Should Your State Legalize Pot?

Should Your State Legalize Pot?

Forget 4/20. The celebration might come early this year for those who enjoy smoking pot, and not just for medical purposes.

We're talking about November 6th, when voters in Colorado, Washington and Oregon will vote on measures that would allow the regulated production and sale of marijuana not for medical but for recreational use.

If any one of these three initiatives passes, this would represent a sea change in policy. Currently, no states allow marijuana for recreational use, though 17 states and the District of Columbia allow its medical use. But many think decriminalizing possession of marijuana and even encouraging it as an industry are long overdue. A 2011 Gallup poll found 50% of Americans favor legalization and only 46% oppose it.


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So what are the arguments in favor of legalizing marijuana? Surprisingly, individual freedom is rarely evoked. Instead, proponents cite a wide range of practical considerations. But is it all hype, or would legalizing marijuana, perversely, do some good?

In our latest of several "What would legalization mean for the economy?" (The first being gay marriage and then more immigration) stories, we break down the economic effects of legalizing pot.

The Pot Industry Right Now

In case you hadn't noticed, there's already a booming marijuana economy, but the profits don't benefit any Americans. Currently, Mexican cartels capture 70% of the profit from selling marijuana.

Marijuana's illegal status makes it hard to measure the drug's economic impact, but estimates put sales of the green at around $10 to $40 billion. Some analyses, which are based on the amount of pot produced instead of estimated sales, put the number as high as $120 billion. In fact, marijuana is the top cash crop produced in 12 states.

What Happens If We Legalize It?

It's almost impossible to guess what legalizing pot for recreational use at the federal level would do for the economy in hard numbers for these reasons:

  • We can't estimate how many people currently buy weed
  • We don't know if weed consumption would overall rise or fall if it were legalized
  • The price of weed could drop as it becomes easier to obtain, or rise as it is heavily taxed

Despite the haziness (pun intended) surrounding pot, marijuana could be a boon to states. "You can basically take advantage of economies of scale, and the price of marijuana will go down and government can come in and capture the difference," Christopher Stiffler, an economist at the nonpartisan Colorado Center on Law & Policy, told MSNBC. So if an ounce is $250 under the current scheme (we got this price off the internet, not from personal experience), and it drops to $150 because there aren't five middlemen (read: drug dealers) in between production and sale, then the state can tack on a $100 tax.

Better Than Alcohol!

But would it be a net win? It's helpful to look at two other industries that provide the model for regulating pot. Currently, taxing alcohol and tobacco brings in only $1 for every $10 incurred by society from related costs, involving everything from law enforcement to car crashes and liver disease. For instance, state, local and federal governments spend $72 billion a year just dealing with alcohol abuse alone.

But legalizing a formerly illegal substance also brings cost savings, primarily in law enforcement costs, which for marijuana are estimated to cost $7.7 billion a year.

$72 billion in societal costs minus $7.7 billion in savings? It looks like the numbers are in the negative territory for legalizing pot. But it's not as easy as comparing weed to alcohol. Alcohol is actually more addictive and physically harmful than marijuana, believe it or not. And given the fact that many teenagers say it's actually easier to procure pot than alcohol, we're not likely to see a giant surge in societal negative effects of marijuana as people who had been really wanting to try it--but dissuaded by harsh laws--rush to dispensaries.

Finally, across states who've legalized medical marijuana, there's been a 9% drop in traffic fatalities, which researchers attribute to people replacing alcohol with marijuana--leading to the conclusion that legalizing marijuana could actually save on societal costs.

This isn't all pure speculation. To see a real-life case of what happens when the pot industry is allowed to flourish, we can look to Colorado.

Cheetos Consumption Soars in Colorado

Just kidding. We made that up. But in all seriousness, Colorado is already halfway to complete legalization. Voters approved allowing medical marijuana use in 2000, but the industry didn't take off until the federal government signaled it would stop raiding dispensaries in 2009. Now about 100,000 Coloradans carry what are known as "red cards" entitling them to buy marijuana.

Opponents of legalizing marijuana worry that legalizing the drug would increase use by minors. But a study from the Center for Disease Control and Prevention examining trends related to marijuana consumption between 2009 and 2011 showed marijuana usage among Colorado teens dropped, even while nationally, marijuana use by minors rose.

A report by the Colorado Center on Law & Policy estimates that passing Amendment 64, which would legalize pot and regulate it like alcohol and cigarettes, could raise millions for the construction of Colorado public schools, produce hundreds of new jobs from construction of those schools, and produce $60 million annually in combined savings and new revenue for the state budget.

No wonder a majority of voters in Colorada now favor going all the way. Polls have found that up to 61% of residents are in favor of Amendment 64.

And for Everyone Else?

There are hints of what's to come from outside Colorado, too. Initiative I-502 in Washington, which would create a closed seed-to-store, state-regulated monopoly, could raise an estimated $560 million in taxes. Eventually, there could be as many pot shops as liquor shops in the state.

Another 2011 study from researchers at Montana State University and University of Colorado Denver surveyed 16 states that have passed laws legalizing the use of marijuana, and found no increase in use by minors, though it did find an increase in adults. Finally, in the Netherlands, where pot is sold legally through coffeeshops, minors are less likely to try pot than they are here in the U.S.

The NAACP has come out in support of these state measures, because of the disproportionate number of blacks who are arrested and incarcerated for marijuana use. This is despite the fact that white young adults aged 18 to 25 use marijuana at a higher rate, according to the U.S. Department of Health and Human Services.

The Big Hiccup in the Plan

A transition to a legalized recreational pot economy might not be smooth. Even if a state legalizes marijuana use, it's still illegal on the federal level. When Proposition 19, which proposed to legalize and regulate recreational marijuana, was up for vote in California two years ago (it was defeated), federal regulators indicated they would "strongly enforce" federal laws against its use, though they've been mum lately on what they would do if any of the three current state initiatives pass.

Romney has spoken against recreational pot use, while Obama (who has admitted to smoking when he was young) has said he doesn't think legalization is the answer. (He used to some years back.) Some have speculated he might surprise everyone and make it legal on the federal level as a move to boost his election numbers, but he only has a month left to do so. Or ... if he wins the election he could "spike the football" by making it legal. Who knows?

What Do You Think?

Do you live in one of the three states with pot initiatives on the ballot? Or would you support or be against an initiative in your own state? Let us know in the comments!


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