Potential I-502 Pot Revenue Double What Supporters predict

[420 Warrior]

State Budget Staff Crunched Numbers in an Attempt to See How Much a State Marijuana Monopoly Might Bring In.

A marijuana-legalization initiative on the November ballot could raise at least $560 million a year in new taxes - well more than double what the Initiative 502 campaign itself had predicted.

That estimate, produced this week by the state Office of Financial Management ( OFM ), suggests that a legalized marijuana system would raise at least $130 million more a year in taxes than the current state liquor monopoly.

But I-502's fiscal impact also appears to be based on guesses, because no state has legalized and regulated marijuana for recreational use. The state analysis, a fiscal note for lawmakers, is the first independent attempt to pin down the numbers since I-502 qualified for the ballot.

It briefly addresses one unanswered question should I-502 pass: What would the federal government do? The analysis said revenues would be "adversely impacted" if federal authorities cracked down, as they threatened to do when California voters were mulling legalization in 2010. Marijuana is illegal under federal law.

The initiative, the first marijuana-legalization measure on a statewide Washington ballot, has drawn national attention because of a roster of supporters that includes two former U.S. attorneys, an FBI supervisor, judges and public-health experts.

It would legalize and heavily tax 1-ounce sales of marijuana to people 21 and over from state-licensed stores. Most of the revenue - at least $433 million the first full year - would come from the 25 percent surcharge at each step from grower to retailer, the OFM estimated. Business and sales taxes would raise an estimated $130 million more.

The analysis doesn't yet estimate revenue from newly legalized hemp production, or cost savings from decriminalization of small amounts of marijuana. A fuller analysis is under way.

But this analysis provides a guesstimate of what a legal marijuana industry might look like. It estimates 100 state-licensed growers supplying more than 300 marijuana stores that - based on federal drug-use surveys - would sell 187,666 pounds to at least 363,000 customers.

But the state analysis includes a second scenario, with 10 percent higher consumption. In that case, the total tax revenue would be $606 million. By fiscal year 2017, the revenue could be near two-thirds of a billion dollars.

Regardless, the state estimates are far higher than the $215 million that I-502's campaign estimated would be raised from the excise taxes. Campaign director Alison Holcomb said those estimates were based on a previous legislative proposal, which predicted lower consumption rates.

"The campaign has always wanted to be conservative in the estimates on the revenue because we honestly don't know what a legal marijuana market will look like," said Holcomb, previously the drug-policy coordinator for ACLU of Washington.

The analysis was prepared by Gov. Chris Gregoire's budget staff, but Gregoire does not support I-502, said spokeswoman Karina Shagren.

"This doesn't resolve the conflict with federal law," said Shagren.

Gregoire instead has petitioned to reclassify marijuana from a federal Schedule I drug to Schedule II, allowing it to be prescribed and sold in pharmacies for medical use.

Thus far, opposition to I-502 is led by a group of medical-marijuana patients who say the initiative's proposed driving-under-the-influence provisions would make it impossible for many patients to legally drive. That group, No on 502, had raised no money as of late February.

I-502 has raised $1.2 million since last May, but spent nearly $760,000 on paid signature gathering to qualify for the ballot, according to public-disclosure reports.

News Hawk - 420 Warrior 420 MAGAZINE
Location: Washington State
Source: The Seattle Times
Author: Jonathan Martin
Contact: opinion@seattletimes.com
Copyright: 2012 The Seattle Times Company
Website: seattletimes.nwsource.com

 

[bob zimway]

I understand that Pat Robertson, Richard Branson and Willy Nelson are going to parachute into Gasworks Park singing "we're gonna get high as the midnight sun."

 

[Junkbarman]

If all they are going to do when it gets legal, is tax the shit out of it, then let it stay illegal..

Careful what we wish for, it seems to me that is the caution i go by now a days, talking about legalization.

 

[TorturedSoul]

If all they are going to do when it gets legal, is tax the shit out of it, then let it stay illegal.

I generally don't agree with people who are against legalization. Just on principle.

But I read the part in the article about a 25% - which is high, but if I went on the assumption that the government has more-or-less created a de facto "tax" (well... price hike) by making recreational cannabis illegal, and thus encouraging people to charge much more than the actual cost of production because of the (somewhat real) fear of arrest/prosecution/penalties.

IOW, if it became a legal product, I would expect the price to fall by an amount that reflects the change in... potential harm to the grower (/etc.). And I would, of course, pass up "deals" where that price change was not applied. If the government took a small part of the difference (relatively speaking... a quality ounce that the grower sells for $300 might instead sell for... $150? $150 + 25% = $187.50, which is still a deal compared to $300), well... Like it or not, governments require money to operate. Most of that is collected through various taxes - and I would much prefer that taxes be collected on products that are both voluntary and recreational (as opposed to food or something equally non-optional in nature). Since the state has a medicinal cannabis program, I am not bothered by the concept of taxing recreational-use cannabis.

