Feature: California Tax Authority Says Legal Marijuana Could Generate $1.4 Billion in Tax Revenue a Year

California could take in nearly $1.4 billion a year in tax revenues from legal marijuana sales, the state Board of Equalization said in a report released Wednesday. The report was an analysis of the fiscal impact of a pending marijuana regulation, taxation, and legalization bill, AB 390, introduced in February by Assemblyman Tom Ammiano (D-San Francisco).

http://stopthedrugwar.org/files/marijuana-plants.jpg
cash crop in waiting
The Board of Equalization estimates are slightly higher than a similar analysis by California NORML. That analysis estimated annual marijuana tax revenues at between $1.01 billion and $1.26 billion.

The Board of Equalization estimates that a $50-an-ounce fee on marijuana sales would generate $990 million a year. The state would also take in an additional $392 million annually in sales tax revenues. The board did not supply an estimate of the costs associated with implementing the bill, but said it would incur "substantial administrative costs." It also noted that there could be a decline in alcohol and tobacco tax revenues if a substitution effect occurred. In other words, some smokers and tipplers might switch to pot if it were legal.

Based on a review of the literature, the board estimated that annual marijuana consumption in California was one million pounds, or 16 million ounces. The board assumed that the legalization of marijuana would cause a 50% retail price drop, which would increase consumption by 40%, but that the imposition of the $50-an-ounce fee would cause that later figure to drop by 11%.

The revenue estimate comes as California grapples with a huge fiscal crisis. The state is running a $26 billion budget deficit, state employees are being furloughed or laid off, and some vendors and recipients of cash payments from the state are now being paid with IOUs.

As currently written, however, the Ammiano bill would not direct revenues into the state's general fund. Instead, they would be dedicated to drug prevention and rehabilitation programs.

That bill could get a hearing this fall, an Ammiano spokesman told the Chronicle Thursday. "Right now, we are tentatively looking at a hearing date around the end of the year," said Quintin Mecke in Ammiano's San Francisco district office.

"It defies reason to propose closing parks and eliminating vital services for the poor while this potential revenue is available," Ammiano said in a statement.

That sentiment was echoed by California NORML's Dale Gieringer, author of the report mentioned above. "With the state in dire financial straits, it makes no sense for taxpayers to be paying to arrest, prosecute and imprison marijuana offenders, when they could be reaping revenues from a legally regulated market," he said.

The report is also contributing to the ever-increasing buzz about marijuana legalization in California. Last week, the Marijuana Policy Project unveiled a TV spot touting the Ammiano bill. The ad, and its rejection by a handful of TV stations in major California markets, drew renewed national media attention to the issue, and this week, the Board of Equalization report is drawing media like flies to honey.

"The release of the estimate has certainly caused a new round of attention to the issue," said MPP communications director Bruce Mirken. "The TV business channels have been especially interested. I was just interviewed by CNBC's Power Lunch, and Fox Business News is also very interested, as well as other media. The interest is certainly continuing," he said.

The report only adds to the growing momentum for marijuana legalization in the state, said Mirken. "It definitely bolsters the case that this is a significant pot of money sitting out there that the state is turning away right now."

The state government isn't the only California entity to express interest in marijuana tax revenues this week. Also on Wednesday, Los Angeles City Council members Janice Hahn, Dennis Zine, and Bill Rosendahl introduced a motion asking city finance officials to look into taxing medical marijuana sales in a bid to close the city's budget gap.

Los Angeles is home to hundreds of dispensaries -- estimates range from 400 to 700 -- doing a thriving business. Hahn argued that taxing the dispensaries could generate significant revenues. The motion itself alluded to a proposed tax increase on medical marijuana dispensaries in Oakland -- proposed by the dispensaries themselves -- which is projected to bring in $300,000 for city coffers. Oakland has only four dispensaries.

Also on Wednesday, supporters of a proposed 2010 ballot initative, the Tax, Regulate, and Control Cannabis Act submitted the measure to the attorney general's office. Spearheaded by Oaksterdam University's Richard Lee, the measure would repeal all state and local laws criminalizing marijuana.

Under California law, the attorney general must provide a ballot summary before supporters can begin gathering signatures. That is only a first step in getting the measure to voters next year. Organizers would then have to gather 443,000 valid signatures to get the measure on the ballot.

It is unclear at this point whether the ballot initiative organizers are planning a serious effort to make the 2010 ballot or if they are just laying down a place marker to keep their options open. In any case, it is increasingly clear that the pot is boiling over in California.

Permission to Reprint: This article is licensed under a modified Creative Commons Attribution license.
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Legalize Cannabis in California

Tell your legislators in Sacramento to legalize, tax, and regulate marijuana. Visit http://yes390.org

Just tell them no.

NO new taxes. NO regulation of plants that people grow.

But by all means make it explicitly legal.

LIKE TOMATOES.

