Cannabis Commerce In The USA
Introduction
You want to uncover how much cannatax is possible in a legal, regulated landscape. Basic searches turn up a few sentences here, a few sentences there, and, maybe, if you’re lucky, a couple of sound bites on YouTube.
The detective work begins in earnest. You search for economists’ white papers, download them, and pore through them. They're written by academics for academics. The reports are missing the human touch. You start getting the wild idea you might be able to provide it — but you'll have to match the relentlessness of doctoral candidates composing longish, fact-filled, heavily researched theses. It’s an insane thought. You commit to it anyway.
You think you’re being compulsive enough ... but then, just when you’re starting to draw what seem like sensible conclusions, doubt creeps in. You begin asking yourself, "How is it that I, someone who bypassed Economics 101 for arcane liberal arts fare like Love And The Secular Spirit, have identified potential taxation streams unmentioned anywhere else?"
Doubt has crept in because there's one important step you haven't taken: you haven't talked with the nation's top poteconomists. You want to make sure you haven’t missed any points, or misinterpreted something they said or hadn't said in their papers.
You take one economist, one poteconomist, and one phenom. After interviewing them, you find yourself with over three hours worth of nonstop talk. You personally transcribe their long interviews, word-by-word, sentence-by-sentence, page-by-page, over the course of about thirty hours, bitching every second. You thought it would be easy to hire a virtual assistant from "a third-world country” to do that for you. It wasn't. There's a reward: now you actually understand what the heck they were talking about!
You find that you’re able, within limits, to process the same data — and draw entirely different conclusions. Ones that you don't doubt.
Then you get another crazy idea. You may be able to show other people how to predict cannatax, too — using the words of the economists themselves.
What do you have when you’re done? Cannabis Commerce in the USA, presented here for your consideration. Comments invited. —Lory Kohn, May 2010
1 Learning to Love Economists, Surveys, and Statistics
{Note: the term "cannatax" describes an estimate of all the money, from individuals and businesses, that could be collected if marijuana was legal, regulated, and treated like any other commodity.}
The “magic number” theory
If politicians currently sitting on the fence had a dollar number representing their jurisdiction’s portion of marijuana taxes — an amount that could keep existing programs running and fund urgent needs in the imminent future — convincing their constituencies that legalization is in their best interests would be a lot simpler.
Just how much cannatax is convincing? Is there a “magic number?” Is it $5 billion? $25 billion? If this number actually exists, does it need a few zeroes before the first comma to make it “pop?” In that case, $100,000,000,000 might just do it.
On the other hand, maybe there is no magic number persuasive enough to overcome ethical and moral concerns held by some voters and politicians. Some influential persons, President Obama and the world’s leading marijuana tax authority included, do not feel the “revenue issue” ought to have anything to do with whether marijuana is legalized. Others feel passionately that this number will have a profound impact on whether or not the economy can claw its way out of crisis.
Forecasting cannatax tests economists
Around 2000, economists began seriously assigning numerical values to the public’s appetite for all things cannabis. It would be difficult, if not impossible, to discuss the current surge in cannabis commerce without looking to economists for a quote, a forecast, a nice juicy white paper, or all of the above.
Economists naturally believe they are the experts in putting percentages and numbers to issues that affect the lives of people. That’s historically been true, and it’s true today if you want to know how soybean consumption habits in the US have varied from 1910 to 2010.
Things are a little less cut and dried when illegal substances are involved.
Three experts, we’ll be meeting shortly, explain why:
The crucial problem with figuring out how much taxation revenue we would get is we don’t know the size of the market. And it’s hard to determine the precise size of any economic market, especially if it’s underground – you don’t have the standard ways of measuring it, so it’s subject to a lot more uncertainty. –JM
If this were a legitimate industry, we would have much more refined data about the economic transactions. –JG
We have to answer questions like, how much revenue can there be, how much quantity is currently on the market ... the data that we have to answer these questions is largely nonexistent. There’s so much guesswork that goes on in any of these papers, that basically, at some point, you have to make assumptions that people could criticize. You have to decide which data you’re going to use, which data you’re not going to use, and try to justify it. –MC
These statements tell us that when they’re tackling cannabis commerce, economists have to make assumptions. Lots of assumptions. Working with known data, economists are in their comfort zones. Juggling too many unknowns forces economists out of their element. They may find themselves juggling one ball too many.
Suddenly, someone with twenty years experience growing, drying, trimming, curing, packaging, and wholesaling vast amounts of Humboldt County holy buds has a lot to tell us about the future of the marijuana trade, too.
That said, economists are still the “first-call” experts for calculating cannatax.
The starting gate
Generally economists look to “literature” (past studies, not Proust) to find out if someone has done the “heavy lifting” before them. Literature can take the form of previous white papers, articles, or surveys conducted by reputable sources.
If you look over the literature discussed in this report, you’ll quickly discover that economists are just as likely to write for an audience of fellow economists as they are to write for public consumption.
Unfortunately, no known cannaboloid has been isolated with brain-stimulating properties enabling the uninitiated to unlock equations like:
ln Ci = α + β ln Qi + δ Ei + γ Xi + ε i
Fortunately, you won’t have to. This report translates the economist-speak for you.
Where you live affects your point of view
Just like living in the jungles of Rwanda enhanced Jane Goodall’s study of great apes, it’s wise to supplement statistical analysis with personal observation in a biosphere of cannabis culture and cultivation. The finest empirical data, currently available for first-hand observation, is found in medical marijuana hotbeds like Colorado and California.
Walking past ten to fifteen thriving dispensaries a day is eye-opening; it greatly affects one’s perception of how cannabis commerce’s largely untaxed contribution to the economy undermines GNP (gross national product).
Venturing inside dispensaries offers insight into the variety of products and services on offer. Bakers, cultivation specialists, massage therapists, and all sorts of vendors fulfilling needs in the industry are regular visitors. Without actually setting foot in dispensaries, it’s hard to grasp the enormity of the retail explosion.
Allow me to condense the concept of “enormity” into two words: money, jobs.
Similarly, living in places where cannabis commerce is out of sight and out of mind — insulated behind the walls of academia, for instance — requires economists to comb through stale reports for lifeless statistics. In essence, they’re operating in a vacuum, deprived of viable observation about how robust the marijuana market becomes, once its integrated into the retail landscape.
Factors economists consider when projecting MPMTP
- Survey data
- What excise or “sin tax” rates the market will bear
- Supply and demand dynamics
- How trustworthy the surveyed statements of people arrested for trafficking really are
- The relationship between seizure statistics and reality
- The average weight of a joint
- How much a pound of marijuana is worth
- How many metric tons of “weed” are grown annually in the US
- How much weed is imported
- How many of us buy marijuana
- How much we collectively spend on marijuana
- How to “model” data
- “Elasticity,” the amount by which price stretches one way or another with respect to a given tax or given event (like legalization).
Let’s examine some of the top considerations.
Survey Data
Economists commonly cite a few major surveys on “drug” use conducted from 1999 to 2008. The surveys, often conducted by firms like Abt Associates working for the White House drug czar, or related entities like the DEA, confound economists the most.
Respondents replying to these queries have often just been arrested for “drug” offenses.
Even if surveyors reach respondents by phone or mail, it’s highly questionable how honest people are responding to questions about their personal consumption of illegal substances.
Does that mean surveys querying persons about their consumption of illegal substances have little value? Not at all. They’re an important piece of the puzzle. But they don’t complete the whole puzzle.
There’s also the issue of whether or not drug surveys ask the right questions. These surveys are heavily slanted toward gathering information about retail transactions. Data is woefully lacking for information about the buying and selling habits of wholesalers. For example, a typical NSDUH (National Survey on Drug Use and Health) question is “How much marijuana do you purchase in a typical month?” If the average answer is “seven or eight grams,” consumers are answering, not wholesalers.
Wholesaling questions like “What did you pay for your last bale (25-50 pounds of compressed, usually Mexican, weed in the form of a hay bale)?" or “How many pounds do you sell in a typical month?” are conspicuously absent from drug surveys.
Agencies that conduct drug-related surveys
- ONDCP (Office of National Drug Control Policy)
- NHSDA (National Household Survey on Drug Abuse)
- NSDUH (National Survey on Drug Use and Health – successor to NHSDA)
- MTF (Monitoring the Future)
- STRIDE (System To Retrieve Information From Drug Enforcement)
- SAMHSA (Substance Abuse and Mental Health Services Administration)
- NDIC (National Drug Intelligence Center, releases National Drug Threat Assessment)
Demand-side data vs. supply-side data
Essentially:
Demand-side data corresponds to consumption, how much marijuana is being “used.”
Supply-side data corresponds to seizure statistics, how much weed has been intercepted at the border, along with how many plants have been “eradicated” domestically.
When calculating cannatax, some economists use demand-side data exclusively, some choose supply-side data exclusively, and some incorporate both.
Understanding excise taxes and sin taxes
Excise taxes are taxes levied on specific goods with rates considerably higher than those applied to normal goods. Gasoline is a common example. Sin taxes are essentially the same as excise taxes, only they carry the built-in stigma intended by their authors. Each state sets its own excise or sin tax rates.
Taxes on “sinful” goods, like alcohol and tobacco, can run as high as 80%. Compare this to the 10%, or so, local and state sales taxes paid on coffee, cream, and sugar.
The sin tax rate levied on marijuana in a legal, regulated, society will have a pronounced impact on cannatax. A 10% difference in the sin tax rate could mean billions and billions in tax money lost or gained.
Arriving at really high cannatax figures generally involves invoking really high sin tax rates.
So, if you run across a really high cannatax estimate, there’s a good probability whoever did the estimating used a really high sin tax rate.
In 2010, a palatable sin tax rate for buyers, sellers, and state governments can only be guessed at – giving the “common man” as good a chance at determination as a PhD economist. Your chances might even be better if you’re actually working in the marijuana industry, and you regularly talk with the same people sin taxes would affect.
