California Tax Board Says Regulating Commercial Pot Sales Would Yield $1.4 Billion Annually — Also Predicts Decline in Use of Booze and Tobacco

  • by Paul Armentano, NORML Deputy Director July 16, 2009

    [Editor’s note: This post is excerpted from today’s NORML weekly media advisory.]

    A revised budgetary analysis by the California State Board of Equalization (BOE) estimates that taxing and regulating the retail sale of cannabis by adults would raise approximately $1.4 billion in annual new state revenue.

    The BOE’s estimate, released late yesterday, assesses a $50 per ounce tax on the retail sale of cannabis (among other state-imposed costs), as recommended under Assembly Bill 390: The Marijuana Control, Regulation and Education Act.  This act seeks to license and tax the commercial production, packaging, and retail sale of marijuana to those 21 years of age or older.

    As introduced, AB 390 would not impose taxation or licensing requirements on the non-commercial production of cannabis (up to ten mature plants), or on the not-for-profit distribution of pot.  Further, the bill would not alter existing legislation on the use of medicinal cannabis, nor would it impose new taxes or sanctions on the medical cultivation of cannabis.

    According to the BOE’s revised calculations, the enactment of AB 390 would raise an estimate $990 million annually from the proposed $50 per ounce levy on retail sales of marijuana in addition to another $392 million in yearly sales tax revenues.

    The BOE assessment did not assess whether the enactment of AB 390 would reduce existing law enforcement and prosecutorial costs, which have been estimated by California NORML to average some $200 million per year.  In 2007, a record 74,000 Californians were charged with marijuana offenses – the largest total since the state ‘decriminalized’ the personal possession of small amounts of marijuana in 1976.

    The BOE report acknowledged that legalizing pot for adults would likely result in a “substitution effect” where consumers gravitate toward the use of marijuana “and away from cigarettes and alcohol.”

    According to a May 2009 California Field poll of 901 registered voters, 56 percent of Californians say that lawmakers should “legalize marijuana for recreational use and tax its proceeds.”  Presently, the state is facing a $26 billion budget deficit.

    Assembly Bill 390 is presently before the Assembly Committees on Public Safety and Health, which are expected to take up the issue early next year.

    101 responses to “California Tax Board Says Regulating Commercial Pot Sales Would Yield $1.4 Billion Annually — Also Predicts Decline in Use of Booze and Tobacco”

    1. money says:

      go cali. go cali.

    2. adle1984 says:

      That’s right folks, marijuana legalization will bring down: alcohol, tobacco – which will cause a HUGE drop in health problems and it’s associated costs in our society, big pharma – who only seek to profit by hooking people on their legalized poisons, prison industry – which is solely dependent on the incarceration of non-violent recreational drug users, drug testing industry – which accounts for 90%+ of profits from marijuana testing – and open up the doors to new industries with the absolutely most useful plant on the planet, HEMP. Don’t get me started with hemp b/c it has over 250,000 useful applications ranging from textile, to paper, to biodiesel fuel – which will end our addiction to fossil fuels – AND it helps rejuvenate soil…. the list goes on and on and on – which mean LEGALIZATION of marijuana will ultimately save this planet.

      Oh and let’s not forget – Real scientific research can be done on marijuana which has been shown to be an anti-tumor suppressor and among other amazing things… Truly, it is a GIFT from God.

    3. h2o420 says:

      Oh wow, who knew?

      Oh that’s right, everybody.

    4. Phil E. Drifter says:

      Alcohol decline? Yes. Tobacco? Not nearly as much.

    5. Will S. says:

      Well, well, well, throw a little (or a lot) of money into the equation and now people are listening. This isn’t exactly the road that most of us would like our legalization issue to take but whatever gets the job done. I personally would like to see legalization come from a personal liberties standpoint, but raising tax revenue seems to be the only way to “raise eyebrows” when it comes to any form of Government.

    6. Mister D says:

      The evidence says it all. The war on drugs does not work and costs tax payers billions of dollars a year. I agree there will be people who will miss use or over use Pot but those people are the ones who are using illegally today and would miss use or over use illegally anyway. It is time for the government to wake up and stop prohibition on Pot and let the recreation/casual users purchase and use without the worry of spending years in jail.

    7. […] more here: California Tax Board Says Regulating Commercial Pot Sales Would Yield $1.4 Billion Annually — Also… Share and […]

    8. The Oracle says:

      I like this bill. It would put the feds in the position of having to pursue every cannabis trifle to enforce their (federal) prohibition, for which they would be highly criticized for diverting resources from hard drugs and the Mexican border drug war area. California has potency standards for the cannabis consumers in place. Mexicans et al. should concentrate on sativa varieties that can’t be grown in the U.S.

      The U.S. Attorney General, Holder, as head of the Justice department, should then in deference to California, as a matter of state’s rights, make the administrative decision to honor the will of the people of California by declaring the cannabis offenses to be the lowest priority, not even meriting a ticket.

      If Congress is still unwilling to act, it stands to reason that other states will follow in California’s footsteps, and will legalize cannabis for medical and recreational purposes to get the revenue, too. The tax of $50 on an ounce is just under $2 a gram, and non-commercial and non-profit cannabis are not taxable. It would be a whole lot easier to compare prices to the rest of the world if they would stipulate the tax by gram, because anyone in the know realizes that in Amsterdam and elsewhere customers may purchase small quantities by the gram. $2 on top of whatever it costs to grow a gram of bud would pretty much be the price. Think about the math for a moment.

      After other states legalize following California’s example, Congress will be in the perfect position to vote on legalization. They might as well. The longer they wait the less revenue to fix things.

    9. Sean says:

      Why can’t they take this on sooner? Oh yeah, giant budget deficit this might help.

    10. Delpart says:

      But if they are talking about substitution effect, there is probably a concern over the loss of potential tax revenue from the reduction of the other sin taxes in place on tobacco and alcohol. I cannt find or tell if the 1.4 is an actualized number or not based on their assumptions here.

      Is the 1.4 taking into account a decreased revenue stream from the other vice/sin taxes? It wont be as much as some people probably think it would be. The same restrictions from employers testing for cannabis and other social stigma will not have a huge increase in people “crossing over” anytime soon after passing something like this. Maybe once it was across the board in the US perhaps. But until then the large corporations are still going to test and punish for its use.