[420 Girl]

The recent financial crisis has reignited the debate over legalizing marijuana.

California is in desperate need of additional state revenue ($40 billion deficit), and no California official has been more supportive of legalization than Democratic Assemblymen Tom Ammiano.

*Edit* - it should be noted that Ammiano is proposing a plan that would charge $50/oz tax for marijuana.

Ammiano’s arguments echo the feelings of renowned economists.

A slew of economists, most famous amongst whom stands Milton Friedman, signed onto a petition in 2005 urging federal, state and local governments to consider the economics of marijuana legalization in any rational debate about the topic.

Among co-signers of the petition are Nobel Laureates and three CMC professors:

Milton Friedman, The Hoover Institution, Stanford University - Nobel Laureate

George Akerlof, University of California, Berkeley - Nobel Laureate

Vernon L. Smith, George Mason University - Nobel Laureate

Bevin Ashenmiller, Claremont McKenna College

Jennifer Ward-Batts, Claremont McKenna College

Colin Wright, Claremont McKenna College

The petition states [emphasis mine]:

We, the undersigned, call your attention to the attached report by Professor Jeffrey A. Miron, The Budgetary Implications of Marijuana Prohibition. The report shows that marijuana legalization — replacing prohibition with a system of taxation and regulation — would save $7.7 billion per year in state and federal expenditures on prohibition enforcement and produce tax revenues of at least $2.4 billion annually if marijuana were taxed like most consumer goods. If, however, marijuana were taxed similarly to alcohol or tobacco, it might generate as much as $6.2 billion annually.

The fact that marijuana prohibition has these budgetary impacts does not by itself mean prohibition is bad policy. Existing evidence, however, suggests prohibition has minimal benefits and may itself cause substantial harm.

We therefore urge the country to commence an open and honest debate about marijuana prohibition. We believe such a debate will favor a regime in which marijuana is legal but taxed and regulated like other goods. At a minimum, this debate will force advocates of current policy to show that prohibition has benefits sufficient to justify the cost to taxpayers, foregone tax revenues, and numerous ancillary consequences that result from marijuana prohibition.

An article published yesterday by Time, titled Can Marijuana Help Rescue California’s Economy?, states:

The state’s tax collectors estimate the bill would bring in about $1.3 billion a year in much needed revenue, offsetting some of the billions of dollars in service cuts and spending reductions outlined in the recently approved state budget.

California seems to be getting cover from the Obama administration as well. From the Time article:

U.S. Attorney General Eric Holder announced that states should be able to make their own rules for medical marijuana and that federal raids on pot dispensaries in California would cease. The move signaled a softening of the hard-line approach to medicinal pot use previous Administrations have taken. The nomination of Gil Kerlikowske as the head of the Office of National Drug Control Policy may also signal a softer federal line on marijuana. If he is confirmed as the so-called drug czar, Kerlikowske will take with him experience as police chief of Seattle, where he made it clear that going after people for possessing marijuana was not a priority for his force.

The issues around legalization are intensely complicated. Amongst other issues, we must consider the following:

Should the government, in effect, be endorsing substances like marijuana? Would taxation even help, or would it just set up a black market? If the government legalizes, will more people smoke? Will less? Should we be filling our jails with relatively minor drug offenders? And, most importantly for the economists, can taxation of marijuana have any substantial effect on state and federal revenue and budgets?

The answers to these questions need to be addressed [For my part, no yes no no no no (unless there is increased munchie revenue...)].

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