Sin taxes from a different perspective
Some economists start with the assumption that marijuana can be taxed at rates anywhere from 50% to 80% because people bear these rates for alcohol and tobacco. They feel the substances are comparable, which justifies setting similar sin tax rates.
Let’s consider sin taxes of 50% to 80% from a different perspective.
Imagine you’ve been raising ganja in northern California for the past 20 years. You’re an outlaw. You enjoy being an outlaw. You’ve grown tons and metric tons over your career, learning to increase potency and yields year by year. In your mind, you’re growing a plant with as much therapeutic value as recreational value. As you tend your crop from seed to smoke, you believe you’re helping people out.
So, when economists nonchalantly assume career outlaws will docilely accept sin taxes north of 50%, just because alcohol and tobacco are taxed at these rates . . . they might not have their fingers on the pulse of a nation.
You could argue that growers won’t be paying the tax; it will just be passed on to the consumer. That argument assumes consumers are somehow less ornery than growers.
Maybe they are, but that doesn’t mean they’ll accept paying 50% sin taxes for a medicinal plant, just for the convenience of buying in a dispensary. Government has a say in this debate as well – if a decent amount of sin taxes can’t be collected, is ending prohibition really worth it?
Then what is a palatable excise tax for all concerned? That remains to be seen, but 25%, at the most, might be more in line with reality.
Should economists be motivated to seek cannatax?
“Should” is a strong word.
It would be nice, if not downright patriotic, if top-gun pot economists emulated bloodhounds, sniffing over hill and dale for choice morsels of data. That’s not always going to happen. Economists usually adopt the Dragnet approach, i.e. “just the facts, ma’am, just the facts.”
That would be fine, or at least acceptable, if there were more facts. Fewer facts call for more imagination. There is no “economists’ oath” prohibiting them from exploring viable revenue streams that haven’t been considered in previous literature. Sometimes economists explore less traveled paths. Not too often, but it happens.
Can you predict cannatax?
You’ve taken a glimpse at the various factors economists weigh as they prepare pot tax forecasts. While this pursuit is serious stuff, it’s also a game . . . a guessing game, to be exact. If you want to get in the game, you have access to the same data economists do.
You never know…sometimes the guy in the stands does a better job of predicting the Super Bowl results than the world’s leading “pigskin prognosticators.” You might just beat economists at their own game, especially if you happen to have some specific insight economists don’t.
You probably don’t want to challenge economists over legal substances, but when it comes to illegal substances ... game’s on! Playing the game requires learning to love, or at least live with, statistics – like the ones some of you turned to, comparing quarterback ratings and turnover ratios, before you bet on the Super Bowl.
By the time you’re done with this report, you’ll be able to jump into any cannatax conversation. How far you want to take it is up to you.
Conclusion
There’s no escaping the fact that economists have something valuable to tell us about cannabis commerce. But as they’re the first to admit, they have a lot more problems forecasting tendencies for cannabis commerce than they have predicting the fate of everyday commodities.
At some point you may want to go the horse’s mouth and read exactly what economists say in their reports, or check out their interviews with Cannabis Commerce. Don’t let the Greek equations throw you.
And don’t neglect the human element, above and beyond statistics.
No less an intellect than Albert Einstein observed: Concern for man and his fate must always form the chief interest of all technical endeavors. Never forget this in the midst of your diagrams and equations. Information is not knowledge.
Next section preview
Literature, statistics, elasticity: welcome to the economists’ domain. You know what consumes them, but who are they? Are they number-crunching androids, devoid of personality? Or are they warm, soulful folks you’d want to . . . dare I say . . . share a bowl with?
Let’s find out.
2 The Enigma
A libertarian, he recoils at the thought of working for the government. An indefatigable crusader, he believes all Schedule One drugs including heroin, cocaine and oxycontin should be legalized — like yesterday. He’s appalled at the colossal sums the government spends pursuing, prosecuting, and incarcerating marijuana “offenders.” He wants in on a Marijuana March on Washington. Should marijuana be listed on the International Commodities Exchange? Absolutely.
We’re talking about a radical, right? Nope. We’re talking about Professor Jeffrey Miron, PhD, Director of Undergraduate Studies at the Harvard University Department of Economics, arguably the world’s most cautious pot tax prognosticator.
Radical, cautious, or both, Miron maintains that the figure, representing all the revenue that could generated from taxing marijuana annually in the USA, is $6.2 billion. Miron became the first economist to receive extensive press coverage for estimating marijuana taxes in a legal, regulated landscape.
A lifelong activist, Miron is held in high esteem by academia, the media, and legalization advocates. Curiously, the most-quoted man in marijuana remains completely detached from his subject.
The Miron Report
The $6.2 billion figure, indelibly branded on the collective unconscious, is most often pinpointed in Miron’s 2005 white paper, The Budgetary Implications of Marijuana Prohibition, funded by The Marijuana Policy Project, a non-profit dedicated to pursuing sensible marijuana policies [read legalization]. This document is commonly referred to as The Miron Report. When someone performs a Google search for “marijuana tax revenue” or similar, The Miron Report is inevitably splattered all over the search engine report page.
For observers who believe the more potential cannatax, the sooner legalization occurs, that’s not a desired result. They feel actual cannatax figures will eventually prove to be considerably more robust. Compounding the frustration, prominent media sources, including the pulp old guard like The San Francisco Chronicle, The New York Times, and The Chicago Tribune, still regularly referenced Miron’s 2005 report in the summer of 2009, often in conjunction with the ongoing story that the California Board of Equalization has estimated — at its Republican governator’s request — that the virtually bankrupt state stands to gain $1.4 billion annually by taxing its #1 cash crop.
Is that all there is?
When a lot of people, other economists included, see Miron’s figure, the first word that pops in their heads is low. Yet $6.2 billion, first introduced in 2005, has staying power. It’s still going strong in 2010. This despite the fact plenty of reasonably well-heeled “stoners” — often disguised as you and me — have been displaying signs of, shall we say, enthusiasm, in the dawn of the dispensary era.
Ironically, $6.2 billion could be a figure blocking the alchemization of buds to bullion. It doesn’t have the look of a “magic number” persuasive enough to convert moderates into activists.
Let’s put that number into perspective. Most people don’t have any idea how much the IRS collected in individual and business taxes in 2008. That would be $2.7 trillion. Contrast $2.7 trillion with $6.2 billion.
Even politicians with pro-pot leanings are unlikely to prioritize legalization for their state’s share of $6.2 billion. Let’s face it: spread out over 50 states, $6.2 billion just isn’t motivating. South Dakota’s share could barely finance a community dog run. It’s certainly not nearly enough to overcome the “gateway drug” theory, or the last echoes of Nancy Reagan’s “Just Say No” campaign.
But is $6.2 billion really all that could be generated from taxing tantalizing strains like Mass Skunk, The Forbidden Fruit, and Light of Jah? We’re getting to that. First, let’s examine Miron’s findings and methodology.
Miron’s methodology
The Miron Report tells us that all the “users” in the U.S. spend a total of $10.5 billion annually on marijuana. He anticipates that figure would experience a “plausible decline” to $7.9 billion in a legal economy. Miron then calculates approximately how much in government receipts (local and state sales taxes, state and federal income taxes, FICA, Medicare) individuals and businesses would pay for the product category “marijuana.”
It’s commonly accepted that federal and state income taxes wind up being around 30% of expenditures on that product [in economic terms, 30% of GDP, Gross Domestic Product]. So, Miron took 30% of $7.9 billion, which works out to $2.4 billion.
Miron next calculated a sin tax at the rate of 50%. 50% of $7.9 billion is around $3.9 billion. That $3.9 billion in sin taxes, plus the $2.4 billion in government receipts, adds up to around $6.2 billion. It’s actually closer to $6.3 billion, but why quibble over $100 million?
Confirmation for Miron’s methodology exists in literature. His figures closely match numbers reached by the research team of Caulkins & Pacula from Carnegie-Mellon Institute and The RAND Corporation respectively.
80% sin taxes?
Miron sees no reason why sin tax rates in a legal, regulated market shouldn’t be directly comparable with rates currently levied on alcohol and tobacco. “It seems to be possible to have 50, 60, 80% sin tax rates without driving the market underground,” Miron told Cannabis Commerce in March of 2010.
That’s an assumption, drawn from comparisons to tobacco taxes in Europe. Presently, no state exacts sin taxes on marijuana. In Colorado, dispensaries pay local and state sales taxes, but no sin tax is charged to “patients” However, it’s whispered on the wind the nation’s first marijuana sin tax debate will take place in the Colorado legislature sooner than later.
No published survey has queried buyers and sellers on the tolerability of 50% or higher sin rates. Miron’s $6.2 billion projection won’t pan out if sin taxes around 50% can’t be sold to the public.
The famous ONDCP table
Miron first extrapolated the now-familiar statistics of about $10.5 billion spent annually, which could generate $6.2 billion in taxes, in his 2002 The Budgetary Implications of Marijuana Legalization in Massachusetts, from a single table on drug “offenders” included in What American Users Spend on Illegal Drugs, a report put out by the Office Of National Drug Control Policy (ONDCP) in 2001. The table displays data taken from a survey by Abt Associates (headquartered in Cambridge, Massachusetts, same as Harvard, eerily enough) that queried drug offenders.
He repeated his rationale virtually word for word in 2005’s The Miron Report.
“ONDCP (2001a, Table 1, p.3) estimates that in 2000 US residents spent $10.5 billion on marijuana.”
Miron suggests that the ONDCP, the same organization that lost the war on drugs, has won the war on statistics. Others disagree.
That same ONDCP study suffers from a number of fatal flaws, according to a later report from December, 2002, by the Drug Availability Steering Committee of the DEA. The later report points out that the original report estimates a total of 927 metric tons of marijuana are consumed by Americans annually — although virtually every other reputable source places the figure at least 9,000 metric tons higher.
The shelf life of a government table
Miron readily admits the ONDCP table has been his lone source for a decade. Relying on only one data source produces an extremely “cautious” forecast.
