The Legalization of Marijuana Doesn’t Solve Financial Problems. So What.



For years I’ve been saying that legalizing marijuana so we can “tax the stuff” and put the money to good use was a really bad idea.  That’s not to say that marijuana should be prohibited. It shouldn’t.  That is to say, however, its legalization shouldn’t be championed by people claiming the extra tax revenue would solve the world’s problems.

Illinois passed a law for limited legal use of marijuana over a year ago. Of course, that means absolutely nothing has changed. In Illinois, there’s a long, twisty, road between passed laws and reality.  When it comes to medical marijuana here, that long road involves over-regulated permitting, licensing bureaucracy and, most importantly, a lot of doing absolutely nothing.  That’s all ok, though, because we’re only hurting cancer patients. No need to rush!

My belief that tax revenue from cannabis sales won’t amount to much revenue is based on some pretty simple math:  Take the average cost of a bag of weed on the street- It’s not much.  Whether it’s coming up from Mexico, or being grown in the open in Hebron it’s not hard to find at rates that high school kids working minimum-wage jobs can afford.  When prices are too high, people just grow it in their basement or hall closets. It’s not tough.

Because of this, market prices are set fairly low.

Enter legalized marijuana.  Especially if you’re doing it like Illinois is pretending to do it, you’re taking the typical cost to grow, package and sell cannabis and adding on all the costs associated with regulated sales (labeling, licenses, etc.). Plus, you’re adding that all-important sales tax that the public can’t wait to spend on other things.

If that sounds like insignificant costs, you’re not very familiar with Illinois-style government. The estimated costs to open a dispensary are near a half-million dollars, which include $400,000 in liquid assets and a $60,000 permit fee.  That doesn’t include any of the costs necessary to your grow operation (industrial space, lighting ventilation, etc).

When you add all of that in, the costs quickly become… markedly more than what you can currently buy the product for illegally.  When regulated like this, legalized marijuana will always have a thriving black market (or, at least, a fairly grey one) reducing the number of taxable sales.

Think I’m wrong? Then why are tax revenues from cannabis sales in Colorado well below anybody’s expectations?  Keep in mind that Colorado already allows recreational use of the drug, so it can be sold to a much larger user base.

So what? Exactly. So What.  To argue for the legalization of marijuana based on a tax-to-spend argument is a very dangerous way to go. If the numbers don’t pan out and the “profit” to the state isn’t as promised, the justification for the legalization is lost.

The better argument is the obvious one- Marijuana is not as harmful as all sorts of other legal substances.  The government shouldn’t be in the business of telling people what to put in their bodies, especially when it won’t be consistent.

So, just legalize cannabis, already. And, don’t wait. If we legalize it in Illinois today, it might actually be legal by 2020.

2 thoughts on “The Legalization of Marijuana Doesn’t Solve Financial Problems. So What.”

  1. What about the flip-side of the financial argument, that enforcing laws against marijuana costs a heck of a lot of taxpayer money that could then be spent on whatever pet cause of the person you’re trying to convince? The number I’ve heard is $10 billion spend every year, nationally. Obviously state and municipal governments pay far less, but even still, enforcement, police time, incarceration, etc. cost money.

    Now that money saved can be spent elsewhere (or returned to the people as lower taxes).

    Is that a persuasive argument to you, or do you see it as a persuasive argument to the voters?


  2. That’s a good point, but I don’t think it would make a difference. It’s not like the “war” on “terror” or “domestic battery” is being lost for lack of funding right now. It would make a lot od sense to take the money pumped into not only cannabis enforcement, but the “war on drugs” into either other (not criminal justice related) areas or tax breaks, but that’s not typically how it goes down.

    Nobody ever got elected by running on a platform of “slashing police budgets” and taking cops off the street. If you take $10b away from law enforcement efforts on cannabis you’re going to have to put the lion’s share (if not more than the original $10b) back into some other area of law enforcement. This might mean we waste less on cannabis enforcement, but it’s really just shuffling money around- not saving.

    Even with a slower economy and traffic and criminal infractions WAY down, the general public can still be persuaded to money into “safety” quite easily (ie.

    I think your point is good and might play well to some moderate voters, but ultimately I think the safest arguments are to stay away from the financials. When the argument to legalize hinges on money all sorts of games can be played- and if the numbers don’t ultimately pan out in the long run, it undercuts the reason to legalize the substance to start.


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