Would the Commonwealth Benefit from a Tax on Marijuana?

This post was written by staff member Zach Greer.

These bad economic times have forced many people to find additional sources of income. For some, growing marijuana has been a popular solution to their economic needs. In 2008, more than 1 million marijuana plants were confiscated in east Tennessee, Eastern Kentucky and West Virginia. Roger Alford, Marijuana farming rebounds in economic hard times, LEXINGTON HERALD-LEADER, Sep. 10, 2009, available at http://www.kentucky.com/news/state/story/929103.html.

In a recent statement, State Budget Director Mary Lassiter said: "The state finished fiscal year 2009 on June 30 with 2.7 percent less revenue than it received in 2008. Things are getting worse, not better." Ronnie Ellis, Kentucky budget picture 'getting worse, not better', RICHMOND REGISTER, Aug. 27, 2009, available at http://www.richmondregister.com/statenews/local_story_239210926.html. Moreover, it is predicted that Kentucky revenues will drop another 2.5 percent this year. Id. Furthermore, the Commonwealth's unemployment rate remained above 11 percent for August 2009. Ky. Unemployment rate steady at 11.1%, LEXINGTON HERALD-LEADER, Sept. 18, 2009, available at http://www.kentucky.com/101/story/939767.html.

An in-depth analysis of the advantages and disadvantages of legalizing marijuana is beyond the scope of this blog posting. Instead, this posting merely poses a question to its readers, instead of funding eradication efforts to destroy this recession-proof crop, could the Commonwealth and its residents benefit from the legalization of marijuana? Ed Shemelya, head of marijuana eradication for the Office of Drug Control Policy's Appalachian High Intensity Drug Trafficking Area, said: "I've never seen any decline in demand for marijuana in bad economic times. If anything, it's the opposite." Roger Alford, Marijuana farming rebounds in economic hard times, LEXINGTON HERALD-LEADER, Sep. 10, 2009, available at http://www.kentucky.com/news/state/story/929103.html. As one of the largest marijuana producing states in the country, the Commonwealth of Kentucky will continue to be a forum for this highly debated political topic.

According to officials at the Office of National Drug Policy's Appalachia High Intensity Drug Trafficking Area Program (HIDTA), Kentucky produces more marijuana than any other state except California, making it home to one of the nation's more intensive eradication efforts — a yearly game of harvest-time cat and mouse in national forests, abandoned farms, shady hollows, backyards and mountainsides.

Chris Kenning, Kentucky goes after 'Marijuana Belt' growers, LOUISVILLE COURIER-JOURNAL, Sep. 30, 2007, available at http://www.usatoday.com/news/nation/2007-09-30-kentucky_N.htm.

Empirical evidence suggests that there could be significant financial incentives to legalizing marijuana. Nitya Venkataraman, Marijuana Called Top U.S. Cash Crop, ABC NEWS, Dec. 18, 2006, available at http://abcnews.go.com/Business/Story?id=2735017&page=1. In 2005, a study by Jeffrey Miron (a visiting professor at Harvard) projected that if the "United States legalized marijuana, the country would save $7.7 billion in law enforcement costs and could generate as much as $6.2 billion annually if marijuana were taxed like alcohol and tobacco." Id.

However, others argue that such large financial gains are unlikely. Rosalie Pacula, a senior economist at the Rand Corp. and co-director of its drug policy research center, said:

First, you have to consider that legalizing it [marijuana] would have its own costs. Recent research . . . shows marijuana to be more addictive than was thought. Because marijuana is illegal, and because its users often smoke tobacco or use other drugs, teasing out marijuana's health effects and associated costs is almost impossible. And more people would smoke it regularly if it were legal -- Pacula estimates 60% to 70% of the population as opposed to 20% to 30% now -- and the social costs would rise. She takes issue with figures from Harvard's Jeffrey Miron, among others, who says that billions spent on enforcing marijuana laws could all be saved by legalization. Rand's research, Pacula says, finds that many marijuana arrests are collateral -- say, part of DUI checks or curfew arrests -- and many arrestees already have criminal records, meaning they might wind up behind bars for something else even if marijuana were legal.

Patt Morrison, Should we tax pot?, LOS ANGELES TIMES, Dec. 4, 2008, available at http://www.latimes.com/news/opinion/la-oe-morrison4-2008dec04,1,2468640.column. This excerpt shows that a tax on marijuana might not result in the economic windfall that many predict.

The fact remains that Kentucky is a major producer of marijuana, a crop that, if taxed, could result in large revenues for the Commonwealth. However, some people have doubts that a "tax revenue [from marijuana] would offset the full cost of regulating and enforcing the legal market." Id. Although economic incentives alone might not be enough to justify the legalization of marijuana, it remains a topic for discussion.