Steve's Blog

If we’re going to legalize the production and sale of marijuana, there has to be a regulatory framework that fulfills the intent of the legislation drafted to do that, while at the same time doing everything within our power to anticipate and avoid the inevitable unintended consequences that will accompany it. Those who oppose legalization have legitimate concerns, and those folks need to have a voice at the table.

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Much of the discussion surrounding legalization revolves around the amount of money that the State will get in new tax revenue. There’s nothing like a good “sin tax” to get a politician into a foaming lather, promising to raise millions by taxing activities that everyone agrees aren’t necessarily good for us and which are borne primarily by those who indulge. Smoking, drinking and gambling are lodestones of every promise to balance the books on the backs of someone else. Our incoming Governor has mentioned using pot revenue to fund education. (Remember when they said that the Illinois Lottery would go to pay for schools?) The outgoing Chicago mayor wants to use it for pension relief. Talk about fishes and loaves.

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The best estimate of the amount of tax revenue the state would generate is anywhere from $350-$700 million per year. Political scientist Kent Redfield says the number is probably closer to the former than the latter amount. “In terms of what it means for the state budget or economy, it’s a significant amount of money, when the state needs an overwhelming amount of money.” When you’re $133 billion in the hole and still digging, that’s an understatement.

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The way the product is to be taxed is also a matter of concern. If the major source of revenue is expected to be the sales tax (both state and local), I suggest that you take a look at this article, which discusses the plummeting price of marijuana that comes about from increased production arising from a competitive marketplace. As the landscape of legal sales expands, prices will most likely continue to fall and those rosy revenue estimates may become ever more optimistic.

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Now let’s talk about who’s going to be doing the growing and selling under this legislation. Companies are already lining up to take advantage of legalization.

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But first, let’s step back for a moment and consider what it is we’re trying to do here. Kelly Cassidy, the House sponsor of the legislation, has said:

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“Our goal is to destroy that illegal street market that makes our communities less safe. Our goal is not to bring in some massive fortune that’s going to solve all the problems of the world, because it’s not.”

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When Cassidy says something like that, I believe her. She’s a good legislator (though we don’t agree on all that much), she’s thoughtful and she’s honest. So let’s use that statement as the basis for opening a dialogue on how the regulatory structure should look.

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In an article published in March in National Review, the author makes a pretty good point:

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“Free-market capitalism unleashes awesome forces. The quest for ever greater profits stimulates innovation in products and production processes, yielding a wider range of cheaper and more effective products in which consumers can indulge — and sometimes over-indulge. That is a blessing in the case of 99 percent of products, but not all of them…With little consideration of alternatives, the country is deciding whether to create a for-profit industry for marijuana and other cannabis products.”

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The article goes on to say that legalization is not a binary choice, that there are varying degrees along which we can legalize production and sale without putting it in the hands of companies whose whole reason for being is to expand the market for their product. The author suggests that an intermediate step between allowing limited home-grown production and a full-blown open market would be to issue licenses for production and sale to non-profit entities with boards constituted to protect public health and with charters that limit their mission to meet existing demand, thus undercutting the black market but not promoting greater consumption. Another option is to allow the establishment of member-owned cooperatives.

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If our real intent is to destroy the street market and not to simply create a new revenue stream to feed the habit of a cash-starved state government, then we should explore every possible means by which we can do that. Legalizing a for-profit industry is a one-way street, once we do it there’ll be no going back, and we run the risk of opening up a whole set of new problems. Prudence dictates that we learn to walk before we start to run.

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Why do I say this? Even though Colorado has had legal sales since 2012, they’re still establishing baseline evidence to determine the effects of legalization. There’s a cautionary note in the October, 2018 report from the Colorado Division of Criminal Justice that states:

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“The information presented here should be interpreted with caution. The majority of the data should be considered baseline and preliminary, in large part because data sources vary considerably in terms of what exists historically. Consequently, it is difficult to draw conclusions about the potential effects of marijuana legalization and commercialization on public safety, public health, or youth outcomes.”

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The article in National Review goes on to suggest what limiting the production and sale to nonprofit entities might look like:

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“One option would require organizations applying for a state license to be nonprofit groups whose governance structures focus them on serving the public interest. First, the majority of governing-board members must come from the child-welfare and treatment communities. Second, the organization’s charter must define its mission as meeting existing demand, in order to undercut the black market, but not promoting greater consumption.

Two arguments for legalization are the need to eliminate the black market and the desire to reduce criminal-justice costs. The approach…described would achieve those goals.”

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This suggestion provides what I would consider to be a sensible middle way, which would allow us to control production and sale through the type of entity to which we would grant licenses. After all, what’s the rush to expand legal sales if our stated intent is to shut down the illegal market? The only reason I can see for headlong legalization of a for-profit market is that we’re more interested in revenue generation than we are in alleviating a social and criminal problem.

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I’m willing to grant grudging acceptance for legalization, but not if it’s being sold primarily as a revenue play. If that’s the way it goes, I’m a “no”.

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I want to see the black market for cannabis shut down as much as anybody, and I believe that a well-constructed and enforced regulatory scheme that limits its reach to doing that and nothing more would be a pretty good way to do it. Therefore, I’m also willing to grant grudging acceptance to a law that limits the means by which this can be done. If, after ten or so years of hard evidence we find out that our fears of increased use, with all the attendant social fallout that accompanies it have been unfounded, then we can expand out to a for-profit market. After all, what’s the rush?