Bongs and Bureaucrats

Following a remarkably contentious proceeding, Senator Jeff Sessions secured Senate confirmation as attorney general last week. Though his aversion to marijuana is well known (see: “Good people don’t smoke marijuana”), the legalization movement has a great deal of momentum at present, with four more states having voted to legalize the substance last November. But for all their laudable progress—Gallup also reports that over 60 percent of Americans now support legal marijuana—there is still much for legalization advocates to determine regarding public policy. Such a disruptive initiative, which marks a stark departure from the previous War on Drugs mentality, would seem to require a sturdy policy foundation. But not enough advocates have paused and truly considered what sort of policies are accompanying the rapid political change they are urging along. Now is a critical moment for them to do so.

A recent Atlantic Monthly report delves into the marijuana black market, examining how it persists in states that have already passed legislation. Journalist Tom James offers a glimpse into Seattle’s black market underbelly, writing that “on the corner it’s hard to see how anything was changed by a movement that aimed to change everything.” The reasoning behind his observation is simple: there are still several angles from which street dealers can find profitability in the newly legal market.

An uncompetitive tax structure, for one, disincentivizes marijuana purchases at regulated dispensaries, while street suppliers entice customers by easily undercutting legal prices. Though other props of black market activity exist, tax policy seems to hold the answer to its suppression. A productive debate on how to properly structure marijuana taxes would consider how effective taxation requires enough flexibility to follow the ebb and flow of the market. Legal prices should be at first competitive with the black market, eventually converting its remaining customers. Then, as the legal market expands and innovation and an increasing supply both drive prices down, marijuana taxes should rise, deterring problematic use and eventual dependence.

Striking this happy equilibrium, though no easy task, seems manageable. The challenge in enacting a more dynamic tax policy is born not of informational disadvantages, nor any kind of technical incompetence, but simply of the fact that state legislators find an immediate marijuana tax windfall too tempting. It is a test of delaying gratification, as lawmakers seek quick revenue today at the risk of jeopardizing even more of it in the future.  

Tom Wainwright, writing for the Economist, comparatively assesses the two approaches taken by Washington and Colorado—the only two states where marijuana has been legalized for long enough that its effects can be studied—and finds that Washington lawmakers seem to have fallen into the trap of setting ineffectively high taxes. Legal transactions account for only 30 percent of sales, he estimates, with the state enacting a 44 percent marijuana excise tax. A 28 percent tax in Colorado, however, paired with more lenient licensing procedures, has enabled legal dispensaries to capture about 70 percent of marijuana sales. Although assessing the size of the black market requires a degree of speculation, the stark contrast in these two states’ outcomes still paints a clear picture for the general direction that lawmakers ought to pursue.

Why is it that such a short-sighted policy manifested in the first place? For one, the usual difficulties of legislating are at work. Decisions to legalize marijuana are largely delivered via public referendums, and little to no policy debate is required to invoke them within state governments—policy considerations are rarely hashed out until well after a referendum passes. In the wake of a successful referendum, what unfolds is an undue pressure to get policy implemented soon. This often allows the myopic tendencies of state legislators to prevail.

But the truly daunting challenge that this dynamic presents is of a longer-term nature: marijuana’s commercialization emerging as the next Big Tobacco. Wainwright views a big business takeover as a simple “lesson of history,” and warns us to not be surprised if “in the future, we start seeing Marlboro marijuana cigarettes.” To be sure, his stance is pragmatic and one that engenders caution, not total cynicism.

Many fervent critics of legalization take this notion even more seriously. Kevin Sabet heads the advocacy group Smart Approaches to Marijuana, which pursues sensible drug policy, and whose motto is “preventing another Big Tobacco.” He points to disproportionate industry influence on marijuana policy, because ultimately, their opposition relies heavily on convincingly projecting the marijuana industry as the next Big Tobacco, whose sales techniques notoriously involve targeting problem users and marketing to youth. Sabet takes this pessimism to the extreme, holding that such a dangerous evolution is an inescapable feature of legalization.

Sabet and his peers are right to instigate a discussion of exploitation by the tobacco and alcohol industries. At this point, there is little reason to suggest that a similar development cannot happen with marijuana. Although it is less habituating than other mainstream illicit substances, marijuana still has the potential for abuse, and its abusers will always be a profitable target for the industry. This possibility of the marijuana industry mirroring its substance counterparts seems to have been callously overlooked by legalization advocates.

Whether the future of legal marijuana is more likely to entail a realization of the movement’s potential or its undoing remains in the eye of the beholder. What is clear is that it is time for legalization advocates to offer a more coordinated, well-thought-out policy agenda. Otherwise, it is simply inconceivable that further legalization efforts will stand the test of an attorney general who is unfriendly to the very idea of marijuana.

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