Amen Brother

Why should I have to pay 1.4 billion dollars to anyone for doing something that is nobody else's business anyway. You'd have to be drunk to think that getting 1.4 billion dollars into the hands of politicians is a good thing in the first place.

this is a joke obviously

Yeah right. A $50/oz tax on a legal plant is funny indeed. Mexican Marijuana would be available, for sale, at $25/oz. Tax free. How is the $50/oz tax going to undermine the blackmarket marijuana? It`s not. A tax on Marijuana that is too high will only ensure the blackmarket supply of Cannabis. Economics 101.

Not necessarily. The price

Not necessarily. The price would drop supposedly 50% if legalized, so even with the 50 dollar tax per ounce it would still be cheaper than it is in today's black market. The illegal growers would not necessarily be able to ship out cheaper weed of the same quality level (the legal producers will probably grow very good weed). I don't know really, the analysis can get complicated and it's not easy to predict what would happen in the end. But even if there is a black market, it will probably be a marginal thing, something like what the black market for tobacco is today. Most people would probably just prefer the convenience of going to a coffeshop.

If it was up to me, i'd just put the tax at something similar to what the alcohol tax is, and in terms of percentage of price, not in terms of ounces. Some ounces are obviously worth more than others, so the tax should be according to price.

No, you're totally confused

The joke is your complete lack of comprehension. We're talking about a 15% tax on the popular $350/ounce quality of marijuana, not a 200% tax on barely functional $25 Mexican dirt weed. And by all estimations the price of legalized marijuana is expected to drop much lower than current levels even taking taxes into account. Think about it. Do most people buy black market cigarettes or alcohol to avoid the taxes? No.

California a-taxing

There's added fiscal benefits from marijuana legalization: hemp cultivation and product development being perhaps the largest. The other would be ending the law enforcement burdens including fewer incarcerations expenses..

Medical cannabis for mill jobs will be the result of legalizing

Happy day to all from Beautiful Garberville California. The skill of Medical Cannabis growers has reached a level where high potency plants can reach between 10 and 30 ft high and wide. We are opening woodshops and mills in California,Oregon,and Washington producing the highest quality composite lumber,fiberboard,cardboard,paper,the list goes on,all from the stems of these giant cannabis plants leftover after bud harvest. We are putting our opponents down by proving to the public that more and higher quality wood products are produced from medical cannabis stems than trees could ever produce. This means jobs returning,mills reopening,and prosperity on the rise. So to all you who are trying to stop medical cannabis people from restoring jobs in the hemp wood products by growing more giant medical cannabis plants for more than just medical purposes; I urge you to take your violent,fraudulent attempted dictatorship and get out of America and every location on Earth so real people can get back to work and have happier lives! Peace and Love to all from James

Income tax

$1.4 billion tax revenues are from just the sale of the plant itself. Just think of all the black marketers not paying their income tax. All the people working in the marijuana industry would be a new source of tax income. I wonder if they even considered the fact that all the stores selling it would be paying a business tax on top of excise tax being proposed?

Plus, more kids staying in

Plus, more kids staying in school and working at burger king instead of selling pot.

1. All the ads for handbags

1. All the ads for handbags above-- are they making the point that these are made out of hemp??

2. "Decline in alcohol and tobacco tax revenues... some smokers and tipplers might switch." I have the feeling they have underestimated how colossal the drop in profits in those industries will be-- once the fear of switching to riefer is gone, children will no longer binge-drink. One Canadian study recently reported over 40% of all beer sales were associated with binge-drinking-- i.e. the medically harmful kind of consumption that costs the economy billions.

As for tobacco, over 90% of all tobacco sales are in the most dangerous of all drug consumption venues, hot-burning-overdose cigarettes, (5.4 bil. deaths/year worldwide) which will disappear from the planet because cannabis legalization will unambiguously legitimize the vaporizer, the e-cig and the long-stemmed one-hitter. WHO official Patrick Petit (Feb. 7, 2008) estimated "tobacco" (mainly cigarettes) costs the US economy alone $180 bil./year. So there could be a medical costs bonanza right when Obama needs one to float the medical payments reform.

3. It is suggested the cannabis tax money will be used for "drug prevention and rehabilitation programs." Assuming the public won't let that be a euphemism for more terrorizing, arrests, stigmatization of youngsters, for example the oft-touted "high percentage of admissions to treatment of pot-smokers" which turn out to be court-imposed, involuntary, and medically unnecessary. But let us remember what happened to the $200 bil. Clinton 1998 tobacco settlement, where the money never got to smoking-cessation programs but instead got routed into local schools, roads, cops (who arrested cannabis offenders, right?). Maybe this cannabis tax money will do the most good if it "prevents" killer drug #1, helping cigarette addicts who really want to quit.

4. The NorCalMedical guy made a good point about HEMP WOOD replacing trees to make superior products (including toilet paper). The best thing about this is, the assholes won't be cutting down virgin-growth forest any more, thousands of indigenous species won't be shafted out of their habitat. Further, as you know, hemp is BEST PRECURSOR CROP for reforestation. Forests will spring up where you never dreamed they would be. There'll be 500,000 orangutans eating 400 species of fruit in Afghanistan by the year 2222.