He defends the cautious approach:
I’ve stayed with the main estimate of the size of the market that I took from a report, commissioned by the White House’s drug czar’s office (ONDCP), back in the late 1990s, published in 2001, and I’ve just taken that number and I’ve updated it for inflation. I wanted to use their number for three reasons:
First I read the study, and it seemed like it made reasonable assumptions.
Second, it’s an order of magnitude that seems plausible to me in the sense of how big a market they’re talking about compared to alcohol and tobacco. There are estimates around of the marijuana market that imply that it’s way bigger than the legalized alcohol and tobacco markets, and that doesn’t strike me as plausible.
Third, I also wanted to use a number that is basically beyond criticism, in particular beyond criticism from the White House drug czar’s office and the DEA, or other advocates of marijuana prohibition. That’s why I’ve used their number, because I don’t want them to be able to say, “You deliberately inflated the size to make a tax revenue estimate look bigger than it’s actually going to be.”
So I think given that if anything I erred on the low side, I’m immune to that criticism.
That’s immune to criticism by government entities. That doesn’t mean he doesn’t get any from his fellows, including plenty of protests that his figures are too high.
In his 2008 The Budgetary Implications of Drug Prohibition, Miron bumped his estimate a half-billion to $6.7, accounting for “inflation.” Taking up the mantle this time for The Criminal Justice Policy Foundation, he was still relying solely on the same ONDCP table circa 2000.
Is there an expiration date for that table?
“Until there is something better, I will continue to use that, though I continue to read other people’s estimates, and think about whether I should change my view, and they maybe nudge me that maybe I’m 20 or 50% too low, but they certainly don’t convince me that I’m off by a factor of ten, which is how different some of the estimates are from the numbers.”
A walk on the demand-side
Other economists have attacked The Miron Report for its reliance on demand-side data (in a word: consumption, how much pot is smoked, eaten, absorbed or otherwise imbibed).
One of those critics, we’ll be meeting next section, describes why:
Demand-side estimates are almost always derived from nationally representative survey data, and specifically the NSDUH (National Survey on Drugs and Health). The NSDUH asks respondents whether or not they have used marijuana ever, in the past year, and in the past month, as well as a limited number of other questions. Additionally, the survey used to ask respondents further questions, exploring the frequency, quantity and other important characteristics of marijuana use.
Given this data, it is hypothetically possible to estimate the quantity that would have to be available on the market to support the self-reported consumption of respondents. This method, however, will consistently and systematically underreport the quantity in the market. A brief exploration of existing consumption (demand-side) estimates illustrates this detrimental flaw. –JG
Miron expresses his own suspicions about the veracity of supply-side data [extrapolated from seizure and eradication statistics]. But do those suspicions justify excluding such data from his reports altogether?
Renunciating the effects of advertising and publicity
Miron’s 2010 report actually downgrades his forecast to $6.4 billion — despite an avalanche of free advertising and publicity which boosts pot’s profile in every conceivable form of communication.
Some cannatax observors are disappointed that Miron’s 2010 report, which borrows much of the same verbiage and draws basically the same conclusions as his previous reports, ignores paradigm-shifting movement like:
The ceaseless broadcast of medical medical marijuana stories by electronic and print media.
The relentless portrayal of all things weedy by Hollywood.
The retail explosion taking place wherever dispensaries are allowed to conduct cannabis commerce like Denver, LA, and Oakland.
Cannabis conventions being held all over the country.
That’s quite a lot to overlook!
Empirical evidence, from areas dispensaries have been allowed to flourish, suggests that Miron’s statement “there will be no increase in consumption under legalization” — this exact wording appears in each of his reports — might not accurately reflect the public’s pent-up demand for exotic buds.
Finding more Cannatax is not Miron’s primary motivation
In fairness, Miron devotes most of the pages in his white papers to calculating the savings from a cessation of pursuing, prosecuting, and incarcerating marijuana “offenders” from readily available statistics. He expends considerable energy toward this purpose. There is no reason to challenge his ability to count actual numbers that exist in the public domain.
However, when it comes to finding more cannatax, Miron is considerably less energetic if not lethargic. He’s simply not motivated. Tax revenue is “sixth, seventh, or eighth” on Miron’s list of reasons to legalize marijuana.
Atop that list is individual liberty:
I don’t want what I think are the compelling arguments — the liberty arguments — to end up being undercut by inflated, excessive, and possibly contaminated estimates of the economic benefits. I think that makes the movement seem somewhat disingenuous. I don’t want people to think they’re getting some goose-that-laid-the-golden-egg benefit out of this; the benefit is letting people consume marijuana in peace.
Miron agrees with President Obama that if marijuana is legalized, it should not be for the sole purpose of raising revenue. With all due respect, there’s ample evidence that one of the main reasons prohibition was lifted in 1931 was to raise taxes in a great depression — the exact scenario we face now.
What about that “magic number” theory?
Personal opinions are fine, but when a nation turns its lonely eyes to you for all things marijuana, the revenue issue inevitably comes up. Many people feel revenue is one of the most important and compelling rationales for legalization, if not the most important argument.
At some point in the hopefully not too distant future, legalization is going to have to be sold to prohibition proponents. One of the basic tenets of sales is that everybody has a hot button. Some folks want a more powerful engine. Some folks want the safest car on the road. Some folks buy the SUV because it has a built-in Kleenex dispenser. Hot buttons are different for everybody. Neglect any potential hot button, risk losing the sale.
Some politicians may advocate legalization because they, like Miron, buy into the individual liberty arguments. That said, it’s just as possible another politician’s hot button could indeed be the revenue issues. What not reach out to them?
There clearly are people in the middle, there are politicians in districts that have more of a mix, and I certainly talk to a lot of politicians who say, “Look, I need cover. I agree with you philosophically or morally, but I need an excuse to tell my constituents that I’m going to vote for this.” And so yes, for some politicians a big number maybe is helpful. But I don’t think that’s a reason to make the number bigger than my objection analysis of the economics suggests.
Fair enough.
Another boring agricultural thing
Unswayed by optimistic voices trumpeting the potential of marijuana taxation as balm for economic ills, Miron relishes his role as “buzz-killer.” Here’s his answer to the question “Do you think legalizing marijuana would make farming sexy again?” Those of you seeking sensational cannatax amounts might want to avert your eyes:
“Not for very long. I think it’ll just become a boring agricultural thing, just like everything else. It shouldn’t be any sexier than anything else. I mean after all, it’s basically a weed, so it’s not that sexy to grow a weed.”
Then why isn't anybody opening avocado dispensaries?
Clearly, Miron’s path home doesn’t wind past the thriving cultivation stores taking root in Denver and LA. It's quite possible he might not have brushed up on his Ralph Waldo Emerson recently, or he'd know the poet/naturalist/philospher said:
What is a weed? A plant whose virtues have not been discovered.
There’s more:
“We’re being, from a tax revenue perspective, a bit hopeful that somehow this is a miracle commodity that’s going to going to overtake everything else. For example, you hear this statement all the time, that marijuana is the largest cash crop in California. I challenge anybody to discover the source of that statement. I’ve been hearing that statement for decades, and I bet whoever made that statement had zero data to back it up.”
The asexuality of weed might be news to the Department of Agriculture, which rated it as California’s largest crop, “larger than grapes, vegetables, and hay combined,” in Agricultural Statistics 2005 (National Agricultural Statistics Service>Statistics by Subject>Crops and Plants.) NASS isn’t really known for fabricating herb lore. Dr. Miron, you can pay the bet in Red Sox tix.
I return the challenge: for Rockies tix, I challenge anyone to walk a mile in my shoes — Denver’s South Broadway, from Arizona to Yale, specifically — and retain a bearish attitude about marijuana futures.
Hold the futurists, please
For months, I was convinced Miron was unable to see into the future. I could barely get his assent that there are any new and different potential revenues streams than those he’s repeated in his reports for the better part of a decade. However, after painstakingly transcribing his CC interview, I realized that Miron does peer into the future; he just doesn’t happen to see much cannabis commerce going on there. The 25 dispensaries that have sprung up within a mile radius of South Broadway and Evans in less than a year are apparently meaningless:
“I am taking account of all those factors. And I still think that they don’t add up to huge numbers, because it’s one product. If we look at the tax revenue we get from any product, no matter how popular, it’s maybe, maybe, tens of billions. But it’s not hundreds of billions.”
The dichotomous nature of man
One can project how advantageous it might be for the cause of legalization if the leading pot tax authority placed greater emphasis on assessing the value of certain forseeable taxation streams, which will seem obvious when they’re addressed later in this report. Some “want to” on Miron’s part would be nice, but it’s probably not going to happen.
Miron tends to trivialize cannabis commerce’s contribution to job creation, labeling it sight-unseen as “job shifting.” He might draw a different conclusion if he spent quality time in medical marijuana hotbeds ripe with dispensaries and a succession of spin-off businesses.
While some legalization advocacy groups focus on “patients’ rights,” as if medical marijuana is all that matters and recreational use is an afterthought, Miron’s more egalitarian viewpoint embraces legalization for everyone.
Miron says it’s plausible that the size of the marijuana market is about the same as the tobacco and liquor markets. However, according to the US Department of Labor statistics, the liquor industry registered $54.9 billion in sales in 2007, while the tobacco industry chipped in with $33.8 billion. Compare this with Miron’s insistence marijuana sales have hovered around $10.5 billion since 2002.
Miron says he assumes that the popularity of marijuana will be on a par with alcohol and tobacco; however, in 2008 the California Board Of Equalization collected $300 million in liquor taxes, but predicted in 2009 that it could raise 1.4 billion in pot taxes. The BOE also used demand-side data exclusively to calculate its figure, according to Miron himself. Why, then, is the BOE estimate over four times higher for marijuana than alcohol, if they are in fact equally popular? If it’s because even though they’re equally popular, marijuana costs more than most alcohol products, then why wouldn’t it bring in over four times as much tax revenue if the BOE’s demand-side prediction proves accurate?