But then they had to go and screw it all up! The article doesn't state that there will be a 25% tax applied once, to the end-user - it states that the tax will be applied at every step from the grower to the end-user. That is not only wrong, it would encourage fraud and black market sales - which puts us back to the status quo (people breaking the law in their cannabis, err... "dealings").

So in one article I both grew hopeful and then lost the feeling. Thanks a lot. Government. B@stards.

 

[Junkbarman]

It's amazing to me what people accept to be the norm in this country anymore. WHEN did it become acceptable to tax Everything? Governments run on money?

Yeah, they get my money already, and ALOT of it, about 20% a check.. that's 1 out of every 5 dollars, and THEN I pay state taxes on everything needed to live, except food.

So you are telling me, that pot becomes legal and according to this law, I have to go to one of these 300 stores, instead of growing a plant, in my back yard or otherwise?

I can make beer in my back yard, but not grow pot? ARE YOU SERIOUS?!?!

People in this country aren't being raised correctly by their parents, if they think the government is their big brother looking out for them.

The government is made up of millionaire, and billionaire old people as a whole, and you really think they have the first clue on what WE need as americans when it comes to this?

 

[TorturedSoul]

So you are telling me, that pot becomes legal and according to this law, I have to go to one of these 300 stores, instead of growing a plant, in my back yard or otherwise?

I didn't notice restricting a person's right to grow their own in this article. I have not read the actual proposed legalization legislation, so I cannot speculate there.

I can make beer in my back yard, but not grow pot? ARE YOU SERIOUS?!?!

It discuses taxing cannabis that is sold.

As for the home brewing of beer - in relation to this article - you can brew it and it is not taxed... up to a point.

26 USCS § 5053(e) provides exemptions from federal taxation for beer brewed for personal use.

(e) Beer for personal or family use. Subject to regulation prescribed by the Secretary, any adult may, without payment of tax, produce beer for personal or family use and not for sale. The aggregate amount of beer exempt from tax under this subsection with respect to any household shall not exceed

(1) 200 gallons per calendar year if there are 2 or more adults in such household, or
(2) 100 gallons per calendar year if there is only 1 adult in such household.

[EDIT: According to Wikipedia, states are still free to restrict the home brewing of alcohol - and Alabama does. But it states that most states allow it. It also states that because alcohol is taxed by the federal government via excise taxes, homebrewers are restricted from selling any beer they brew.]

 

[chuck14od]

Yes, I can see if it is actually legalized for recreational use, the government will be making more money off it than tobacco and booze. 25% is kind of excessive though. I know the state of Maine was talking last year of doing this in 2012, and how the 7% tax raised on it's sale would benefit the people of Maine and their poor income opportunities up there with little work available. Living in a state in the Northeast who have yet to get the med program off the ground even though it was passed nearly 21/2 years ago, I would prefer to be in a state that I could affordably grow it myself, as I know I could get a card, and there will be no growing allowed in my current home state anyway if it ever comes into production. With top of the line seeds costing $10 or $20 bucks, and then growing cuttings from a mother plant, producing multiple ounces per plant, it would be damn near free. At 55, I'm not sure if I will ever see the day where it is completely legal in the U.S. for all. But one way or the other, I will move, even into a state where it isn't legal, where I can be remote enough to grow my own, if only for myself. No doubt, it is a Mother Nature's gift to us all. F the evil empire who keeps it from us.

 

[Nerdmaster]

I-502 has a lot of flaws, there is no doubt. But look at CA this year. Prop 19 was barely beaten in 2010, and now *nothing* is even making it on the ballot this year.

I would still urge people to vote yes and then work on fixing the flaws later. Better to take a kind of crappy first step than no steps at all.

The taxing is outrageous, no doubt, but it's not as bad as it sounds. Growing the stuff is dirt cheap. A very professional grower here in Oregon wanted $3000 to cover "labor and care" for 6 outdoor plants over a single growing season. As I understand it, those six plants would likely yield at least 5 pounds (the grower claimed 20+, but I'm pretty sure he was including shake). That ends up working out to $600 a pound, about $40 an ounce, and about $1.25 a gram. Assuming a reasonable for-profit markup to $2 a gram (60% markup), and taxation of 25% applied 4 times, and you have a gram of really good organic bud for under $5 a gram, or $150 an ounce. It's not cheap, but as I understand it, it's not bad for really good, locally grown bud. Comparing to alcohol: a 22oz bottle of Ninkasi can sell for a similar price.

I'm also assuming 4 steps of taxation (I don't know the process well, but I think that's a high estimate), and that prices don't go down as legalization becomes more accepted by the nation as a whole. If either of these prove to be better than my assumptions above, then prices would be even better.

