Press Release: Marijuana Dealers Offer Schwarzenegger One Billion Dollars

(press release from the newly-launched LetUsPayTaxes.com web site)

August 6 -- A coalition of California marijuana growers and dealers has offered Governor Arnold Schwarzenegger one billion dollars to solve the current state budget crisis. The group, calling itself Let Us Pay Taxes, makes the offer through its web site LetUsPayTaxes.com. The offer comes at a time when the California legislature is deadlocked on a new budget and California has stopped issuing checks for vitally needed social services. Legislators are currently arguing over which programs will be cut in order to balance the budget.

"It is ridiculous that California can't pay its bills," said spokesman Clifford Schaffer. "It is a tragedy that they will cut badly needed services and programs such as medical care for the elderly and prison drug treatment when the money to fund all these programs and more is there and available. Everyone who is currently waiting for a check from the state should be enraged at this foolishness."

Regulation and taxation of marijuana could produce six billion dollars in additional tax revenue, according to economic studies linked from LetUsPayTaxes.com. In addition, it could save up to ten billion dollars in enforcement costs. "That is a conservative estimate," said Schaffer. "By other estimates, the revenues could be five times that. The economists are with us all the way on this one. Marijuana prohibition is an economic disaster."

"Let's face reality," Schaffer says. "Marijuana legalization is inevitable. The situation is already beyond control in California. The state and local authorities have offered safe harbor for medical marijuana use and the Federal Government simply doesn't have the resources for effective control." More importantly, says Schaffer, the operators of the medical marijuana clubs are no longer afraid of the Federal Government. "If you talk to them, you will find that they know they are going to win this battle. They know that the DEA is vastly outnumbered and can't begin to prosecute all of them. The few that are prosecuted are accepting their fate as martyrs because they know that what they are doing is right. They are willing to sacrifice themselves to make the point that the Federal Government has just gone too far in interfering with very personal and private decisions. There is no way the DEA is going to win this battle. At this point, it is all over but the counting of the money -- and the victims of the DEA."

Schaffer went on to say that the national market for marijuana has been estimated from a low of ten billion dollars per year to more than fifty billion dollars per year. "The first states to regulate and tax marijuana will receive an economic bonanza bigger than the original California Gold Rush," says Schaffer. "Some states will get rich like the Saudis." Schaffer predicts that it will not take long for some local areas to wake up to the economic possibilities. "We are talking potentially big bucks here," he said. "The Canadians are already starting to take note of a cannabis-fueled economic boom in some areas. Politicians can't resist fresh cash, especially when it is coming to their local community. There will be big winners and losers here. The winners will be the ones who recognize the foregone conclusion first."

The group also cites foreign terrorism as a reason to regulate and tax marijuana. "Drug Czar John Walters is being dishonest when he says that marijuana money goes to criminals and terrorists. The only reason any of that money goes to criminals or terrorists is because of the prohibition that Walters supports," said Schaffer. "Marijuana prohibition makes criminals rich just like alcohol prohibition did. The criminals are now so rich and powerful that they can challenge the legitimate governments of their own countries. There is no reason to send billions of dollars per year to foreign criminal gangs when patriotic Americans make the best products in the world. There is no reason to suffer such a huge foreign trade deficit when that money could be providing jobs and funding badly needed services right here in the USA."

Let Us Pay Taxes calls upon all US citizens to sign their petition at their web site http://LetUsPayTaxes.com and press the issue with their lawmakers. "Take the money, please," said Schaffer. "These people want to contribute. Now it is up to our politicians to tell us why they want to send those billions to foreign criminal gangs rather than to their own voters."

Permission to Reprint: This article is licensed under a modified Creative Commons Attribution license.
Looking for the easiest way to join the anti-drug war movement? You've found it!

Criminal Politicians should not benefit from taxation!

As a Libertarian I agree with your analysis of the economic benefit legalization promises, but, as a Libertarian I oppose most taxation... especially taxation without representation... that's against the law... remember?
And in no way should the criminals responsible for the continuation of the illegal drug war benefit from its end!

It's important to put the drug war in full context... a war fueled by ultra nutty religious types... who in the past have shown the will & zealous desire to kill (by the hundreds of thousands), incarcerate (700k+ annually), and steal (so much they don't keep track) from those that disagree with them.

Combatting the failed religious philosophy of Christianity is going to be a bigger and more dangerous problem for the drug war reformer, because, nothing is more dangerous then religious zealots that know their days are numbered.

