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Oakland Almost Stumbles Upon California’s Budget Fix

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News came out this morning that Oakland is going to start taxing medical marijuana. It will be the first city in the US to do so after garnering 80% of the vote. I found it interesting that there was almost no formal opposition to this. Oakland's City Council was fine with it. They get money. The business owners were fine with it. They viewed it as a start to legalization of marijuana. Perhaps more important, they view it as legitimizing their business in eyes of the public..

I'm of mixed opinion here. It seems wrong to tax some kind of medically approved substance and not another. Is there anyone looking for a special tax on Lipitor? Maybe that's different since it's patented and Pfizer pays it's fair share of taxes.

On the other hand, California's budget needs a fix. I've been making a big deal out of this for three reasons:

  • I live in California. It hits close to home.
  • California's economy is said to be the world's 8th largest (if you were to consider it a separate country). I haven't verified this fact, but it sounds reasonable.
  • Some say that what California is going through is a harbinger of what the US government might go through before too long. I'm not sure whether I believe that or not.

I was telling my wife about the budget simulator at that aforementioned link and how the state budget is a big game of "Would You Rather" - with almost all choices being very unappealing. She came up with one idea that seems be more and more popular in the area. Legalize pot... then tax the [excrement] out of it. Now is a appropriate time to say that neither my wife nor I have ever tried pot. (Cheap, domestic, light beer with splurges of Tanqueray Ten works for me. The wife is more of a wine fan.)

Legalizing pot would have two financial benefits. One, the obvious inflow of cash from the tax. Two, law enforcement would be relieved of policing it - a budget savings. The problems would be in what side effects our society would see. I'm not an expert on that, but it seems as if we could look at societies that already have legalized pot - places like Amsterdam.

What's your take? Is it a fix or just going to bring a pile of new problems?

Posted on July 22, 2009.

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15 Responses to “Oakland Almost Stumbles Upon California’s Budget Fix”

  1. Are other prescription drugs (antibiotics and such) taxed? If not, then this would seem to be a bit of a double standard. After all, the stance of California is that it is a legitimate prescription medicine, correct? No different than anything else you would pick up at the pharmacy? I’m not saying whether or not that stance is correct, but if that IS the stance, why not treat all meds in a consistent manner?

    I thought California (or at least some areas) had already decriminalized possession of small amounts of pot (it’s still technically a crime, but police wouldn’t actively pursue violators). Or perhaps this was just one of the many referendums on the ballot at some point (you folks do seem to enjoy voting on things). The logic was that it would free up police to catch killers and such.

    I still suggest big string of casinos. There’s nothing better than a voluntary tax :) I’m kidding – mostly.

  2. Lazy Man says:

    Massachusetts has decriminalized small amount of pot. I don’t know if California has or not. I know there was a proposition to decriminalize prostitution for freeing up police resources.

    Nothing wrong with casinos, that’s always in the budget talks as well.

  3. Jessica says:

    California has decriminalized possession in many places, but those who are legal purchasers don’t have a prescription like any other medicine. They actually must obtain and carry an ID card from a doctor’s office to purchase and carry the substance. I think since “dispensaries” are separate businesses from pharmacies (CVS has no pot), and there is no prescribed amount to be legally dispensed like there would another medication, Oakland has found a loophole.

  4. I would have no problem with legalizing pot and taxing it. I don’t partake, and it’s probably not the best thing to put into your body, but it seems hypocritical to allow another drug (alcohol) that causes highway deaths to sponsor sporting events simply because it’s socially acceptable. It’s another paradigm in need of a shift.

  5. My Journey says:

    Lazy Man,

    “I found it interesting that there was almost no formal opposition to this.”

    Actually, the people against it are those AGAINST legalization for the exact same reasons you mentioned:

  6. Lazy Man says:

    The CNN article that I linked to said that there was no formal opposition though Paul Chabot questioned if it was the right thing. It sounds like he doesn’t agree, but didn’t take to campaigning against it. That’s just my guess though.

