Revenue from marijuana will be small at first, because highly taxed legal commerce can’t beat the black market. RAND’s 2015 Insights for Vermont makes that point clearly. Liquor taxes had to stay low for a while after Prohibition was repealed, as 2011’s “Laws to Tax” pointed out.
Elected officials in Colorado are having to explain that to the public. Here’s an excerpt from an article by Peter Marcus in the Durango Herald, titled “Hickenlooper: Marijuana not a budget savior”:
Gov. John Hickenlooper on Thursday said now is not the time to consider marijuana tax revenue as a new funding source for Colorado. . . .
“This whole notion of legalizing recreational marijuana should not be addressed and … analyzed as this is a source of new revenue, that this is going to help us build roads, or this is going to help us expand other worthy programs,” Hickenlooper said.
The governor’s office maintains that the money should be spent on enforcement and controlling the “grand social experiment” that is legalization.
I put the phrase “now is not the time” in bold. The same think happened in the early 30s, as federal enforcement of alcohol laws needed time to shut down the black market. Only then could taxes go up. The nascent cannabis industry can’t stand much tax. Yet. The state needs to invest in a system before meaningful financial returns can come in.