax gathering. All be it supported by the classic revenue collection double speak of doing so in the name of mitigating the social cost. From my perspective the greatest social cost associated with marijuana today is the criminalisation of youth and the excess profits for the gangs. I don’t think implementing a tightly controlled and probably heavily taxed alternative will do much to either restrict cash flow to the gangs and IMHO it would require extensive enforcement much like today.

    From my perspective, the sale of laboratory experiments in psycho stimulation in dairies ( or approved outlets ) while marijuana is still a criminal offence is complete madness. We accept dairies selling packets of god knows what but not tinies … Oh no… You would need to register and they are restricted in supply. Cha-Ching to the gangs brother.

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  39. SPC (5,392 comments) says:

    burt, I don’t see restricting legal sales to those with a card as particularly onerous, those over 18 and under 25 have to show their ID to buy alcohol now. And given 80% and more of users would be within the moderate use cap it would not impact on their buying behaviour. So most sales would soon be legal.

    Those few who had to have more would probably just grow their own once this was legal.

    As to whether taxation would give people a reason to buy cheaper illegal product, I am not so sure. The legalisation advantages, as to tax revenues comes from the taxation of wages of growers, and the business profits of their employers and retailers, as well as GST.

    And even if there were extra taxation, as applies on alcohol/tobacco without any illegal supply then coming onto the market, would this mean illegal supply in marijuana would continue? The punitive impact of loss of assets and incarceration for those selling illegally now would mean many of these growers would supply the market legally once given the chance.

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  40. Griff (6,739 comments) says:

    Treat it like any recreational drrrrg.
    R18/21 sale restricted to acceptable outlets.
    The price is set by the market price now.
    There is scope to charge for licensing to supply commercial quantity’s.
    Quality must be as good better than it is now
    Do you drink spirits like you drink beer? Stronger pot means you smoke less.
    It has been shown by the country’s brave enough to give the USA’s war on drrrrgs the finger, that legal pot and education leads to decline in use.
    Cannabis is a mild drug compared to some legal options.
    http://www.thelancet.com/journals/lancet/article/PIIS0140-6736%2810%2961462-6/abstract

    Drug harms in the UK: a multicriteria decision analysis
    The Independent Scientific Committee on Drugs

    Proper assessment of the harms caused by the misuse of drugs can inform policy makers in health, policing, and social care. We aimed to apply multicriteria decision analysis (MCDA) modelling to a range of drug harms in the UK.
    Methods

    MCDA modelling showed that heroin, crack cocaine, and metamfetamine were the most harmful drugs to individuals (part scores 34, 37, and 32, respectively), whereas alcohol, heroin, and crack cocaine were the most harmful to others (46, 21, and 17, respectively). Overall, alcohol was the most harmful drug (overall harm score 72), with heroin (55) and crack cocaine (54) in second and third places.
    Interpretation
    These findings lend support to previous work assessing drug harms, and show how the improved scoring and weighting approach of MCDA increases the differentiation between the most and least harmful drugs. However, the findings correlate poorly with present UK drug classification, which is not based simply on considerations of harm.
    Funding
    Centre for Crime and Justice Studies (UK).

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