    That’s still a great article on Taxgirl though

  7. Ron says:

    As a Libertarian, you can probably figure out where I stand. I’ve never tried it either and cannot stand the smell, but I think we could divert the billions we’re spending on the “war on drugs” to other things … like the deficit.

    Are YOU a Libertarian? You might be surprised.

  8. Bill says:

    Legalize pot, prostitution, and gambling. If you think doing so will ruin society, what makes you think it already isn’t? I jest…but pot is a natural resource, just like oil off the coast, that we could be exploiting. It doesn’t have to be a permanent tax, either. Just to get us a little tax relief.

    Plus, it’s very debatable whether pot is any worse than alcohol or tobacco. Many would suggest it’s much safer.

  9. Sooner or later we’re gonna have to face the prospect of taxes. I think taxing the [exrement] out of pot will drive it more underground, but I do support taxing gambling. I don’t think taxes will hurt gambling because it’s a speculative sport; people will play it anyway. But perhaps more attention needs to be paid to legislative perks. And yes, CA is a precursor of what’s coming for the U.S. Federal Govt….we are the world’s 8th largest economy (but weren’t we the 5th several years back? Hmmm).

  10. Would you say that we currently “tax the [exrement] out of” alcohol or cigarettes? I think we do.

    With a pack of cigarettes costing $9 in NYC. It costs less than $0.25 to procude. And less than a $2 per pack wholesale even with advertising and distribution.

    Pot on the other hand costs ~$100 on the street for enough post to make a packs worth of cigarettes.

    Underground? It already is. That is what makes it so profitable for criminals to distribute.

    It seems to me that legalizing and taxing the “excrement” out of would reduce the cost by 50%. Remove the criminal element of distribution. Free up lots of prison space by letting the nonviolent pot only prisoners go. Protect our national park lands. Etc etc etc

    Seems like a no brainer. Legalize and tax.

  11. Roger says:

    I’ll second Rich Credit Debt Loan; we could easily legalize pot, tax it some absurd amount (say, 1000%), and it would still be much cheaper than it is currently, when it’s illegal and on the street. Yes, you will have people who try to buy and sell it under the table to avoid the taxes, but you deal with them the same way you deal with people trying to dodge taxes on cigarettes. Frankly, if the only thing stopping everyone from taxing pot is that the only legal use is ‘medicinal’, expect non-medicinal pot to be sold soon.

    I wouldn’t be surprised if pot is just the start and some other ‘soft’ illegal drugs begin to be legalized and have the snot taxed out of them, particularly if pot turns out to be a decent cash cow. And to my mind, that’s not a bad thing; if we take the same precautions with do with alcohol to limit use by minors and punish things like driving under the influence and otherwise putting others at risk, why continue to spend huge amounts of money to keep these drugs illegal?

  12. Brian says:

    Sure, go ahead and tax it, but as with anything the Gov’t does it will lead to subsidies as soon as the poor start crying about “affordability”

  13. Bret says:

    I’m not for encouraging anyone to smoke pot, but it’s status as an illegal substance is probably the biggest problem related to it.

    In America, we have forgotten the lessons we should have learned from the phohibition of alcohol. This created a huge underground criminal empire that culminated in lots of related crimes and murders. And, this is exactly what is happening in Mexico and South America right now.

    My opinion is that law enforcement should ignore marijuana and instead concentrate on fighting meth and heroine. These are the drugs that are really ruining people’s lives.

  14. 1 Serial Entrepreneur says:

    Yes, it is imazing that marijuana stays on the list of illegal drugs, yet cigarettes, which are just as harmful are perfecfly legit.

    They should learn from the tobacco industry. Tax marijuana nationwide, and help the deficit.

  15. You have to great points. It would bring in more tax dollars and allow the police to focus on real crimes like rape and murder.

    Every state should do it because the US economy can really use those tax dollars.

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