Miron’s as generous with his time for marijuana causes as he is stingy with his data sources.
Miron admits to some omissions in his reports which could have been included, like licensing fees for individuals and dispensaries which are measurable. “No, that’s not in the report. I agree.” But he won’t concede demand has increased measurably since 1999.
Conclusion
Enigmatic or not, Jeff Miron is an influential and highly-respected figure in legalization circles. Discussing cannatax without highlighting Miron would be like writing about great drama without including Hamlet. He’s a genius at extemporaneously translating economist-speak into plain English for pubic consumption. Even maintaining a posture of unshakeable caution, Miron still aids the cause of legalization, because his reports receive considerable media attention, and he’s the go-to guy for quotes. He also has an avuncular quality that makes him impossible to dislike, even when consistently disagreeing with him.
Is Jeff Miron the beginning of all things cannatax or the end? Hard to say. But anyone following in his footsteps better really bring it if they want to make a go of the cannatax forecasting business.
Next section preview
The medical marijuana phenomenon was impossible to anticipate in 2005. However, even without the benefit of hindsight, much more data was available for predicting potential tax revenue back then. And someone with time on his hands and a high capacity for researching semi-obscure statistics was tapping deeply into it.
3: A Poteconomist Plays the Game
Some of us wonder how many beers are left in the fridge. When you’re Dr. Jon Gettman, PhD, chronicler of the bulk folk, you wonder how many metric tons of marijuana people consume in a year.
Hopefully, that amount balances with how much ganja growers are producing. It’s helpful knowing what an average joint weighs, how much an average “user” consumes, and how much “demanders” are willing to compensate “suppliers” for preferred rations.
When new government data becomes available for any of the above, your blood races a little faster. Why not – isn’t this the essential data economists live for?
Economist or poteconomist?
“I’m not an economist. My training is in both criminal justice and regional economic analysis. I’m just an adjunct professor of Public Administration at Shepherd University in Shepherdstown, West Virginia,” Gettman says modestly.
Gettman throws around figures pretty good for a civilian, pot figures in particular. Jeff Miron’s bottom line numbers don’t quite do it for you? Evidently, the road to “more” runs through Shepherdstown.
If you believe that there’s more than $6.2 billion in "lost taxes," you’d better find a whole lot more metric tons have been supplied to the market.
Gettman has.
Here’s a taste from his April, 2010 interview with Cannabis Commerce:
"If we’re going to say – as I do – that there’s 14,000 metric tons of marijuana on the market, then we have to reconcile that with survey data to ask how many people are consuming marijuana? How much are they consuming, and can we account for all that marijuana? It is kind of a funny thought. Like, OK, we’ve got 30,000 pounds of marijuana here, how long will it take to consume it? Well, gosh, to have such problems! But that’s the nature of the intellectual exercise, if you will. What data do we have about supply? What data do we have about demand, and how do we correlate it?"
Since the Public Administration professor somehow manages to correlate supply and demand data, perhaps he won’t object to the designation “poteconomist?”
One thing is certain. Poteconomists face the same handicap as economists:
"The problem is, we don’t have an inventory, an audit, a census. . . of all the marijuana that’s coming into the country or grown here. It’s not like it’s registered in a warehouse and it’s brought to market. At the same time we have better, but very limited data, about how many people consume marijuana."
It’s certainly true no one’s figured out how to attach a barcode to Lime Kush – yet.
Playing the game
A gleam comes into Gettman’s eye when he expounds upon obscure cultivation statistics.
“One of the things that people do when they play with statistics in this fashion is make what we call an educated guess, and I’m sorry, but it is play.”
This comment reinforces the contention that seeking MPMTR (maximum-pot-ential marijuana taxation revenue; “lost taxes” in Gettman’s parlance) is a game that anyone can play. Gettman is just way more advanced at it.
Here’s Gettman playing with how much land it would take to grow all the nation’s marijuana:
"Basically you could look at 50,000 acres supplying all the marijuana that Americans consume today. That’s 12% of America’s idle cropland. Now, again, these are really general estimates, and they’re based on certain assumptions about how many plants per acre, how much space between rows, based on the premise that you’re growing outside, while some people might prefer marijuana grown inside."
Marijuana Production
Sweating the space between rows is one reason Gettman’s star shines brightly as the foremost expert on domestic marijuana production. In 2006, Gettman trained his guns on a growing industry. His Marijuana Production in the United States is a laudably researched paper. It spotlights the bulk folk and the untaxed 15,000 or so metric tons they clandestinely cultivate for commerce in grow rooms, greenhouses, and the great outdoors – including national forest land.
We learn that an average joint weighs .75/gram, an average pound of pot costs $3,570 a pound, and, in case you’re provisioning an epic event, only $7,871,480 stands between you and a metric ton (2204 lbs.).
Ditchweed to richweed
Gettman wasn’t exactly cramming for Marijuana Production. The prolific pot advocate has been writing articles championing marijuana reform for at least twenty-two years. Gettman recounted marijuana’s long, strange trip from ditchweed to richweed for Cannabis Commerce:
Originally pot was grown in just a few states, primarily California and Hawaii. What happened was, first people were growing large fields in a few states, then government started eradication programs. As people started growing in more states, the eradication program spread to more states. Then people started growing smaller plots and getting a greater yield. They started cultivating sinsemilla – seedless marijuana. They started paying attention more to individual plants. They started growing on fence lines, in little groves here and there.
And as production spread through more states, the eradication program spread through more states. As production got more intensive, the eradication program got more intensive. At one point the government started seizing private lands, so people moved on to public lands, growing in national forests and national parks for example. As part of this action/reaction cycle between growers and law enforcement authorities, two big developments evolved. One, a higher quality, more valuable crop was produced, and second, cultivation moved indoors.
Meanwhile, the government was keeping statistics about all that eradication. It was also tracking what informers pay for marijuana in a little-known program called STRIDE (System To Retrieve Information From Drug Enforcement).
Anyone that’s been arrested – there were a staggering 847,864 marijuana arrests in 2008, according to NORML – is surveyed about their usage and buying habits by agencies like NSDUH (National Survey on Drugs and Health).
Data harvested from those sources and several more previously untapped founts found its way into Gettman’s next white paper. It became his signature work.
Going the extra mile
Gettman’s 2007 Lost Taxes and Other Costs of Marijuana Laws went above and beyond acceptable due diligence. It took into account all sorts of comparison scenarios, referenced every survey issued by credible pot traffic-tracking entities (more government agencies with longish acronyms), and produced a slew of vital statistics about the acquisition habits of cannabis connoisseurs.
Gettman left no stone unturned in his exhaustive investigation of known statistics. He averaged four different methodologies to reach his conclusion, exhibiting plenty of industriousness in the process, even weighing street prices published by High Times magazine, the Playboy of herbology.
Shepherd 31, Harvard 7
In Lost Taxes, Gettman estimated there were 41.8 million users spending a total of $112.9 billion, which deprived the nation of $31 billion in "lost taxes" for the year 2006. He emphasizes that $31 billion represents what he terms “lost taxes” for the year 2006, not the amount of taxes that could be collected in a fully legal, regulated economy (MPMTR).
How did Gettman land on $31 billion?
Economists know that the amount of “government receipts” (i.e. income taxes; local, county, and state sales taxes) individuals and businesses wind up paying on any given product averages 28.70%. Gettman calculated the government receipts by “source as percentages of GDP.” The “source” is the $113 billion in marijuana sales. If we divide the source of $113 billion by the GDP percentage of 28.70%, after a few minor tweaks, the total of lost taxes comes in right around $31 billion.
There’s no doubt Gettman went the extra mile to arrive at his figures. There’s no disputing he’s deeper into marijuana production than Miron – or anyone else, for that matter. But does that make his $31 billion figure any truer than Miron’s $7 billion? Perhaps. It’s certainly more robust. But why is it so much higher than Miron’s?
Supply and demand: working both sides of the street
As noted, Miron mines demand-side statistics on consumption, based on NSDUH data. Gettman uses these figures, too, and blends in supply-side data, taken from DEA seizure and plant eradication records – that’s where he found all those metric tons.
Because Gettman works both sides of the street, he’s confident total marijuana expenditures in the US add up to $113 billion annually. Compare this figure with Miron’s $10.5 billion. Hmm. How do we account for a 1,000% difference?
As it turns out, the economist and the poteconomist are friends. They don’t agree on everything, but they respect each other’s opinions and know each other’s position inside and out.
Miron offers his take:
"There are a couple of reasons for the difference. First, I’m using a demand side estimate. There’s data from surveys on the amount that people use. And he’s using that data, and other data from the supply side estimates of the amount seized, combined with some assumptions about what fraction of the market gets seized – and those numbers turn out to be higher. I think that the supply side numbers are very suspect, because they come from law enforcement, and law enforcement has a strong incentive to want to make it look as though they’re being very effective. Frequently, when they estimate the weight, they’re looking at the entire plant, not just at the smokeable part, so the plant is way big in terms of weight, and they‘re looking at the wet weight, which is less relevant than the dry weight, for estimating the size of the market. So I don’t use the supply side stuff at all, and I think one should be very cautious when using supply side guesstimates."
Gettman begs to differ – to a certain extent:
"There is a considerable problem reconciling supply and demand-side data. All the surveys suggest a much smaller market than data on the supply-side. I try to bridge that gap with my own analysis, but the gap remains. This is why some credible analysts are skeptical of my estimates. They think a marijuana market of over $100 billion is just way too big, much too large to believe in.
But police are frequently indicating that marijuana has an extremely high retail value. And that price is inevitably between $2,500 and $4,000 a pound. When you look at all the marijuana they say that is on the market, it’s clear that based on that data, how accurate that data is is of course the open question.
But based on what police reports provide, and I mean DEA reports, state police reports, price estimates from all sorts of sources, there is some consensus of what the price of marijuana is these days. Again, we’re looking at a $100 billion a year retail market based on these reports.
