False Promise of Tax Revenue from Pot
Study predicts windfall but discounts loss of productivity, increase in youth addiction, other medical burdens
Dollar signs are flashing in the eyes of state lawmakers under pressure to legalize marijuana. In Arizona, the state has been told it could make $113 million if it legalizes recreational marijuana; in New Jersey, the financial promise behind a push for legalization is $300 million.
The costs of legal substances such as alcohol and tobacco are about 10 times greater than tax revenue —exceeding $400 billion annually.
If all 50 states jump on this bandwagon, total revenues could be approximately $5.3 billion at a 15 percent tax rate, a Tax Foundation study found. That number could surge to $8 billion at a 25 percent tax rate.
More money may sound like a win for states. But some officials may be paying too much attention to the potential dollar signs — and not enough to the health and societal ramifications of making marijuana legally available.
“Legislators are being aggressively pressured by an army of lobbyists hired by the marijuana industry, which is motivated by increasing marijuana consumption,” said Henny Lasley, co-founder and project director for Smart Colorado, a nonprofit group aimed at protecting the health, safety, and well-being of children in the state. Lasley said legalization supporters claimed the model would eliminate the black market and generate revenues at the same time — but that hasn’t been the case.
The state itself has emerged as a new black market, said Lasley. There are also reports of marijuana from Colorado being found internationally.
“The voters of Colorado were promised that the first $40 million annually of new tax revenue would go to our schools, and yet this annual number has not been achieved,” she said.
The revenue goals were not reached in the first two years and just $27 million has gone to schools, reports have found. A new video circulating — dubbed “How Marijuana Legalization Impacts Denver Public Schools” — aims to educate voters about how state excise taxes on marijuana are used.
[lz_bulleted_list title=”High Numbers for a High” source=”National Institute on Drug Abuse; 2014 National Survey on Drug Use and Health”]Every day, 3,287 teens use marijuana for the first time.|There are about 22.2 million users monthly in the U.S.[/lz_bulleted_list]
“I have people asking me all the time, ‘Why are we struggling with school funding when we have marijuana taxes?’ Truth be told, only a portion of the marijuana taxes were dedicated to public schools and only for capital construction,” Colorado Sen. Pat Steadman, a Democrat, told Fox 31 in Denver.
“The revenues being generated are truly a drop in the bucket,” Lasley added. She noted that the $135 million generated in 2015 from medical and recreational marijuana represented approximately 1 percent to 1.3 percent of Colorado’s tax revenue.
Are Revenues Real?
Marijuana is currently legal for recreational or medical use in 24 states and the District of Columbia.
In the first month of Colorado’s cannabis sales, starting in January 2014, the state raked in $14.7 million from recreational drugs and $32.2 million from medicinal marijuana. In 2014, the regulated marijuana system produced just over $76.1 million in total revenue. That included about $56.2 million from adult-use marijuana tax revenue and fees along with $19.9 million in medical marijuana tax revenue and fees.
An amount of $31.1 billion is requested to reduce drug use and its consequences in the U.S. during the 2017 fiscal year — an increase of more than $500 million.
Stores that were licensed and regulated by the state sold $996 million worth of recreational and medical cannabis in 2015, according to the Colorado Department of Revenue, as reported by The Denver Post. Colorado’s cannabis dispensaries sold more than $270 million worth of marijuana, edibles, and other marijuana products in the first three months of 2016, the Department of Revenue reported.
There are three types of taxes on recreational marijuana in Colorado: a 2.9 percent sales tax, a 10 percent special marijuana tax, and a 15 percent excise tax on wholesale marijuana transfers.
Dr. Bertha Madras, a professor of psychobiology at Harvard Medical School, said the motives for legislators to approve legalization may be more complex but can include raising campaign donations from marijuana companies, using tax revenue to garner votes, and using that money to appease constituents.
Profits Over People
“The motive for lobbyists is clearly profits, as it was for big tobacco … with total disregard for human consequences,” she said. It is likely that high revenues will not cover the costs that marijuana will add to local and national budgets when it comes to health care, lost productivity, and legal, educational, and safety consequences.
In general, the costs of legal substances such as alcohol and tobacco are about 10 times greater than tax revenue — exceeding $400 billion annually. For illegal drugs such as marijuana, costs exceed $200 billion annually, she said.
President Obama has requested a total of $31.1 billion to support National Drug Control Strategy efforts to reduce drug use and its consequences in the United States during the 2017 fiscal year. That’s an increase of more than $500 million, or 1.7 percent, the Office of National Drug Control Policy reported.
Is all the revenue worth it? Several problems have plagued Colorado as money poured in. The state has had to increase costs for law enforcement while the prevalence of drugged-driving incidents, fatal crashes, gang-related crime, and more homeless people raises questions about the cost-efficiency of legalization.
Educators have now identified marijuana as the number-one problem facing our schools.
Some research has found that legalized medicinal marijuana was tied to more binge drinking and simultaneous pot and alcohol usage among adults. Figures from the AAA Foundation for Traffic Safety found that fatal crashes doubled in Washington after the state legalized the drug. A University of Pittsburgh Graduate School of Public Health analysis reported that Californians who lived in areas with a higher density of marijuana dispensaries had a greater number of hospitalizations for abuse and dependence.
“Our educators have now identified marijuana as the number-one problem facing our schools. Colorado now ranks the highest in the nation for youth use,” Lasley added.
Word to the Wise
Lasley said other states that have not legalized marijuana need to think “long and hard” about doing so.
There is a broad spectrum of products that fall under the term marijuana, she said. The potency of products — including those with high tetrahydrocannabinol (THC) levels — is not always listed on labels, so people may never know what they’re getting.
“[Marijuana] is marketed every day as a benign wellness product that can treat just about every medical condition possible,” she said.
Lasley added: “The green cross splashed across our state signals wellness, health, natural and organic, and this simply is not the case. It has resulted in too few kids having knowledge of just how harmful today’s high-potency marijuana can be.”