Legalizing Marijuana: New Revenue For The State, Local Governments?

When Gov. Arnold Schwarzenegger mentioned last spring that it may be time for California to “open the debate” on allowing the recreational use of marijuana, he lit up the eyes of legalization advocates everywhere.

He also piqued the interest of those who say it will dramatically increase revenue for the state and local governments.

The Office of Assemblyman Tom Ammiano, a Democrat from San Francisco, claims an initial estimate of $1.3 billion in new revenue to the state if his AB390 legalization bill passed. A share of that would go to local governments, said Quintin Mecke, communications director for Ammiano.

“All sales tax would still be applicable, that’s not including local fees,” Mecke said. “Municipalities could certainly take advantage of that.”

That scenario, of course, would only transpire if federal government law changed. If the bill was passed and federal law stood pat, it would only decriminalize marijuana for personal use and private cultivation. There would be no state revenue.

If federal law were amended, Ammiano’s bill would suggest a model similar to the regulation of alcohol, suggesting a $50-per-ounce tax to be paid through the cultivation and retail process.

Allen St. Pierre, executive director of The National Organization for the Reform of Marijuana Laws (NORML), said Schwarzenegger, consistent with his overall management style and economic philosophy, has been decidedly laissez faire regarding the proliferation of medical cannabis dispensaries in California.

“Considering the size of California's annual budget struggles, absent the morality play in the minds of a minority of Americans these days, a governor of a state with likely $10-$15 billion in untaxed and uncontrolled cannabis sales annually, in NORML's view, is malfeasant not to explore ending what is clearly a failed prohibition of a popularly consumed product,” St. Pierre said.

NORML’s take is that it seems unlikely that the federal government will take the lead anytime soon on cannabis law reforms.

“Leaders in the House and Senate tell us that they're looking for more and more states to first put pressure on the federal government, to create the proverbial 'tipping point' for federal law reforms,” St. Pierre said. “Many in Congress acknowledge that this tipping point appears closer than ever before.”

John Lovell, lobbyist for the California Peace Officers Association, said AB390 would not raise money for the state. He explains the $50 tax on each ounce of marijuana would mean the price of marijuana at a liquor store or grocery store would be the value of the drug on the street, plus $50.

“People can go to Safeway and buy it at street value plus $50 or continue to buy from the same drug dealer who is only going to charge the street value,” Lovell said. “As customers get more sophisticated, they will simply buy illegal marijuana.”

In addition, Lovell said there is no fine or penalty under AB390 for a customer to buy marijuana illegally and the penalty for a dealer to sell illegally is just $250. He also noted the bill undermines the penalties against selling dope to children and illegal cultivation for growers abroad who will now choose to grow in California.

Cost-savings at the local law enforcement level?

Ammiano’s office asserts the initial $1.3 billion in added revenue to the state does not take into account the additional savings to the state regarding redirection of current law enforcement efforts committed to fighting the drug.

But Los Angeles County Sheriff's Department spokesman Steve Whitmore disagrees, explaining it is not that simple.

“We would be doing other things,” Whitmore said. “That dollar is spent elsewhere. If marijuana becomes legal, there is always going to be a black market. I’m not sure that we would have cost-savings. Our narcotics bureau would be doing other things.”

Whitmore explained most of the department's resources in fighting the drug go toward the eradication of marijuana grows.

Sgt. Norm Leong, a spokesman for the Sacramento Police Department, doesn’t comment on such matters since the department is not a political entity.  Leong did say that there was not an inordinate amount of resources dedicated to fighting marijuana.

James Gray, a retired Orange County Superior Court Judge and a supporter of legalization, told Time Magazine in a recent article that he estimates legalizing marijuana and ceasing the arrest, prosecution and imprisonment of nonviolent offenders could save the state $1 billion per year.

A much smaller savings number came from a California NORML Report done in February that estimates $170.3 million is spent in marijuana enforcement in California per year.

An increasing trend in pro-legalization opinion

A Field Poll recently released found that 56 percent of California voters supported legalizing and taxing marijuana. ABC News recently did a poll showing that 46 percent nationally favored legalization.

Mecke says Ammiano’s office is certainly under the opinion that, over time, legalization is going to happen.

There are a couple factors, Mecke said, including the support of states who have legalized medical marijuana for more than a decade, and that America is at the point in which the majority have tried marijuana.

“Reality is catching up to people’s attitudes toward marijuana,” Mecke said. “Studies have shown a lot of people use it. “

As new generations become the voice, the cultural potency may change, said Robert Thompson, professor and founding director of the Bleier Center for Television and Popular Culture at Syracuse University.

“You’ve got a lot of old stoners now in their 60s who grew up when this had become much more domesticated and naturalized,” Thompson said. “They are now becoming the grandfathers and grandmothers.”

Regardless of society’s view on marijuana and its dangers, the large source of revenue itself makes it open for discussion.

“It makes sense to have the debate,” said Thompson, who said he doesn’t lean one way or the other on the controversial topic. “It is time for an intelligent discussion about this. It’s a very complex issue.

“In Barack Obama’s town hall, it was posed as a question and put off as a joke and everyone laughed about it. The very mention of marijuana still brings giggles in the Jeff Spicoli type of way. Instead of having a good scholarly conversation, everyone is putting their elbow in their ribs.”

Schwarzenegger’s quote in a press conference this month was open-ended: "I think it's time for debate. I think all of those ideas of creating extra revenues -- I'm always for an open debate on it."

The debate, which has gone on for years, is now back in the spotlight.

This article originally appeared on PublicCEO.com in May, 2009. James Spencer can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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