That’s where the issue of marijuana consumption comes in. Like right now we’re talking about estimates of supply. Generally, these are assumptions based on very limited data. We have to balance whatever we come up with in this supply-side estimate context in relation to whatever estimates we have of consumption."
But there’s no way to do it without observors poking holes in your methodolgy. Developing a thick hide is an occupational imperative. Findings by economists and poteconomists have to withstand attacks by their peers, keep the press from asking too many questions, and survive merciless grilling from the likes of Cannabis Commerce. So they have to look hard at their claims.
And Gettman has looked really hard at his claim that all of us put together purchase $113 billion worth of weed annually.
"The data is the data, and if the feds want to publish such numbers, then they should confront the economic ramifications of their supply estimates. But that's a lot of money. The truth is probably somewhere in between Miron's numbers and my own."
The apparent “downgrade” has to do with Gettman anticipating the market “collapsing” in a legal, regulated, market. He expects prices to fall hard under legalization. That $113 billion could turn into $50 billion. This is an example of the “elasticity” poteconomists refer to. How much will prices change due to a paradigm-shifting event, like legalization?
That was then, this is now
Miraculous events have occurred in the three years since Gettman penned Lost Taxes. Strange but true, we actually transact in a partially legal poteconomy. Total legalization hovers on the horizon, at least in some states. That begs the question: what kind of numbers could we rake in – I mean collect – in a fully legalized economy?
I shy away from a revenue number because I just don’t know what the consumption versus price issue is going to be. My report is based on ‘now.’ It’s based on a status quo. It’s based on the taxes lost by marijuana being illegal. It’s ‘what does this policy cost taxpayers today?’ It’s not really meant to be the taxes available from legal marijuana tomorrow.
Right now I’m comfortable with saying it’s costing us $40 billion a year. And I’ll tell you something. We can speculate all we want about the potential money that will come in when marijuana’s legalized, but that’s imaginary money.
What, then, makes his $40 billion real?
One reason I focus on the fiscal costs is that this is money that the government’s losing out on today. It’s not imaginary. This is lost money. This is directly hitting everybody’s wallet. It’s hitting every government’s balance sheet. This is real and it’s now. The potential tax revenue is important to evaluate as a policy, it’s important to evaluate its economic impact, it’s important to evaluate costs vs. benefits.
It’s not a trivial exercise to try to evaluate this stuff, it’s extremely important. But the losses . . . these are tangible . . . these can be estimated with a greater degree of reliability, and they show an immediate impact on people. People are paying higher taxes these days, or getting less services, because marijuana’s illegal. That’s the situation as we speak.
And as we speak . . . $40 billion’s not bad . . . or it wouldn’t be if people encountered this figure nearly as often as the ubiquitous $6.2 billion.
Gettman on “sin taxes”
Since he was seeking lost taxes in 2007, not MPMTR, Gettman did not consider sin taxes in his estimate. One of the reasons $31 billion turned into $40 billion, despite the possibility of prices “collapsing,” is that sin taxes are now in the discussion. He spoke about these with Cannabis Commerce:
"Let me give you a proposed tax. $10 per 1% THC (tetrahydrocannabinol, the primary intoxicant in cannabis) of marijuana per ounce. So an ounce of marijuana at 5% THC would have a $50 tax on it. I think that would produce a retail price, for an ounce of pot, of maybe $100. Whatever the tax structure is, it has to come up with a price at which producers and consumers would prefer a legal market, rather than an illegal market."
There are several problems with that statement:
A non-smoker since the 80's, Gettman's a little out of the loop; it’s now 2010, the age of super-potent 25% THC domestic exotics, not 1982, the age of perfectly good 5% THC Columbian imports. That means ounces would be taxed at astronomical rates. $10 x 25% thc = $250 oz. sin tax alone. Yikes!
Calculating increments of THC content from 1% to 25% and beyond (some tinctures and extracts boast 75% THC content) would be a bookkeeping nightmare.
Ounce prices free-falling from today’s $400 oz. to “maybe $100” are, to use Gettman’s own term, “imaginary numbers.”
An exercise in modeling: a Miron/Gettman mashup
Once they’ve accumulated data from reasonably trustworthy surveys, poteconomists look for ways to “model” that data. Why? Because, placed in a mathematical context, assumptions start looking a lot more authoritative. Gettman explains:
"A model is a mathematical formula, based on a relationship between certain variables, between certain concepts. You know how long it takes to drive to the grocery store based on the speed limits, based on the speed of the car, based on the amount of traffic at the time of day you’re traveling. You can estimate that by some kind of equation that uses the relationships between those concepts.
One of the things that we do when we do model is we say, OK, we’ve tried to come up with an estimate that’s consistent with all the available data. We don’t know what we don’t know – sounds like an obvious thing, but it’s an important principle of modeling.
An example pertaining to marijuana would be quite simple. For example, the government has seized about 100 pounds of marijuana and the government concedes that they seize about 10% of all that comes into the country. Therefore if 100 pounds are 10%, then 1000 pounds came into the country. When you look at how much the government seizes, you can multiply that by 10 to come up with a fair estimate of what the total supply is. Another model is the government seized 100 pounds of domestic marijuana and that might be one fourth of all that was grown, so again, the same process applies.
These are very simple models. And I’ll tell you something, the more complex a topic is, the more useful simple models become . . ."
OK, let’s try a simple modeling experiment.
What if we apply Miron’s 50% sin tax rate to Gettman’s stated $112.9 billion total annual expenditures? Then, borrowing the purportedly impeccable rationale of a Harvard PhD, we’d arrive at a considerably more alluring annual sin tax projection of around $56 billion. That’s before we even add in Gettman’s percentage of GDP, which, you’ll recall, came to $31 billion in 2007.
If we’re bold enough to add $56 billion in sin taxes to the $31 billion from percentage of GDP, that catapults our result to an impressive $87 billion. This figure does not result from applying an esoteric formula contrived by Cannabis Commerce. It’s a variation on the simple model Miron used: adding sin taxes and GDP together to come up with MFMTR, the same calculation he used for his $6.2 billion estimate.
$87 billion is a relatively giddy number. If it’s not there already, it could be awfully close to “magic number” territory. But wait – if we use Gettman’s $40 billion 2010 figure rather than Lost Taxes’ $31 billion, we ride the thermals to the even more rarified air of $96 billion! Take a moment and let that sink in.
Time’s up! We never would have attained this altitude without applying Miron’s 50% sin tax rate. What would Gettman’s bulk folk have to say about that? Maybe not, “Sir, yes, sir!”
You’re sharp enough to realize that halving the sin tax rate in the given model, from 50% to, say, 25%, sends those alluring MPMTR figures plummeting back down to earth $28 billion lighter. Does that mean MPMTR is capped in the $68 billion range?
Not so fast! Although Gettman did a great job of predicting potential tax revenue based on known data, as he admits, the truth is there’s only so much known data can tell us about the taxation potential of an underground activity only recently sanctioned after 65 years of prohibition.
Playing the game beyond 2010
What tools will the poteconomists of tomorrow have at their disposal to make better projections than we can make today? I asked Gettman:
"The real area that we’re missing good information on is what production actually is, how much marijuana is really on the market.
That’s the area we just don’t have exact data on, and sometimes it’s like the old story about a dozen blind men trying to figure out what an elephant is. One of them touches the trunk, one of them touches the leg, and one touches the tail. They all have a different idea what kind of animal they’re groping around, trying to size up.
It’s really a question of getting better data about two revenue streams. One of them is the amount of money being spent on pot being spent on other stuff and the taxes that regular sales produce. Sales tax, payroll taxes, corporate profits, etc. The other revenue stream is what we call sin taxes or excise taxes, the additional taxes that we have on alcohol or tobacco, and in this case marijuana.
To address the issue of getting better data, there may be a way to collect data from dispensaries after they’ve operated for a while. There’s potentially a way to see what they’re collecting in sales tax as a way of modeling what would happen if similar policies were in force in other states. There’s a possibility of using data from the dispensaries in California and Colorado, for example, and using that to provide a much more specific and detailed estimate of current tax revenue and projections of tax revenue.
Nowadays we have something called the National Drug Intelligence Center. So, for example, there’s this website where they have drug threat assessments, and every year or two they put out a threat assessment about cannabis production.
The California Department of Health has a website where they note how many identification cards they have issued verifying how many people are marijuana users.
All this “data of the future” will come in handy for tomorrow’s poteconomists.
However, there may be areas presently overlooked that could be accounted for today."
“Quite legitimate speculation”
While hesitant to futurize in numbers, after reading a preliminary version of this report, Gettman commented “the other sections provide quite legitimate speculation.” In particular, he was referring to Part 6, “Obvious Taxation Streams,” revenue-generating possibilities Lost Taxes and The Miron Report do not address.
Big Pharma’s cannaboloid products were given by way of example:
"I don’t have the data or the models to estimate that, that’s a bit beyond my capability at the moment. But there’s a lot of money to be made by developing highly refined pharmaceuticals based on the chemical ingredients in marijuana. Yeah, there’s billions of dollars there."
Billions of dollars to add to our aforementioned total of $68 billion? Er, that was a modeling exercise. Can’t take that to the bank quite yet. Read on.
Conclusion
With three years to reflect on his Lost Taxes claims – that’s about 36 episodes in Weeds time – it would have been invigorating to hear Gettman shoot for the moon. It wasn’t meant to be. So much for expectations.
However, unlike $40 billion in taxes, all is not lost for those of us optimistic about MPMTR.
Gettman leaves us with this thought:
Consider this. Crops like corn, wheat, and soybeans gross farmers several hundred dollars per acre. Marijuana, in the current market, grosses a grower several thousand dollars per plant. We can argue about the numbers. But if you put aside the quantitative perspective and look at this in a qualitative manner, there are two inescapable conclusions:
The current market diverts an unacceptable amount of money away from the licit, taxable economy.
The marijuana market, even if deflated by legalization, represents a lucrative source of tax revenue.
Maybe marijuana’s sexy after all?
