(For a more comprehensive discussion of this issue, go to http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1741735.)
The process of initiative and referendum that California and other, mostly Western, States use is a weak instrument for creating a new system of taxation and regulation .
California’s Proposition 19 reflects the wishes of the powerful forces in the marijuana community. For instance, it doesn’t even tax marijuana: it allows localities to tax or not tax.
This one-sided drafting is a recipe for backlash. In a deliberative process, by contrast, if marijuana becomes legal, opponents of marijuana won’t necessarily be convinced it’s OK, but some of them may cut a deal if they see enough benefit from the revenue gain.
The American way of the Founders is not the victory of one faction over another, but accommodation. Meaningful taxation of marijuana is the middle ground we may get to one day.
Proposition 19’s revenue is so speculative and ephemeral that even if it passes, all the tax thinking remains to be done.