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Pot and the Deficit

This week’s musings pertain to a leafy plant with the Latin name of Cannabis. It is a magical plant. When properly ingested or smoked, it can produce pleasurable physical affects on its user. But the didacticism of this column is about the fiscal, as distinguished from the physical, virtues of the plant. It is a column about common sense of which this country has precious little. It is a column about economics and compares the cost of leaving the leafy thing as an outcast in society or taking steps to help it gain respectability.

As might be expected, there are many ways of calculating the cost of treating the plant as something illegal to possess and it is beyond the scope of this column to choose between various studies. A column on AlterNet published by Paul Armentano in 2007 states that it costs $1 billion annually to incarcerate U.S. citizens for criminal violations associated with our little green friend commonly known as marijuana. Referring to the U.S. Department of Justice’s Bureau of Justice Statistics for 2005, Mr. Armentano says in 2005 there were 33,655 state inmates and 10,785 federal inmates incarcerated for marijuana offenses. Mr. Armentano further cites FBI reports that state that police arrested an estimated 786,545 people in 2005 on marijuana charges of which 88% were for possession only. Mr. Armentano was then the senior policy analyst for the NORML Foundation in Washington D.C., an organization devoted to educating American about marijuana and marijuana policy and his figures may be high.

A working paper entitled The Cost of Marijuana Prohibition on the California Criminal Justice System published in July 2010 by the Rand Drug Policy research Center analyzes more recent statistics and the works of Harvard economists, Jeffrey Miron and Dale Gieringer. According to the Rand paper, in 2005 Miron “estimated the dollar value of criminal justice resources being spent enforcing laws against marijuana production distribution and use” at $7.7 billion for the entire U.S. In 2010 those figures were revised upward to $13.7 billion of which $1.87 billion was California’s share. Mr. Giering, dealing exclusively with the California cost, comes in at a cost of $204 million and the Rand paper puts California’s cost in the range of $280 to $370 million per year. Whichever set of numbers is most accurate, the least of them is a large amount of money spent because of the leafy plant’s status in society. The cost of enforcing the laws is not the only cost associated with societal attitudes towards the plant. It is the other side of the equation-the amount of money that would be generated if marijuana were legalized and taxes and license fees imposed on those selling the product. In the United States, however, a puritanical instinct prevails, and communities and states are quite willing to cut off their noses to spite their faces.

In California, a state facing a 6 billion dollar budget shortfall for the current fiscal year and a $19 billion deficit for the 2011-2012 fiscal year, proposition 19, a ballot measure that would have legalized the personal use and possession of small amounts of marijuana, was defeated. Here is a sample of revenues the California voters rejected. Colorado, where medical marijuana sales are legal in a number of cities and towns provides Californians an insight into what they rejected. Fort Collins, home of Colorado State University (that permits its students to carry concealed weapons on campus) anticipates total receipts by year’s end of more than $250,000. Colorado Springs, home to Focus on the Family, is earning more than $50,000 a month in sales tax revenues. Boulder, home of the University of Colorado (whose students remain unarmed on campus pending the outcome of a lawsuit filed by those seeking six gun campus privileges) , anticipates receiving more than $400,000 in 2010. In addition to the amounts received by local communities, the state has received $2.2 million in tax revenue in 2010 and an additional $8.5 million in fees.

According to Donald Boudreaux, a professor of economics at George Mason University, prior to the advent of the personal income tax in 1913, liquor taxes accounted for one-third of the federal tax revenues. Those revenues dried up with passage of the 18th Amendment to the Constitution. Mr. Boudreaux suggests that the 1933 repeal of the 18th amendment had less to do with congress’s belief that prohibition was silly than with its need for the revenues provided by taxes on liquor sales. Following prohibition’s repeal, liquor taxes as a percent of federal government revenues jumped from 2 percent in 1933 to 9 percent in 1934 and 13 percent in 1936. Perhaps some day citizens will awaken and marijuana prohibition will go the way of liquor prohibition and sales and other taxes and fees will rise. So will the spirits of much of the populace. Don’t hold your breath.

CHRISTOPHER BRAUCHLI is a lawyer in Boulder, Colorado. He can be e-mailed at brauchli.56@post.harvard.edu.

 

 

 

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