Next section preview
Cannabis Commerce loves visioning and futurizing about lifestyle and MPMTR in a post-legalization landscape. The brainstorming has only just begun.
As it develops, another bold and determined researcher with an even higher tolerance for painstaking research examined the same statistics Miron and Gettman pored over – and more. He liberally referenced both in a vibrant, 100-page document. Astonishingly, this Ivy League phenom concluded that Gettman’s prediction was $172 billion too low!
4: The Wunderkind
In 2008, economics major Max Chaiken was chugging along the graduation track at Brown University, arguably Earth’s hardest-to-get-into college. He was campus coordinator for Obama. A natural song leader, he loved raising his voice in song, often to folk tunes he composed himself – in Hebrew, no less. He was active in a fraternity.
What he didn't have was a subject for his undergraduate thesis.
Coincidentally, one of Chaiken's frat brothers was involved with the Rhode Island Patient Advocacy Coalition, a medical marijuana lobbying group.
“I was talking with him, and thinking about writing a thesis,” Chaiken told CC, “and the question popped into my head, how much revenue could there possibly be? So I started doing some reading, and eventually, that became the topic.”
When that revenue number emerged, it was so staggering, Providence couldn’t contain it.
Stephen J. Dubner, Freakonomics blogger for the The New York Times, dropped it his May 22, 2009 entry, “What Would Happen If Marijuana Were Decriminalized?”
Although President Obama doesn’t seem interested, arguments in favor of decriminalization are popping up everywhere, from the Law Enforcement Against Prohibition platform to the senior thesis of a graduating economics major at Brown named Max Chaiken, which finds that “a legally taxed and regulated marijuana market could generate upwards of $200 billion annually in excise tax revenues for the federal government … [which] would be enough to fund Medicaid.”
They don’t card you if you want to play the game. You’re never too young or too old. And maybe a little youthful open-mindedness is exactly what prior MPMTR (maximum pot-ential marijuana taxation revenue) prophecy has lacked. Whether he was 19 or 91 when he wrote it, Chaiken’s The Other Green Economy deserves a "standing O" from anyone with the slightest interest in how they, their family, and their community will benefit from a legal, regulated society.
Naturally, we have to ask the question: what if he’s right? Is there actually a distinct possibility there’s way over $200 billion MPMTR to be had? Could this number skyrocket past the $300 billion barrier, if certain taxes Chaiken admittedly didn’t address were accounted for?
Hmm. Seems a bit... optimistic .. but let’s poke around and see what we find.
$212 billion: did that get your attention?
Cutting to the chase, in The Other Green Economy, Max Chaiken boldly concluded that there’s a bare minimum of $71 that could be collected in excise taxes alone, with a “high probability” the number could be $212 billion. “Enough to fund twenty months in Iraq,” he wrote, though I don’t think he was referring to a vacation for two. A $300 billion bonanza “wouldn’t be surprising” at all.
Where did this wunderkind find the chutzpah to eclipse Gettman’s forecast by the same order of magnitude Gettman’s eclipsed Miron’s?
He found it on the supply side.
Uh-oh. As we’ve found, economists who only work one side of the street tend to get slammed. Sometimes it comes from economists working both sides of the street. Sometimes it comes from economists working the other side of the street.
Maybe you’ve heard the term “poetry slam?” Well, welcome to “economy slam.”
Economy slam: what grade would Professor Miron give The Other Green Economy?
Any top economist you can think of who works the demand-side exclusively?
"First of all, if he’d been in my class, I would have been discussing his progress with him all the way, and I would have cautioned him that I thought his higher numbers were incredibly implausible, and asked him to do more robustness checks, and more investigation into the supply side numbers that underlie his big estimates. I would challenge him to go back and find the original sources of these amounts seized, and where these estimates come from. It was just some DEA official saying ‘I think the market will be this big,’ based on nothing. Therefore, I would tell him you should have put more weight on this. I don’t want to say what grade I would have given him, because it would have been a different experience. I don’t think he got instilled in him a healthy enough skepticism of data. How did somebody actually figure out that number? How could anybody know that number?"
Translation: “Kid, you shouldn’t be using supply-side data exclusively.”
A walk on the supply side
Let’s review:
Miron uses demand-side data exclusively.
Gettman uses demand-side and supply-side data.
Chaiken uses supply-side data exclusively.
Scolded for exclusive use of supply-side data, did Chaiken capitulate, or did the criticism steel his resolve? That was the burning question when Chaiken spoke with Cannabis Commerce in April 2010.
The answer is, some of each:
"Professor Miron basically looks at the data out there, and takes only the demand-side data, while Professor Gettman takes demand-side data and supply-side data. I take only the supply-side data. And I lay out in detail why I chose that, and why it seems to me we should be looking at one data set and not another. I think I expanded a little bit, and tried to use other sources that are not as traditional as well. But there’s certainly some valid criticism that they have for my figures, and it does make me ultimately think maybe my more minimum estimates are in the better range, rather than my more astonishing $200 to $300 billion estimates. But a lot of this comes because most of the data we have to answer questions like, how much revenue can there be, how much quantity is currently on the market . . . the data that we have to answer these questions is largely nonexistent. There’s so much guesswork that goes on in any of these papers, that basically, at some point, you have to make assumptions that people could criticize. You have to decide which data you’re going to use, which data you’re not going to use, and try to justify it. Professors Gettman and Miron don’t necessarily agree, and I respect that opinion. But I still have a feeling that we’re talking about significantly more than their most recent efforts."
How he got stratospheric
Basically, Chaiken found a whole lot more metric tons than Gettman, along with higher pricing per metric ton than Gettman, while aligning with Miron by calculating sin taxes, which Gettman didn’t calculate at all, at the fixed rate of $4 per gram (28 grams to the ounce), or around $112 per ounce at current average medical marijuana rates of, give or take, $400 per ounce.
In this model, $4 per gram can also be viewed as a sin tax percentage of around 25%, quite possibly a “sweet spot” that might actually work out for all concerned.
Once he warmed up, Chaiken got downright professorial as he laid out his methodology.
What follows is a virtual handbook on how to estimate MPMTR, with the caveat, using supply-side data only:
"Basically, I try to estimate a simple equation using a “variable of interest.” We want to know how much the federal government could conceivably earn if the marijuana market that we have today were legal, and regulated, and taxed. So there’s a few different ways to go about this. You have to know something about price, what the price of marijuana currently is in the market. We know that it varies regionally; we know that it varies by quality. It’s not too easy to know much about price, but we have some limited data on price to give us a general range of what’s out there. Then you need to know something about the quantity, of how much is being consumed. So there’s two ways to know how much quantity is being consumed. Producers supply marijuana to the market. There’s a whole illicit chain of suppliers that we know very little about except what the DEA and the ONDCP (Office of National Drug Control Policy) kind of tell us about it. And on the supply side, we have information about what the government has claimed to have seized in terms of pure pounds and metric tons of marijuana. We have information about how many plants have been eradicated in outdoor and indoor locations. We have some information about where most of this marijuana that we’ve seized is coming from, mostly at southwest borders, also some on the northern border as well. That’s all on the supply side. So to get an estimate of how much is out there you have to say, well, OK, how good are they at catching it? Are they getting 10% of all that’s coming in or are they getting 2%? Or should we be generous and say they’re getting a third of all that’s out there? Those sources that try to estimate how much is cultivated domestically, for example, will say that eradication efforts are getting 30 to 50% of the domestically grown market. I just think that’s pretty unrealistic. I don’t think that one of two plants grown in this country either indoors or outdoors is being seized or eradicated by the government. So, for the sake of understanding what the very maximum could be, it was helpful to say, well, what if they’re only getting 2%? What if the metric tonnage that gets seized is only 2% of the market that’s out there? Then it’s ridiculous, it’s probably unlikely, some of the data on the demand side that I did exclude, indicates that it should be, perhaps some of their data listed at 10% could be more realistic based on what we think we might know about how many people are using marijuana."
Quit being so demanding
Why, exactly, didn’t Chaiken analyze any demand-side data?
On the demand side, one of the criticisms of my paper was that I excluded demand-side data. What that means is that I didn’t use the National Survey of Drug Use and Health (NSDUH), that Professor Gettman used, which basically says ‘we think there are so and so many Americans who use marijuana, and they use approximately so and so much.’
Basically, we know that those surveys underestimate significantly how many users there are, and the most recent data that we have about frequency of use, about how many times those users are using, is fifteen years old. So, a lot of that data to me, was more suspect than the amount of marijuana seized, the government saying we seized this much marijuana, a hard quantity of marijuana that came into the country, we took it off the market. I think another one of the criticisms is that I did exclude some estimates of data that would have resulted in estimates closer to Professor Gettman’s.
What about those metric tons?
Chaiken’s “high” number of 175 metric tons is one of the more extraordinary figures in The Other Green Economy. While Jon Gettman makes assumptions, like all poteconomists, his latest figure of “around 15,000 metric tons,” sold annually in the US, had appeared relatively bulletproof.
Chaiken parachuted his high metric tonnage figures back down to earth:
"When you change the parameters of the equation that you’re looking at, it can change fairly significantly. Those parameters include a few different things. First and foremost, those include the number of how much marijuana that was seized. In this case, we know that over the past few years, it’s been increasing. And we know that the amount of plants that’s been eradicated, both indoors and outdoors, is also increasing. Those numbers imply that more is being imported, and more is being grown domestically. All these things would lead us to believe that more marijuana is being consumed in the country as time goes on, and, if I recall, that 15,000 metric tons or so is Gettman’s average of several computations. If you relax those factors to see what the maximum potential could be, you start getting up into a much higher number of metric tons that could be on the market. But it is somewhat speculative. My feeling today is that there could be 15,000 or 20,000 metric tons on the market. I wouldn’t be surprised if there was a little bit more. You know, the 2010 National Drug Threat Assessment is out ..."
