Legalized marijuana in CA "could drop from $375 to $38 an ounce, undercut tax windfall"

Wednesday, Jul 7, 2010 17:52 ET
Study: Pot prices would plummet with legalization
Marijuana could drop from $375 to $38 an ounce, undercut tax windfall, if California initiative passes, says RAND
By LISA LEFF, Associated Press

Legalizing the recreational use of marijuana in California would sharply drive down prices for the drug, causing more people to use pot while possibly undercutting the tax windfall that supporters have touted, according to a study published Wednesday.

The study by the nonpartisan RAND Drug Policy Research Center predicts that retail prices for high-grade marijuana could drop from $375 an ounce under the state's current medical marijuana law to as little as $38 per ounce if voters approve a November ballot initiative authorizing counties to license and tax commercial pot sales to adults.

"Right now, when individuals purchase drugs, they are paying for the drug dealer taking risks of being arrested," Beau Kilmer, the center's co-director and the report's lead author, said.

But apart from creating sizable price cuts, little seems certain about how the measure, known as Proposition 19, would affect the cash-strapped state's budget or pot's popularity, according to the RAND researchers. RAND, a nonprofit think tank headquartered in Santa Monica, Calif., paid for the research to educate voters ahead of the election, Kilmer said.

One of the biggest unknowns is how much revenue state and local governments stand to gain if the measure passes, they said after analyzing existing research on marijuana prices, cigarette taxes and current pot consumption and applying modeling techniques to determine possible scenarios.

The California Board of Equalization estimated while evaluating a bill introduced in the Legislature last year that would have taxed and regulated marijuana like alcohol that sales taxes and a $50 per ounce excise tax on commercial pot sales would generate $1.4 billion for the state.

The researchers said legalization could bring substantially more than $1.4 billion in new revenue if California sees an influx of "marijuana tourism" similar to Amsterdam's, where pot is legally sold at coffee shops, and if out-of-state dealers purchase California cannabis to sell back home.

http://www.salon.com/life/drugs/index.html?story=/news/feature/2010/07/07/marijuana_legalization_lower_prices