Remember, Christians don't think in rational, humanistic, terms... they are operating solely on faith... the sick & insane faith that their superheroes (god & jesus #13) will save their collective souls... and if they've packed properly grant them access to Heaven?

We should STOP looking to our enemies, gov't & religion... those that created the problem, to solve the problem.

Gov't & Religion continues to be the greatest threat to honest men,

Billy B. Blunt
Tacoma, WA

comment re;criminal politicians etc.

AMEN!

Ad hominem comment-- a reply to Billy B. Blunt

As a libertarian I cannot disagree with the body of your remarks. I have a problem with you signing in as "blunt".

I understand that the word "blunt" is in use to mean a type of marijuana cigaret using a cigar skin in place of paper. Why anybody would do this is hard to understand, unless it happens that children have been maliciously misadvised for ulterior purposes. The tobacco used for cigar wrappers contains nicotine and can help get kids addicted to tobacco, which is certainly what the tobacco companies want. Through no fault of its own riefer can increase the impact of drugs it is
combined with, including addictive nicotine tobacco.

Therefore I find it highly unfortunate that anyone finds the word "blunt" under these circumstances so glamorous that they would want to use it to sign a comment ostensibly in favor of riefer legalization.

2. As concerns taxation, I don't see much problem for myself as user. I don't roll big chauvinist overdose joints or blunts. These may burn up 300-500 mg. of herb (typical commercial cigaret 700) which is several dollars a smoke.

If instead you make yourself a miniature toker (anti-overdose utensil) with a quarter-inch-diameter screened crater, you can serve a 25-mg. toke, or two, each time you want a smoke. Now do the math. Suppose you paid $280 an ounce for your herb and sifted it through a 1/l6-inch mesh strainer-- you might get 900 single tokes as described above. That's 31 cents per toke-- less than the current price of a cigaret in some states!! Smoke for "smoke", we're already ahead of the competition, even with black market prices.

2. Besides, it is not to worry about taxes anyway. If herb were legal, each family would raise their own; the rate of use, once cigaret papers are eliminated from the planet, will be a fraction of the present; how will the govt get any tax money out of it anyway?

The bad news is, they probably understand that, which is probably the reason why they stick with hardlining and scaring parents with those ONDCP/PFDFA commercials.
Tobacco is the problem. Philip Morris gives big bucks to Partnership for a Drug Free America to sponsor those scare ads in hopes that voters will elect legislators who simply keep riefer forbidden, and with it the (truly CONSERVATIVE) anti-overdose utensils which, if legalized along with riefer, would spill over into use by nicotine addicts and exterminate the profit margin in the tobacco industry as we know it!

I'm in favor of taxes on luxury items & anything unsustainable

To claim spiritual integrity, Christians have to take responsibility for and respect God's first two "commandments" to use "every herb bearing seed" and "every green herb."

"God" is on our side in the drug war, since "His only begotten son" was a ganjaman (Exodus 30:23, "swet cane" "kaneh bose" "fragrant cane" ect...)

peace

a step towards sanity... and liberty!

While it's obviously true that lying Nazi scum have stolen our government, it's also true that politicians can't resist a cash cow, a golden goose, or, in this case, money growing on trees, er, cannabis bushes. And while we won't get nearly full benefits by letting government use our tax money, legalizing the marijuana markets is certainly a step towards a sane drug policy - and a big step towards liberty at a time most government action is openly hostile to our liberties.

Good idea, but needs more work.

The cited web site doesn't say how, or how much (i.e., the tax rate) sales would be taxed. That's a problem and I can't sign a petition or support this idea until it is better fleshed out.

I think there is some "fuzzy headed" math logic involved with the notion of "taxing and regulating" cannabis sales which centers on the idea that the surplus value or profit from cannabis production and sales which now goes to supposed "criminals" can simply be shifted to the public fisc for roads, bridges and schools, and everyone wins.

But the reality is not so simple, because a within a year after "legalization" there should be a retail price crash, perhaps of as much as 50 - 75% as the per gram price of cannabis rapidly deflates to that of legal agricultural products like tobacco, strawberries and arugula. So the idea that people will still pay $400/oz. with $200 going to federal and state taxes is a chimera. It won't work that way.