He shared this revelation with breathless anticipation, as if the Sports Illustrated swimsuit issue awaited him in his mailbox:
"... That puts the number of how much is produced in Mexico at 21,500 metric tons. So even if only half of that is coming into the United States, that’s 10,750 metric tons right there. And we know that a lot of it’s being grown in this country as well. So it’s not inconceivable to me that we have 20,000, maybe 25,000 metric tons on the domestic market that’s being consumed by Americans."
Ladies and gentlemen, now playing the game . . . you!
Here's an excellent opportunity for you to jump in the game. Yes, you!
Take Chaiken's last metric tonnage figure, 25,000. Now, what do you think the average price of a pound of marijuana is in the USA? The range is anywhere from a high of around $6,000 a pound for high grade "medical marijuana," to around $1,300 a pound for commercial-grade Mexican. Wholesale pricing and retail pricing will differ. For the sake of brevity, let's guesstimate a value of $3,000 a lb.
Remember, a metric ton is approximately 2200 pounds.
2200 pounds x 25,000 (metric tons) = 55,000,000 lbs. (all the supply available for purchase annually in the USA).
55,000,000 lbs x $3,000 = $165,000,000,000.
In this scenario, you just calculated that Americans spend $165 billion annually on the magic herb.
Do you think the average value of a pound is more than $3,000? Less? What about the metric tons? Too many? Not enough? OK, just plug those figures into the equation, and see what you come up with.
From there, to compute how much of that supply will wind up as tax dollars, you would play around with varying percentages of sin taxes, local taxes, income taxes, and so on.
We'll try some more exercises later in this report.
An actual cannabis fan, OMG!
When discussing the brouhaha the cannabis plant is currently causing, and all it could mean to the country in a legal, regulated landscape, Chaiken actually expressed excitement and admiration. “Refreshing” is a word that springs to mind.
Here are a few highlights:
"There definitely is a whole chain of supply between whoever is planting the seeds and watering them, and doing whatever they’re doing with technology which is really quite amazing, some of the things that you can do to enhance strains and get a better quality product, which should fetch a higher price."
"There’s a possibility that we could be exporting choice strains and importing choice strains. It’s a wide world of the unknown. Where could it go? How much could we get at the border for imported product, and how much could we get when it’s sold at retail level? Really, there’s some potential there ."
"There’s also people who may not even quit their day job, but they’ll make glassware (for pipes) on the side, adding more productivity to the economy, and, basically, I don’t think it’s trivial that it would be countable, even if it’s not true job creation as much as reassignment of jobs. I don’t think it’s trivial. I think there will be people put to work who might not otherwise be working right now, who would be willing to work legally as a grower, as a light technician . . . who knows what it would be. But I think there is at least some potential for true job creation ."
"Over the last eighteen months, as you said, recent boosts in publicity have the potential to bring more people into the market, whether that will be as legal medicinal marijuana users in their respective states, or more black market consumption. That has the potential to bring people into the market and slowly push demand out before we get to a complete legal and regulated market. So, as you know, if a larger number of people are consuming marijuana, there will be a larger amount of money going into government’s purse strings."
Hold the presses
Hard to say how I managed to research pot-ential marijuana taxation for months before stumbling upon The Other Green Economy. Unearthing it came at the worst possible time, right before Cannabis Commerce was due to launch – with this report intended to be the “pillar” article. Once I got my hands on it, the rest of this report had to be adjusted accordingly. It’s that provocative.
Conclusion
There’s nothing wrong with throwing in best-case scenarios, for the benefit of fencesitting politicians, as Chaiken has done. Other poteconomists are entitled to their opinions. Is Chaiken a fledgling, too "green" to be taken seriously? Decide for yourself.
But consider this. With over a year to reassess his position, aided and abetted by constructive criticism by the sharpest poteconomists on earth, the Brown graduate listened to what critics had to say, observed the cannabis commerce conducted all over the country, and honed his estimate accordingly. He sees that other lucrative taxation revenue streams exist, streams currently unexplored by poteconomists steeped in more traditional thinking. These represent significant opportunities.
At the very least, The Other Green Economy deserves a gold marijuana leaf for Best Title Of A Poteconomics White Paper.
Next section preview
You’d think a $71 billion MPMTR projection might include every conceivable revenue-generating stream. Believe it or not, Chaiken’s thesis omits several golden opportunities.
He admits as much:
“Spin-off industries would flourish . . . All of these areas require further research, as many of them represent significant opportunities to catalyze growth and stimulate the economy. Unfortunately, for now they are outside the scope of my estimates.”
$71 billion – or more – without accounting for spin-off industries? Spin-off industries include some of the heaviest hitters in the GNP lineup! They’re coming up in Part 6.
Keep in mind Chaiken’s $71 billion minimal estimate represents solely what consumers would pay in excise (sin) taxes. It doesn’t even factor in local and state sales taxes, much less state and federal income taxes. Or the ingenious fees local, county and state regulators impose on dispensaries and collectives.
Accounting for all these additional taxes – none of which are contrived to accommodate marijuana, they’re normal taxes for all goods produced in the US, is within the scope of Cannabis Commerce’s estimates, as we’re about to see.
5 What We've Learned So Far — And Who Can Tell Us More
So far, we’ve heard from perhaps the world’s most cautious economist, a poteconomist who plows the middle ground, and a phenom bullish about marijuana futures. In this section, we’ll sum up their commonalities and differences. We’ll identify sources we haven’t heard from – that could fill in the blanks. Then we’ll start the ball rolling with a core estimate of MPMTR (maximum pot-ential marijuana taxation revenue) . . . sure to whet your appetite . . . for more.
All three poteconomists agree:
- Marijuana/pot/cannabis should be legalized.
- They have to make way more assumptions than they’d like.
Odd man out:
- Neither Miron or Gettman endorse Chaiken’s exclusive reliance on supply-side data.
- Gettman and Chaiken wonder why Miron only mines demand-side data.
- Chaiken and Miron write “there will be no increase in demand under legalization.”
- Chaiken and Gettman feel the economic argument ("the revenue issue") for legalization is certainly not trivial, while Miron says it is “sixth, seventh, or eighth” on his list of reasons to legalize.
- Chaiken and Gettman muster enthusiasm for growing and the dispensary phenomenon, while Miron remains completely detached.
What else do all three analysts profiled have in common?
- At least two of them don’t smoke marijuana.
- None of them has a medical marijuana card or spends time in dispensaries.
- None of them live anywhere near a retail medical marijuana hotbed.
- None of them travel in circles of people who actual buy and sell marijuana . . . that we know of.
- None of them has made a dime selling marijuana ...that we know of…
- None of them grows marijuana…that we know of ...
Whose figure represents a solid “core estimate?”
And, oh by the way ... which one is most believable? Whose work can support a “core estimate” of MPMTR – an amount of MPMTR consisting of income taxes, sin taxes, and local and state sales taxes paid mostly by individuals? We’ll get to corporate “contributions” next chapter.
The gold cannabis leaf for “Best Prediction For Use As A Core Estimate” is hereby awarded to Jon Gettman. Why?
Why not give it to the only guy who accounted for both demand-side and supply-side data?
In 2007, Gettman’s $31 billion Lost Taxes estimate didn’t consider sin taxes; his 2010 “at least $40 billion” estimate takes these into consideration. That’s a sensible adjustment.
Jeff Miron can only criticize him so much.
Gettman draws from multiple sources to Miron’s one.
Gettman travels in more marijuana circles than Max Chaiken, and focuses more on marijuana than Chaiken.
Does that mean Gettman’s “at least $40 billion” in lost taxes (for the purposes of this paper, the terms “lost taxes” and “MPMTR” are basically the same thing) is a magic number? Can politicians on the fence sell it to their constituencies as a value proposition to support legalization?
Hmm . . . not quite. But it’s a great starting point.
The Chaiken Factor
Despite lacking endorsement from either Miron or Gettman, Chaiken’s The Other Green Economy cannot be summarily dismissed. Chaiken had two more years in pot time, the booming, though not peaking, years of 2008 and 2009, to hone his estimates. In his 2010 interview, Chaiken conceded his best-case scenario was difficult to support; but there was no wavering over his $71 billion minimum forecast.
I’m not completely enraptured with that number. Every red cent is derived from collecting an unspecified percentage of sin tax. On the other hand, that's what makes it compelling - Chaiken didn't forecast sales taxes or income taxes. What if he had?
Chaiken pushed the envelope hard. Latest government statistics suggest his current guesstimate about the amount of metric tons annually consumed — 20,000 to 25,000, based on the 2010 National Drug Threat Assessment — is reasonable. Gettman's figures are based on around 15,000 metric tons consumed. Accordingly, we’ll bump Gettman’s $40 billion figure another $10 billion, bringing our core estimate to $50 billion.
In case anyone or everyone disagrees ...
There are no right or wrong answers
We’ve heard from three super-intelligent, highly educated, and highly informed sources. Listen to their interviews. Read their white papers. But what did that really get us? A really great education, for one thing! You can’t discount that.
It also got us estimates ranging from $7 billion to $300 billion! I don’t mean to belabor the point, but it should be abundantly clear by now: there are no right and wrong answers.
In case anyone's wondering why this report doesn't include one footnote after another, or include hundreds of references, well . . . re-read the last paragraph.
Our three poteconomists liberally sprinkled footnotes and references all over their papers - and look how all over the map their results were.
All our poteconomists are more than qualified to offer their opinions. Their groundbreaking work is appreciated. But as far as any or all of them being the be-all, end-all, or last word on MPMTR, I’m afraid we’re still missing valuable input.
Other voices CC wants to hear from
Where would that input come from? Glad you asked. It would come from:
- Futurists
- Convicted “drug” kingpins
- Wholesalers
- Winnebagos – don’t laugh, these have a tale to tell!
- Growers
- Dispensary owners
Stories these voices could tell would really supercharge this report or future reports. This fresh input could be more compelling than the combed-over data in government surveys that's been regurgitated one too many times.
Futurists
What’s a futurist? Are futurists jokes? Do they romp around in sci-fi jumpsuits, straight out of 50s’ flicks like Forbidden Planet? I can’t tell you what they wear. I can’t tell you if they’re nerdy or nice. What I can tell you is that corporations with a lot of money on the line don’t introduce bleeding edge products without consulting them.