 

[TorturedSoul]

Four steps? Hmm... They're working an angle here, you know. What do you want to bet there will be something done so that growers cannot sell directly to consumers? Because that would only allow them one chance to take a bite out of you. Four steps might not be too far off the mark.

 

[Junkbarman]

Assuming a reasonable for-profit markup to $2 a gram (60% markup), and taxation of 25% applied 4 times, and you have a gram of really good organic bud for under $5 a gram, or $150 an ounce. It's not cheap, but as I understand it, it's not bad for really good, locally grown bud. Comparing to alcohol: a 22oz bottle of Ninkasi can sell for a similar price.

did you just figure out the tax on a gram and then apply that figure to an ounce?

You need to come back sober, and look at your math again, and think about how taxing a gram and an ounce are not really close to the same thing the way you did your math...

((2*.25)*4)+2=$4 per gram.

(((2*28)*.25)*4)+56=$112 per ounce.

There's A LOT of misinformation in this thread, people NOT reading the original post and then replying to other posts based on things they assume to be true.

 

[Junkbarman]

I didn't notice restricting a person's right to grow their own in this article. I have not read the actual proposed legalization legislation, so I cannot speculate there.



It discuses taxing cannabis that is sold.

As for the home brewing of beer - in relation to this article - you can brew it and it is not taxed... up to a point.

AND grown...clearly says:

It estimates 100 state-licensed growers supplying more than 300 marijuana stores...

and LIKE I said. I won't be able to grow in my back yard, because I COULD sell it, and wouldn't have a liquor type pot license to legally do so. and would STILL be breaking the law. the only difference, it would be not worth it at that point to do so, because it would be dirt ass cheap and couldn't recoup my costs and make any dime of profit.



edit: the difference is, NOW I'm doing this LEGALLY, growing and selling because I'm licensed to do so. This is the governments way of putting pot into the hands of Big Business. read between the lines people, and OPEN your eyes.

The government isn't against pot being illegal because of the kids, they just haven't figured out a way to get it accepted by America and into Pot-mart stores.

 

[Junkbarman]

Yes, I can see if it is actually legalized for recreational use, the government will be making more money off it than tobacco and booze. 25% is kind of excessive though. I know the state of Maine was talking last year of doing this in 2012, and how the 7% tax raised on it's sale would benefit the people of Maine and their poor income opportunities up there with little work available. Living in a state in the Northeast who have yet to get the med program off the ground even though it was passed nearly 21/2 years ago, I would prefer to be in a state that I could affordably grow it myself, as I know I could get a card, and there will be no growing allowed in my current home state anyway if it ever comes into production. With top of the line seeds costing $10 or $20 bucks, and then growing cuttings from a mother plant, producing multiple ounces per plant, it would be damn near free. At 55, I'm not sure if I will ever see the day where it is completely legal in the U.S. for all. But one way or the other, I will move, even into a state where it isn't legal, where I can be remote enough to grow my own, if only for myself. No doubt, it is a Mother Nature's gift to us all. F the evil empire who keeps it from us.

 

[TorturedSoul]

For a while it was legal to grow and trade in cannabis, iIRC. You just had to have a tax stamp - which was, for all intents & purposes, impossible to get. I would have to see some kind of wording worked into the legislation that stated such a situation wouldn't be able to happen again... if I were to be 100% in favor of it.

Also important to me - not as important as everything else, but - is this: As stated, I'm not opposed to taxation. (I have several metric tons' worth of opposition to how the taxes are managed/spent, but that is not relevant to the topic at hand.) And taxing an optional thing is better than taxing a necessity. That's why I never griped when the taxes on cigarettes went up, even though I'm a poor smoker, lol. Anyway, the talk of multiple applications of taxes... Each time they apply a new tax (or the same one over again, I guess), they should only apply it to the product itself and NOT to all the previous taxes. And that should even hold true for sales taxes. Cigarettes for example - there are lots of taxes in the price... and then when the girl behind the counter rings them up, you get (sales) taxed on the total price instead of the pre-tax price. I've always thought that was wrong.

 

[Nerdmaster]

did you just figure out the tax on a gram and then apply that figure to an ounce?

You need to come back sober, and look at your math again, and think about how taxing a gram and an ounce are not really close to the same thing the way you did your math...

((2*.25)*4)+2=$4 per gram.

(((2*28)*.25)*4)+56=$112 per ounce.

There's A LOT of misinformation in this thread, people NOT reading the original post and then replying to other posts based on things they assume to be true.

I applied the tax in a compound sort of way. 2 * 1.25 * 1.25 * 1.25 * 1.25. Not 2 * 2. Assuming the original $2 is taxed at 25%, the first sale is for $2.50. The next sale, getting 25% applied to that $2.50 ends up at $3.125. Etc. I also used 28.5 grams per ounce to avoid too much rounding.

