Folks in favor of the legalizing marijuana could, until today, point to a plausible tax-free scenario: A state could just repeal its Prohibition laws, as New York did for alcohol in the early 1920s. In that case, the state would collect no tax, but would leave enforcement of non-tax laws to the federal government. A variation on that scenario would have happened if the federal government had shut down the regulatory schemes in Washington or Colorado, leaving possession legal.
But Eric Holder’s announcement, that the Administration will let state legality operate, takes away the possibility of tax-free marijuana, as a practical matter. Marijuana, where legal, is no more likely to be tax-free than wine, taxed in every state, even California.
The Center for New Revenue 