5. Good news for users, if you do the math: a $50/oz. tax means 5.55 cents added per single toke defined as 25-mg., or 40 per gram: after sifting out seeds (-->flower pot) and hard cellulose (-->tea pot) you get about 900 single tokes of real pot per ounce. Qur'an-Compliant (moderation, folks!) regimen of ten tokes per two days = 1826 per year, about two ounces, or $100 tax per year. Compare that with a hot-burning-overdose cigarette pack-a-day addict burning up $2000 family money per year (in a $7-per-pack state)! (Plus all that gas driving to the Walgreens.) Go for it, everybody!

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We're currently working on a solution to the spam problem...

... but thanks for turning it into positive with the hemp handbags comment. We'll aim to block hemp handbag spams too, though...

David Borden, Executive Director
StoptheDrugWar.org: the Drug Reform Coordination Network
Washington, DC
http://stopthedrugwar.org

Democrats doing damage to our cause

David
Have you seen the msnbc show "Morning Meeting"?
They are trashing our cause with false information and democrats like Karen Finney are outright laughing at the suggestion of legalization...it is sickening!
I suggest an organized write in campaign to the show demanding that if they are going to raise the issue they should get serious and stop acting like Reagan republicans.

of course every politician

of course every politician laughs at legalization. no politician takes their job seriously... in my opinion there will never be legalization, at least not in my lifetime. tyranny of the majority, thats the problem.

Legalize Dope

Legalizing pot faces serious political obstacles, but do not let that keep you from helping the state out. Let me propose for those who endorse legalizing and taxing pot as a means by which to help ease state budget problems - voluntarily pay the tax.

For California (illegal) pot smokers, simply declare on your annual tax return that you purchased X dollars of pot in the prior year, multiply that dollar amount by your local tax rate, where I live, its 9.25%, and add it to your tax liability. Come to think of it, this would work regardless of the illegal drug used – cocaine, methamphetamine, extasy, LSD, heroin, etc. Remember though, California is broke so be honest about the amount of illegal drugs you buy.

We don't need more unnecessary laws; we just need to enforce the laws that are already on the books.

In fact, California like every other state I know has both a sales and use tax. The sales tax is reported and remitted by retailers while the consumer reports and pays the use tax. So when illegal drug users buy dope and don’t pay either a sales or a use tax, they are not only contributing to death and violence such as is going on in Mexico right now, but they are also tax cheats and are helping deprive California of revenues it needs to keep nurses, teachers, police, firefighters and tax collectors, on the job.

Join ranks with medicinal pot users who already pay sales tax. You don't need to the cowards in Sacramento to legalize your drug addictions to pay the tax you owe, just declare your usage on your tax return.

Take a page from the Gay & Lesbian community and come out of your closet. Do it for the kids.

I don't think so, Carl in S.F.

I don't appreciate your calling marijuana dope. What do you call alcohol then-the gateway to wisdom? The state needs to help cannabis users by stopping kicking their faces in, before cannabis users should help the state by giving a penny more than they are forced to, to the government that is screwing them so royally.
Alcohol supremacism over cannabis tramples on every American principle of justice and fair play, the bloodshed because of the war on selected drugs is squarely on the shoulders of those making such crazy, dictatorial, violence-promoting choices as ordering alcohol use over cannabis use.
Your last comment was interesting, maybe I'll deal with it later. Gotta get back to work!
-newageblues

The same corporate illegal drug dealers who started alcohol/drug

prohibition are the same illegal secret drug dealers that keep it going in its double standard form called drug prohibition. Their just like any other cruel dictatorship which uses prohibition as resource deprivation tool as they are exempt from punishment. Just look at the story of Oliver North and Freeway Ricky Ross and you will see what we mean.

False claims

I hear the Board of Equalization is predicting a 40% increase in use with legalization.
Hard to believe since in every place where decriminalization has been implemented use has dropped.Has there been a huge increase in Alaska?
Does anyone remember the National Academy of Sciences report "An Analysis of Marijuana Policy"?
From what I've seen since the election,democrats have been worse on this issue than republicans...time for a third party.

Tax and Regulate

Tax, Regulate, Grow.

marijuana

I'd rather pay the tax then my $1000 fine, and have a clean record. I would also have a bomb job..... legalize Marijuana...... right here in america yeah.

legalize now and help the economy and create desperately needed

write to your politicians and make them work for your cause, let the peoples voices be heard, we need to get the 18-35 age group voting as the 50-65 year old voters are always at the polls if we all vote our voices will be heard in numbers a lot harder for the government to styfle the word of the people,for the people by the people lets make that ring true. in the good old usa as we need to stop putting our non violent citizens in jail for nothing , not to mention all the possibilities we could use it for fuels, oils,clothing, food, plastics,and building supplies,the list goes on and on ect..............peace love and constitutional rights for privacy, the right not to incriminate ourselves, and the pursuit of happines

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