It won't even work like packaged cigarettes whose price has gone up over the past several decades to support sin taxes. I'd argue that perhaps you can soak long addicted ciggie smokers in that "boil the frog" manner, who will grumble and pay $1 more for their fave brand, but from an even start, the black market will continue to beat a legal packaged goods market if the price of the goods is layered with "sin taxes". Even cigarettes seem to have "topped out" the tax potential as bootlegging, counterfeiting and restriction (people quitting altogether because of normal "demand"/price curve effect) have combined to make it unlikely that the sharp tax price increases for ciggies of the past will continue.

I'd argue that the proper tax rate, for reasons of logic, consistency and practicality should be the normal personal property sales tax rates of municipalities that have such a tax (which is not usually applied to pharmetecuticals or food in most places). that's usually in the 5 - 8.25% range. Multiplied against billions of dollars of cannabis sales, that would indeed produce big numbers and satisfy the desires of those who want to practically "tax and regulate" as a means of legalizing and mainstreaming cannabis use.

But I'd refrain from making extravagent claims that would encourage legislators to enact some special tax with a high rate which would not provide a practical alternative to the black market. Keep in mind that the original "tax stamp" legislation of 1937 and similar state "stamp acts" had an artifically high rate to serve as a de facto form of prohibition (i.e., no one would spend say $1000 to get a tax stamp to put on their quarter ounce baggie of pot to make it supposedly legal and insulate them from piling on of a civil tax liability on top of criminal charges, as such "tax stamp" laws are sometimes used).

borden's picture

I actually raised the point

I actually raised the point about the price dropping after legalization with Cliff myself. He pointed out to me that his numbers were based on the studies by Boston University economist Jeffrey Miron, links to which appear on the site. Miron's a smart guy and he understands the economics of the black market well, so I am inclined to regard his estimates as credible and hence the claims in the petition not unrealistic.

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

And Professor Miron's assumptions were what?

I agree that Professor Miron has done some groundbreaking work in the macroeconomics of estimating the existing market size, but I am very curious to the assumptions used in his study if these purport to be estimates or a model of post-prohibition demand curves for retail purchasers.

I'll have to see whether I can dig into these links and see what Prof. Miron may or may not have assumed. Should be interesting if the links ultimately let me see the original research papers. I have seen those $XX Billion macro market studies and the resultant publicity (e.g., "#1 agricultural crop in U.S., B.C. etc.")...but feel free to share if you've already drilled down there, David, and are not basing your opinion on Professor Miron's general reputation rather than his study per se as your comment seems to indicate.

The biggest issue in my mind is whether, either de jure (like homebrewed beer) or de facto (lack of effective enforcement, penalties), home grows are going to CONTINUE to be a black market alternative good to the now "regulated and taxed" commercial production. If so, as all good economists know, the retail price of pot -- including all taxes, sin or otherwise -- is ultimately going to reach an equilibrium around the marginal cost of a homegrow op. The cost of that can be readily deduced from existing costs and data (X,000 watts * yyyy hours for power * .0xxxx local power rates/kwh + materials + labor (free for true homegrows, minding and trimming costs for small "under the radar" black market grows) / typical yields.

While I'm not familiar with the economics of tobacco growing, economies of scale and so forth (indeed, if it's even practical to grow tobacco in most climates, I am not knowing), I would argue that per gram costs of tobacco compared to tax rates is pretty useless. I'd argue that in a legalized environment, the bogies going to be the cost of homegrown in a small operation, like hobyiest beer brewing at present, which is going to be nominal, approaching zero in effective terms.

The retail price is only going to reflect the convenience of someone else growing pot for you, and won't support huge markups and margins. I think a lot of assumptions about post-prohibition economics haven't neccessarily been thrown up to this reality bogie. A lot of the thinking seems to be based on what people are willing to be soaked to buy black market product today...a la "they get $400/oz easily, so let's say the retail price crashes to $200 and half of that is taxes, etc...that works!"

My only point is that once the business is out of the black market, the retail price of an ounce is going to crash down to the level of a six pack. If you can find a lot of space for taxes to be wrung out of the Phillip Morris of the world and any other Fortune 100 enterprises that want to follow the agribusiness model and distribute packaged pot to Wal-Mart in tractor trailer loads, that's great! But if Phillip Morris wants to charge $200 pack of pre-rolled reefers, I'm sure a lot of folks are going to be rolling their own, especially where there's already been effective technology transfer (e.g., Ed Rosenthal, Showtime "Weeds" second season).

Off to see if I can find out what the good professor assumed...will post back if I find out...

