Executive Summary
In most states, public expenditures and demand for public services have continued to grow exponentially as populations increase. However, sources of revenues to fund increased demands for such services have continued to dwindle. Consequently, public policymakers face critical challenges.
While economic principles stress scarcity of resources, public policymakers can always find new ways to raise revenues. These new sources of revenues, however, have not been easy to find. Nevertheless, new sources continue to emerge. The solution to a new source of revenue is the legalized medical and recreational marijuana. States should tax marijuana (Smith, 2009). It is a solution to close the budget deficit in most states.
The new marijuana and other ‘sin’ taxes are likely to solve financial issues in several states. Smith noted that marijuana was valued at $13.8 billion annually (Smith, 2009). This value doubles the value of grapes and vegetables crops together. Some of the states have failed to tax marijuana. Indeed, the average value of marijuana is more than several cash crops in the US.
Data from government sources have shown that over 14.5 million Americans consume marijuana at least every month (Smith, 2009). However, farmers and consumers of this valuable crop have failed to pay tax to their states. The business remains illegal in many states. Hence, it is difficult to get the precise figures in terms of tax values that states could collect from marijuana. There are various reports to suggest that marijuana tax could add millions of dollars to states’ coffers.
For instance, the State of Colorado could get over $100 million a year from medical and recreational marijuana taxes (Healy, 2014). This figure is more than earlier estimates. In 2009, Smith noted that California had an opportunity to collect at least $1.5 billion or as much as $4 billion annually as additional tax revenue from marijuana. This, however, can only happen if marijuana is legalized and is no longer a criminal underground trade. Marijuana could be handled in a similar manner to beer, tobacco or wine.
Taxes from marijuana could differ. States may impose sales tax in addition to the other local sales tax. States could include other special taxes to maximize revenue collection from the trade. Marijuana could attract retail excise tax (Erb, 2014). There are also required licenses and fees, particularly for medical marijuana. Hence, it is imperative to understand how these taxes can transform public safety programs and the economy.
Interestingly, no one is complaining about marijuana taxes. This implies that consumers will still purchase marijuana even at significantly higher prices and state governments should therefore observe these figures closely. No matter how many taxes are imposed on marijuana, the crop sales have continued to increase steadily in states that have legalized it. In fact, marijuana advocates have pointed out additional revenues as critical reason for legalization.
They have claimed that marijuana taxes could fund “school construction, healthcare, substance-abuse programs and public health” (Healy, 2014). Opponents, however, have warned that windfall gains from marijuana could be too optimistic.
They have attributed such challenges to possibly higher costs associated with “regulation and enforcement, which could outweigh any tax revenue from marijuana sales” (Healy, 2014). While the revenue projections provide the best guesses, the actual revenues could shift based on demands, prices and the availability of retail outlets.
Campaign Against Marijuana Planting (CAMP) has not achieved much as it attempts to eradicate the crop. However, CAMP costs states several resources in its endeavors in terms of human resources, expensive equipment to uproot marijuana and helicopters. This happens because marijuana is illegal in some states. CAMP seeks for marijuana in remote locations of the country.
If states can legalize marijuana, they would save several millions of dollars used in eradicating and cleaning the environment. States also spend resources to curb the use of marijuana. All these are lost revenues and misplaced use of resources. This implies that revenues for public safety programs, schools, healthcare and other essential services get critical cut in budgets. States should tax and regulate marijuana as a cash crop for additional revenues.
While marijuana can bring substantial revenues to state coffers, the biggest challenge would be actually how to spend such revenues wisely. Voters may have little influence on how states could spend revenues from marijuana. In most cases, states that collect taxes have not yet decided what to do with the additional revenues.
There are various proposals on how the money could be used. For instance, a significant percentage of the revenue could support several public safety programs such as education on drug abuse, treatment and anti-stoned-driving initiatives. Lawmakers are spendthrifts. The more money they receive, the more they want and the more they would want to spend.
Later, they would even cry for more. It would be difficult to convince lawmakers and policymakers to direct all revenues from marijuana taxes to public safety programs. The new source of revenue will result into a fierce battle as lawmakers struggle over exactly how to spend revenues from marijuana. Overall, let states legalize marijuana and tax it well and then it will pay for public safety programs.
References
Erb, K. P. (2014). It’s No Toke: Colorado Pulls In Millions In Marijuana Tax Revenue. Forbes.
Healy, J. (2014). Colorado Expects to Reap Tax Bonanza From Legal Marijuana Sales. The New York Times.
Smith, F. A. (2009). A neglected revenue source for California – marijuana. SFGATE.