Given that prices will likely go down, the grower here in OR was charging too much, and other economic factors, I expect a very high-quality gram to eventually be more like $2 post-tax as businesses become more common and more accepted, need less security, etc.

I obviously made assumptions, trying to show a worst-case scenario. I was merely stating that as bad as the tax sounds, $5 a gram for really good bud is still better than today's rates by a good deal.

 

[TorturedSoul]

Thinking $56/ounce (grower's gross selling price) for premium indoor bud - especially a sativa - is a little low. I'd want $100 if it were me. That'd cover depreciation on the equipment, a new bulb for vegetative, a new bulb for flowering, electricity... Hmm. MAYBE nutrients and water. Labor is looking like a gimme, though. Depending on several factors (total time of grow, gross yield, yield per watt, total hours of labor, et cetera).

 

[420 Warrior]

Thinking $56/ounce (grower's gross selling price) for premium indoor bud - especially a sativa - is a little low. I'd want $100 if it were me. That'd cover depreciation on the equipment, a new bulb for vegetative, a new bulb for flowering, electricity... Hmm. MAYBE nutrients and water. Labor is looking like a gimme, though. Depending on several factors (total time of grow, gross yield, yield per watt, total hours of labor, et cetera).

Hmmm? I wonder how much a tobacco, barley, hops, or any other farmer, who grows the Ingredients to make alcohol or tobacco products, makes annually for their hard work?

What makes a Cannabis farmer, any less deserving of making a living?

 

[TorturedSoul]

Hmmm? I wonder how much a tobacco, barley, hops, or any other farmer, who grows the Ingredients to make alcohol or tobacco products, makes annually for their hard work?

But they're not growing... Is "boutique" style the term they use for those who grow a more specialized, higher quality product? Requiring more work/expense and givving less yield? Because your average indoor cannabis gardener surely produces less than the typical "small" farmer with his 10-50 acre plot. And, therefore, he should be able to demand more per than they. (Am I arguing for a high price, lol? Well... something above the break-even point, at least.) And definitely a better product - I'll take a Kewpie of good bud (or... even average commercial) over the same weight in tobacco eleven times out of ten (the last time I went, there was none :roleyes - and I'm a cigarette smoker, too.

But I suppose that we're getting a bit off-topic with that. So I'll tie it in...

I do fear that with their step-by-step taxation plan, that they may be intending to force the small, slightly-more-than-personal grower out of the game. Such a grower would likely sell directly to the end-user, meaning one tax application. Large commercial warehouse growers, OtOH, growing on the order of 50 pounds at a time... Probably don't sell to the end-user. Too many sales when they aren't needed to make a buck. So he sells to a retail outlet or perhaps even a distributor who then sells to the retail outlet. Tax + tax + tax.

Unless the small grower is specifically addressed - and in a positive fashion - by the language of such legislation, there could be some conflict here.

BtW, most farmers I know (admittedly, a limited number) bust their balls seven days a week, often putting in more hours than the sun... And when they break even on expenses and manage to meet their family's most basic needs, they're happy. The unhappy ones (about 40% of the ones I know) either somehow find time for one or both spouses to carry the additional load of a full time job... Or lose everything, move to town, live in a crummy rental and consider themselves lucky to have that. (One man I knew lost his farm, which means his son will be the fist of that family in four or five generations not to get to work their family's land, which they no longer own.)

So... Let's not place think of small cannabis growers as small farmers, lol. Better as producers of natural medicine - or at least something along the lines of a high quality microbrewery owner.

Mass-production has it's uses. But one of them is to show people why we really do still need proper craftsmen.

 

[crashnfool]

I'm afraid to comment too much without reading the whole initiative first. As I have seen in the past these type of things(initiative) usually don't go over well with the general public.

From what I understand anytime you add driving penalties(to legislation) these things get shot down in flames.. And as far as taxation.. they will... if they legalize it for recreational use...But.... Are we already to go with legislation now?? ...I doubt it.. there is alot more to this legislation that needs to be ironed out in order to make it fair for all... and then theres the whole FED issue... I fear that as much as we want to legalize..We should make sure the groundwork for legislation is sound and sane before we go raising our hands and screaming yes at the top of our lungs..

We dont need a committee to study this ....
We need level heads to set concrete, and acceptable rules and regulations. I won't be holding my breath on that one...

 

[420 Warrior]

We dont need a committee to study this ....
We need level heads to set concrete, and acceptable rules and regulations.

 

[Irish]

We dont need a committee to study this ....
We need level heads to set concrete, and acceptable rules and regulations. I won't be holding my breath on that one...

No, actually we don't. We don't need rules or regulations. We need it legal across the board. Perhaps apply state sales tax like everything else when sold from a storefront or business, but other than that, leave the industry alone.

It will regulate itself. I promise.