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by Monis Khan
Last Tuesday’s midterm elections have left liberals panic-stricken as they lament lopsided losses by Democratic party candidates for U.S. Congress. For progressives paying attention to ballot measures at the state level, however, there is cause for encouragement.
Even with the lowest turnout nationwide for any midterm election since World War II—a metric that perhaps would not bode well for populist policies on the ballot—voters in Oregon and Alaska bolstered a growing trend of support to end marijuana prohibition as both states passed measures legalizing the drug for recreational use, while also taxing and regulating its production and sale. A closer look at these ballot initiatives highlights the positive impact that a comprehensive legalization and regulation strategy can have on an entire state, while also exposing the hazards federal tax regulations may have on the recreational marijuana industry’s ability to grow and flourish.
Modeled after legalization efforts passed in Washington and Colorado, Oregon’s Measure 91 and Alaska’s Ballot Measure 2 are not only intended to make marijuana available for purchase to individuals over 21 and provide these states with much needed tax revenue, they are also designed to curtail growing prison populations and thus save taxpayers money. With a majority of Americans nationwide favoring legalization of marijuana, and a ubiquitous hysteria in state capitols as elected officials desperately try to balance state budgets, there is much to be learned from the great policy experiments taking place in these four states.
In 2012, voters in Washington approved a regulatory framework that would allocate tax revenues from recreational marijuana sales to specific purposes, with 15% of revenue directed to substance abuse programs and 10% set aside for marijuana education and public health programming.
By contrast, Colorado’s ballot initiative in 2012 did not specify to the same degree how tax revenue would be divided, beyond having the first $40 million dollars from the excise tax on retail marijuana products earmarked to fund school construction projects in the state as a part of the state’s Department of Education’s Building Excellent Schools Today (BEST) program. According to the Denver Post, Colorado is also “readying another $2.5 million from pot taxes so interested schools can hire health professionals.” Although legislators in Colorado have chosen to fund substance abuse programs with taxes from recreational marijuana sales as well, there is a hesitation to route funding in any particular direction until the state has a better idea of how much tax revenue to anticipate.
Although Alaska has decided to place up to a $50 tax on each ounce of marijuana sold, officials have not yet released projections on how much tax revenue is anticipated, and they will set up a Marijuana Control Board to oversee how the revenue is allocated. Oregon, on the other hand, will be placing up to a $35 tax on each ounce of marijuana sold and has decided to allocate 40% of tax revenue from marijuana sales to the Common School Fund and 20% to mental health and substance abuse programs, while also appeasing opposition groups by directing 15% of taxes to state law enforcement, 20% to local police, and 5% to the Oregon Health Authority.
As sales of recreational marijuana continue to increase in both Colorado and Washington, spectators across the country can see with more clarity how marijuana legalization, taxation, and regulation may impact their state. For those interested in knowing whether marijuana legalization has led to an increase or decrease in crime in Washington and Colorado, experts suggest that it is still “too early to tell.” Additionally, those curious to see if marijuana tax revenue can rejuvenate depleted public coffers, they may be surprised to find that taxpayers in Colorado may even see a tax refund due to higher than anticipated revenue returns from retail marijuana, courtesy of the state’s Taxpayer Bill of Rights.
With new research suggesting that prolonged pot use by young people can alter the composition of the brain, as well as a growing suspicion that marijuana’s increased potency may potentially lead to higher addiction rates, states would be wise to complement their legalization initiatives with substantive funding for substance abuse and mental health programs, just as voters in Oregon and Washington have stipulated, and legislators in Colorado have supported.
Although regulation of recreational marijuana sales will provide each of these states with much needed tax revenue that can be spent on valuable services for their citizens, federal tax code continues to threaten the very existence of the retail marijuana industry. Despite assurances from President Obama that the federal government would not intervene in legal marijuana retail at the state level, marijuana’s categorization as a Schedule I controlled substance enables the IRS to tax legal marijuana retail businesses at excessive rates, regardless if the businesses are turning a profit or not. As USA Today reports, “Under this tax code the federal government stands to make more money from the sale of marijuana than those legally selling it. And that could be enough to shut down many shops.”
Victorious ballot measures for marijuana legalization and regulation suggest there is robust bi-partisan support in this country for policies that decrease our prison population, save taxpayers money as a result, and also generate valuable tax revenue so that resources like mental health and substance abuse programming are available to the general public. Unless Congress supports public opinion on the subject by altering the Controlled Substance Act, the positive contributions that tax revenues provide may be short lived as the federal tax code continues to undermine the fledgling legal marijuana retail industry.
Monis Khan is host of an independent web show, Colored Commentary, a journalist with the Al Jazeera Media Network, and a former Fellow for Public Affairs at the Coro Center. You can follow him on Twitter at @monisismissing.