Forbes: Stirring the Pot: Could Legalizing Marijuana Save the Economy?
On April 2, One L. Goh allegedly went on a shooting spree inside Oikos University in Oakland, California, killing seven students. That same day, federal agents were otherwise occupied, raiding a business less than a half a mile away. That business, Oaksterdam University, is a medical marijuana training school in a location where it is considered legal for state and local purposes.
There’s some sad irony here.
One is, of course, not directly related to the other. But you can’t help but look at the two events – on the same day, just blocks away from each other – and wonder about our priorities. The expenditure of resources – including those linked to public safety – for political purposes feels misguided and wasteful. And it takes away from bigger, more important matters, like keeping taxpayers safe.
A spokesperson from the Internal Revenue Service (IRS) was on hand for the raid but didn’t comment on the specifics. She didn’t need to. It is no secret that the IRS has been at the forefront of the efforts to shut down medical marijuana dispensaries – not because they haven’t been filing and paying taxes (they have) – as part of a targeted effort by federal agencies to shut down the medical marijuana industry.
The IRS has been involved with monitoring the marijuana trade for nearly a century: it was the taxation of marijuana in the 1930s which lead to the criminalization of the drug in the first place. Until recently, however, the IRS had not come out swinging against medical marijuana dispensaries – not until last year when directed by the current administration to do so, memorialized in a June 2011 Department of Justice Memo (downloads as a pdf).
What’s the basis for the crackdown? States are getting cheeky, it seems. And apparently, the feds don’t care for that very much.
Under federal law, marijuana is still classed as a Schedule I drug which means that it is not legal in any form, including for medical purposes. Despite popular belief, it cannot actually be prescribed (to get it in most states where it’s legal, you need a note, not a prescription, from a doctor). That hasn’t stopped states moving to legalize marijuana for medical purposes. Sixteen states and D.C. have done so: Alaska, Arizona, California, Colorado, Delaware, Hawaii, Maine, Michigan, Montana, Nevada, New Jersey, New Mexico, Oregon, Rhode Island, Vermont and Washington. Twelve more have similar legislation pending: Alabama, Connecticut, Idaho, Illinois, Kansas, Maryland, Massachusetts, Missouri, New Hampshire, New York, Ohio and Pennsylvania.
States that have moved to legalize marijuana for medical reasons have done so for quite logical reasons: legalizing the drug (like nicotine and alcohol) means that it can be regulated. Regulations mean control. And control is directly linked to the almighty dollar.
The drug industry – both legal and illegal – is quite a lucrative market. Keeping it illegal, the argument goes, means that the most benefit flows to illegitimate members of society: dealers and cartels. On the other hand, taxpayers and government bear the burden of chasing those dragons as incarcerations for what are basically petty drug crimes continue to rise: $200 transaction can cost society $100,000 for a three-year sentence.
It’s estimated that the legalization of marijuana (not just for medical purposes) could take as much as $10 billion away from the cartels and dealers. And that’s not limited to the Colombian or Mexican drug trades. Domestically grown marijuana is thought to be the second most profitable cash crop in the United States: only corn is considered to be more lucrative.
To think about the kind of impact that could have on our economy, you need only look to the U.S. beverage alcohol industry. Making alcohol legal again has paid off. Just last year, the industry generated $91 billion in wages and over 3.9 million jobs for U.S. workers. In 2008, alcohol contributed over $40 billion to state and local revenues; nearly half of that came from corporate, personal income, property and other taxes.
State and local governments aren’t stupid. They see those numbers as positives. Take San Jose, for example. According to the Sacramento Bee, taxing legal medical marijuana collectives brought the city $290,000 in the first month the tax was imposed. Annualized, that’s nearly $3.5 million.
At the same time, decriminalizing the use of marijuana could reduce the amount of resources that states and municipalities are now forced to spend on enforcement and incarcerations.
But not everyone is on board with the idea. Some worry that taxing medical marijuana (or any form of marijuana) will legitimize the drug. That, it’s argued, would open the floodgates to increased drug use, moving from marijuana to stronger drugs like heroin and cocaine – the whole “gateway drug” argument. The Coalition for a Drug Free California objects to taxing the drug on principle, noting that some studies cite the societal burden of the drug as higher than the potential value (downloads as a pdf); the same arguments have been made against alcohol and nicotine.
There are no easy answers. But if the federal government successfully puts an end to legal medical marijuana sales – and the revenue generated for states and municipalities – where will those dollars go? Underground? Street criminals? Mexican cartels? One thing is for sure: they’re not going away.