Regulating and Taxing Marijuana

marijuana-greenhouse-ColoradoThere are a lot of interesting stories related to the legalization of marijuana. Some of the interesting stories relate to the legislative and financial aspects of such legalization.

Several U.S. states have legalized marijuana for medical purposes. Residents in a smaller number of states have voted to make marijuana legal to use recreationally.

The U.S. federal government has made marijuana illegal for any purpose. In fact, the government has classified marijuana as a Schedule I drug, a category that includes “drugs with no currently accepted medical use and a high potential for abuse.” Other drugs in this category include heroin, ecstasy, and LSD.

Bur since marijuana is legal in a number of states, the U.S. federal government has recognized this. Members of the U.S. House of Representatives have proposed legislation to tax and regulate the sale of legalized marijuana in those states. One wonders if this legislation to regulate marijuana will conflict with states’ own decisions to regulate (or not regulate) marijuana.

The taxation of marijuana is another issue. Some states have generated sizable tax revenue from the drug. How much? In Washington State, the state government charges a 37% sales tax on marijuana. This is more than five times the rate of the state’s normal sales tax, which is 6.5%.

Other states generate tax revenue from marijuana. Colorado, for instance, charges 10% sales tax and a 15% wholesale tax on the drug. Given these high tax rates, and the fact that marijuana is a popular substance, it’s surprising that more states haven’t legalized marijuana, just for the financial benefits alone.

Drugs and alcohol are big business. They generate huge profits for manufacturers (and dealers). They also generate revenue for the states that tax these products. They also generate jobs, both legal and illegal. Marijuana and other drugs are not just substances, they’re economic commodities.