Well, Miron doesn't disagree with my caveat

I checked out the article from the Petition site links here http://www.prohibitioncosts.org/MironReport.pdf and after making several reasonable assumptions (same consumer demand for product, pot is somewhat 'price inelastic', price = 50% of current, based on Netherlands, plus sin taxes to take the whole price from between 50% to 100% of present levels, so his $9.5B market is conservative "ceiling"), he does include this caveat (my point above) that the devil is really in the details on legalization economics and assumptions:

"The $9.5 billion figure is not necessarily attainable given the characteristics of marijuana production, however. Small scale, efficient production is possible and occurs widely now, so the imposition of a substantial tax wedge might encourage a substantial fraction of the market to remain underground. The assumption of a constant demand elasticity in response to a price change of this magnitude is also debatable; more plausibly, the elasticity would increase as the price rose, implying a larger decline in consumption and thus less revenue from excise taxation. The $9.5 figure should therefore be considered an upper bound”. Miron, The Budgetary Implications of Marijuana Prohibition, 2005 at 15.

and footnote 30, Miron, p. 14:

"Whether such production is illicit depends on the details of a legalization law. Plausibly, growing small amounts for personal use would not be subject to taxation or regulation, just as growing small amounts of vegetables or herbs is not subject to taxation or regulation."

Presumably, either de facto or like beer (unless they come up with some novel regulation techniques, like limiting grow sizes, providing for numbered tags to use on plants and having serious enforcement and penalties for growing unregistered or overlimit plants, etc.

Of course, the costs of such regulation and enforcement would need to be factored back in as a net offset to the new tax receipts. Miron's study assumes all money now wasted in inefficient enforcement would be a savings and counts that as a benefit. However, more complicated regulation that seeks to regulate even the home grow or small operator effectively will have to deal with a very serious issue of enforcement: effective enforcement will be a big expense, and little enforcement would render the regulation a dead letter effectively. I'm not sure that the cost-ben favors regulating the non-commerical operations, and with that, the whole retail market scenarios go out the window.

borden's picture

Hi, Jack

Jack,

Just figured out who you are. :) I won't reveal it here, though, unless you do. If you want your real name to show up, there's a box that you can check in the user account settings (or I can check it for you, if you want).

I confess that my comments were indeed based on Prof. Miron's general reputation, as you guessed (as well as on my impressions from having heard him speak and having read other work by him). I would also think that as a pure free market libertarian he would be disinclined to exaggerating the potential for tax revenue on marijuana (or anything). Still, none of that is a substitute for actually reading the paper as you've done. Sadly I have much less time for that sort of thing these days; if LetUsPayTaxes.com were my own project, I would certainly have read it first.

Correct me if I'm wrong, but my impression from your comments is that while you've raised some cautions, you still do not find the $1 billion figure per year to be an implausible one. I'm personally think that while the informal market would likely continue, the commercial market would be huge. Look at how many little plastic containers of different kinds of sprouts there are in the right section of any supermarket, despite how easy it is to grow them in your own home, and those are easier plants to grow. Even with friends sharing with friends, for a lot of people my guess is that it will just be easier to go shopping.

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

No to TAXES

The previous poster is Right ON. I'll simply grow enough for my own use; therefore I will pay no production tax nor sales tax. This is indeed a chimera. The Feds recognized from the beginning they had no right to restrict the private use of any drugs; they just kept at it until the public accepted their BS. Only the Constitutional prevention of any prohibition, existing or future, will change this egregios affront to personal liberty.

RE:No to taxes

You missed one important point. . . true, if you grow your own, you won't pay the taxes as if you purchased. . . but there will still be an aggregate savings, in that the Government will no longer be spending obscene amounts of money trying to *prevent* your growing. I have read estimates of up to $46B yearly in savings (Federal), just from the elimination of using law enforcement assets to bust growers/distributors/users.

An additional budget benefit to convince Schwarzenegger

Regardless of whether or not a tax on legalized marijuana would plateau and then drop below a projected $1 billion, the Calif. state and local budgets would realize an incredible savings from costs they now incur to enforce & punish marijuana growth, sales & usage. It would be nice to see the numbers calculated for all Calif. jurisdictions for expenses of law enforcement, the judicial systems and the prison systems. And added onto that should be the economic costs of the disruption to families and employers of those who get caught up in the criminalization system. Eliminating these expenses forgoes the need for that amount in taxes.

Decency

How about just doing it because it's the right thing to do? You know, freedom and all.

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