Skip to main content

Marijuana is getting cheaper. For some states, that's a problem.

Marijuana is getting cheaper. For some states, that's a problem.


(Reis, Patrick)

Wholesale marijuana prices in Colorado have fallen by a third in just the past 12 months, continuing a price crash that began soon after the drug was legalized. Although this implies that some marijuana entrepreneurs are going to go bankrupt, the bigger financial hit will be felt by states that tax marijuana based on its price.

Marijuana prices are collapsing in Colorado and in other legalization states (e.g., Oregon, where the price can go as low as $100/pound) because a legal business is dramatically cheaper to operate than an illegal one. Because states generally set their marijuana tax rates as a percentage of price, their revenue per sale sinks in direct proportion to the fall in marijuana prices. Ironically, in a bid for more tax revenue per marijuana sale, Colorado increased its marijuana tax rate from 10 percent to 15 percent last year, only to see the anticipated added tax revenue wiped out by falling prices in a year’s time.

States may have failed to anticipate this problem because of misleading predictions about the effects of legalization. Pro-legalization economist Jeffrey Miron projected in 2010 that marijuana prices would only fall 50 percent when prohibition was repealed, leaving the drug at a price that would yield high tax revenue. That was clearly a rosy scenario.

A starker prediction made by drug policy analyst Jonathan Caulkins looks more prescient every day: He forecast that legalized marijuana will eventually fall in price to the level of other easily grown, legal plants such as wheat and barley, such that a joint might sell for a nickel or even become a complimentary item akin to beer nuts at the bar. If that comes to pass, taxes based on a percentage of price might not even cover the costs of the government’s regulatory system for legal marijuana, meaning that rather than helping states’ bottom line the industry would be an outright drain on the public purse.

The simplest way for states to retain some revenue from marijuana sales is to tax the drug by weight, as California has always done and Maine has started to do. The main risk of this approach is that producers will sharply increase product potency to create more “bang per ounce.” However, this shortcoming of weight-based taxes can be surmounted by capping the allowed potency of marijuana products, a policy for which there is already a good case to be made on public health grounds.

Let's block ads! (Why?)



https://www.washingtonpost.com/business/...s-problem/

from potads - All Forums learn more

Popular posts from this blog

Martha Stewart launches CBD line in crowded market - CNN

Martha Stewart launches CBD line in crowded market - CNN The hemp-derived, cannabidiol-rich gummies, soft gels and oil drops officially launched on Thursday after more than a year in development. The products are the result of the style maven's partnership with Canopy Growth ( CGC ) , the Canadian cannabis company with a multibillion-dollar backer in US alcohol giant Constellation Brands ( STZ ) . Stewart joined Canopy as an adviser in early 2019 for the express purpose of developing cannabis products for humans and their pets after being introduced to Canopy's founder by her friend Calvin Broadus Jr. -- the rapper and businessman better known as Snoop Dogg. His Leafs by Snoop cannabis brand is produced by Canopy. The initial Martha Stewart CBD products, which range from $34.99 to $44.99, will be sold online at Canopy's e-commerce site . The pet products are expected to debut later this year. "I was surprised to learn that while most people have heard of

This UK-Based Entrepreneur Has Mastered the Art of Entrepreneurship - Entrepreneur

This UK-Based Entrepreneur Has Mastered the Art of Entrepreneurship - Entrepreneur June 20, 2020 5 min read Opinions expressed by Entrepreneur contributors are their own. All businesses hinge on the success of their founders. With their unique blend of innovation and brilliance, successful entrepreneurs can transform their industries by filling a gap in the market. This is what Vithurs (or V, as he likes to be called) did when he entered the digital marketing world and ultimately launched Blessed CBD —one of the fastest growing CBD brands in the UK. His unique skill set, paired with his fearless approach to business and deep knowledge of the cannabis industry, propelled him towards success. Because ultimately, a company is only as successful as its founder. And there’s no arguing Vithurs is a leading name in the UK’s growing cannabis industry. Global reach in digital marketing Born and raised in the UK, Vithurs was just 13 when he delved into Internet marketing f

The Half-Legal Cannabis Trap - POLITICO

The Half-Legal Cannabis Trap - POLITICO LOS ANGELES — Everything about Kelvin’s job in a neighborhood southwest of downtown seemed like any other assignment, if not a little more exciting. The 40-year-old, who had previously worked as an electrician, had been employed since 2015 by a private security company that contracted him out to guard marijuana dispensaries. In 2019, he was protecting one of the thousand or so cannabis stores in California’s biggest city—part of an industry that has grown less and less underground since 1996, when the state first legalized medical marijuana. Kelvin, who asked not to be identified beyond his middle name to avoid professional retaliation, doesn’t smoke pot, but says the gig felt like the future. He grew up in a time when other Black people he knew in Los Angeles would go to jail for possessing even small amounts of the drug. Now, customers could walk into shops like the one he was guarding, many of which can be identified by green crosses on