According to Wikipedia:
"Many corporations use futurists as part of their risk management strategy, for horizon scanning and emerging issues analysis, and to identify wild cards and black swans – low probability, potentially high-impact risks. Every successful and unsuccessful business engages in futurizing to some degree – for example in research and development, innovation and market research, anticipating competitor behavior and so on."
Futurists – why not?
Convicted kingpins
“It takes a thief to catch a thief.” Why has that saying stood the test of time? Because it’s true. Who does the Treasury Department hire to find forgers? Convicted forgers. Who do insurance companies hire to detect art forgeries? Convicted art forgers. Who knows more about the size and scope of cannabis commerce in the USA than the people who have profited the most from it?
Nobody.
Can some kid busted for a marijuana DUI tell us a whole heckuva lot about predicting MPMTR? Doubtful. Conversely, someone who’s actually sold metric tons worth of ganja has meaningful insight — in spades. That’s real cannabis commerce. Metric tons aren’t ink on a page or pixels in a .pdf file, they’re big, bulky, pungent chunks of America’s most valuable crop matter.
I want to know how much cannabis the biggest dealers in captivity think could be on the market. If I ruled the world, I'd be on the next plane to San Quentin, with a bunch of interviews lined up. I bet I'd get a lot more out that than the DEA gets out of its drug surveys.
It’s “high time” the feds survey some real movers to find out how much pot is really out there. Measuring things from the one-joint perspective has some value – it tells you something about minor retail transactions.
What currently tells us about major wholesale transactions?
Seizure statistics may hint at major wholesale transactions. But do they recreate them? How could they? What if only one truckload out of three truckloads intended for a deal gets seized?
How, exactly, does knowing how much weed has been eradicated tell us how much weed has not been eradicated? Well . . . it doesn't. That’s why ultra-cautious predictors like Jeff Miron won't touch these data sets.
Would convicted kingpins tell the truth, the whole truth, and nothing but the truth? Don’t know, but with nothing to lose, the more articulate ones could help us define the overall scope of cannabis commerce in the USA.
Wholesalers
The next best thing to hearing from convicted kingpins would be hearing from wholesalers. Who else could better answer questions like “How many middlemen are typically in between cultivators and the customer buying an eighth of an ounce at a dispensary?
What good is knowing? Because there could be three, four, or five sets of hands touching those buds along its journey – meaning that in a legal, regulated, landscape, maybe three, four, or five people would be paying state and federal income taxes on the profits they made from the same cannabis.
That’s a lot of money.
Compare pot with another agricultural product everyone has purchased at one time or another. Oranges. Some oranges go directly from farm stand to consumer, but, usually, produce is sold through a commission agent or a broker. Oranges go through through a chain of middlemen or agencies before a consumer plucks one from the produce section of Piggly Wiggly. The main functionaries are the producer, the village or itinerary merchant, pre-harvest contractors, commission agents, transport agents, etc.
Ditto for pot.
The Winnebago’s Tale
While some pot is sold locally, plenty of it gets transported from Point A to Point B, for sale thousands of miles from its point of origin. A Winnebago is the perfect conveyance for transporting metric tons of bulk marijuana pressed in 50-80 lb. bales.
Pressing pot into bales is a common practice with commercial strains. Exotic strains, whose value is dependent to a great degree on cosmetics, are handled more delicately.
Note the term “bale,” as in “hay bale,” is absent from all the reports in our library.
What, then, is the significance of the bale? And what can a Winnebago tell us?
Bales and Winnegabos tell us that marijuana goes directly from grower to consumer only some of the time. They tell us there are usually middlemen in the equation, not to mention a (potentially tax-paying) driver, who is compensated handsomely for the risk.
There’s something else Winnebagos tell us. They tell us to forget whatever lingering Miami Vice imagery anyone’s retained, that is, flashy guys who drive Ferraris buying from sinister Colombians flanked by Uzi-toting drug soldiers.
Sorry to kill the illusion, but that’s a romanticized version of the cocaine trade.
In the real world, a Winnebago’s worth of pot can be delivered to four or five suburbanites or college kids to distribute to their network of friends and stoner buddies – or wholesalers one level down from them. That’s real cannabis commerce in action, in the non-legal, non-regulated world. And, yes, it would be great to hear from those college kids and suburbanites one level up from “street” sales.
The Winnebago’s tale screams, “Hey, NSDUH, you need a new survey! You forgot the middlemen. There are a lot of us. We’ve been making tons of money and stimulating the economy. You could be taxing us, and we’d pay it, if the rate wasn’t too outrageous, to eliminate the fear of possible arrest.”
Growers
Who better to answer the following questions?
Regarding sin tax, what is your resistance point? 10%? 25% 50%? More?
What’s the average amount of money you wholesale 25 pounds for? 100 pounds?
How many levels of wholesale would you say exist between yourself and the end “user?”
What are your supply costs per pound?
How much yield do you obtain per plant?
How would it affect your business if marijuana were legal and regulated?
Dispensary Owners
The last dispensary owner I talked to, Chuck D, from Colorado Wellness in Denver, told me that if things proceed according to his business plan, his shop would pay $150,000 in local and state taxes in 2010. He, like every other dispensary owner, paid the State of Colorado $5,000 in fees just to open his doors. He’ll pay another $3,000 per year for license renewals.
Chuck D could tell you what the average amount a customer buys is. He could tell you what the average weight of a joint is. He could tell you what he pays per pound for medical grade marijuana. The difference is, these would be real figures.
Exactly what method would I use to cull data from all these sources? Can’t tell you off the top of my head.
However, no less a cultivator than Albert Einstein said:
If we knew what it was we were doing, it would not be called research, would it?
Conclusion
We came up with a core MPMTR estimate of $50 billion. That represents an amount based on individuals’ government receipts, which you’ll recall, consists of sin taxes, local and state sales taxes, state and federal income taxes, FICA, and Medicare.
Checking in with other voices could really help fine-tune our $50 billion core MPMTR estimate. Cannabis Commerce can and will check-in with these voices in the future.
Presently, undertaking that level of research is beyond the purview of this paper.
Next Section Preview
Sources we wish we could check in with, to anchor our estimates in reality, have been noted. That still leaves the question: what else do we need to know?
Plenty! It’s time to plow some untilled ground. When I start rattling off the prime taxation sources missing in action from serious studies, they’re so obvious, you’ll be amazed!
6 Obvious Cannatax Opportunities Oddly Unaccounted For
Question: if you write white papers for marijuana organizations, individual liberty organizations, or state governments, are you limited by code or oath to projections based exclusively on government statistics or previous literature?
If “yes,” why does Scott Bates’ 2004 The Economic Implications of Marijuana Legalization in Alaska, written for Alaskans For Rights and Revenues, introduce previously unmentioned revenue-raising concepts like “cannabis tourism” and “Alaska Energy Bars” (edible cannabis) to appeal to the “kayaker market segment?”
Just wondering ... cause it’s baffling why highly intelligent, characteristically thorough economists have ignored the following easily-identifiable business and corporate taxation streams in their MPMTR (maximum pot-ential marijuana taxation revenue) forecasts:
Big Pharma releasing a series of cannaboloids
Big Food introducing a succession of edibles and consumables
Big Agriculture instituting commercial hemp and marijuana farming
Big Tobacco venturing into packaged cannabis cigarettes
Business and corporate government receipts (state and federal income taxes, payroll taxes, Social Security, Medicare deductions) on a bigger scale than economists have thus far implied
Revenue from leasing lands and other government initiatives
Import/Export Taxes
License Fees and Renewals
Sales taxes collected at big box retailers, supermarkets, convenience stores, entertainment venues including spectator sports
Marijuana stocks and commodities trading
Cannabis and hemp cosmetics
Cannabis academics
Cannabis Tourism
The time has come for these to be addressed, analyzed, and accounted for.
We’ll come up with “ballpark” dollar amounts for each revenue source. Then, at the end of this section, we’ll add these figures to our core MPMTR estimate. Can we approach a "magic number" persuasive enough to hasten legalization? Let's saddle up and see.
Big Pharma taxation
Think cannabinoids, healing products derived from various cannabis strains, targeted at healing/mitigating specific physical and mental ailments. With 18,000 studies (and counting) so far, the pharmaceutical and biotech industries are poised to pounce the nanosecond prohibition is repealed.
Can anyone dispute Big Pharma's demonstrable knack for producing taxable income? Although it may have experienced a down season or two in recent years, Big Pharma is still a heavy hitter in anyone’s lineup. Here’s an industry that charges one price for horse medication, then ups pricing 2500% for the human version of the exact same drug. Cunning in its simplicity.
That strategy, and many more like it, showcase a mastery of sales psychology, proven over time to generate supersized profits. A little deviousness doesn’t hurt in the MPMTR game, either.
Jon Gettman, not one to casually toss billions around, admitted, “There’s a lot of money to be made by developing highly refined pharmaceuticals based on the chemical ingredients in marijuana. Yeah, there’s billions of dollars there.”
Does “billions” mean $2 billion or $20 billion? Let’s be conservative. Call it $3 billion.
Big Food and beverage taxation
Smoking marijuana has a downside.
Although it’s nowhere near as carcinogenic as, say, menthol cigarettes, ingesting any form of smoke affects lungs and lung-power. That puts quite a few people off, for good reason.
Hello edibles! Cookies. Brownies. Cereals. Tinctures. Extracts. Oils. Sodas. Problem solved.
State regulatory agencies, like the California Board of Equalization and the Colorado Department of Revenue ought to be licking their chops over this burgeoning category. The possibilities are endless for inspired products and marketing, providing a field day for food technicians, production teams, graphic designers, and ad agencies. Heck, it's already begun.
Watch how creative this area becomes as enterprising minds infiltrate the kitchens of America like Rachel Ray on LSD.
Big Food is already doing boffo business with cannabis connoisseurs, providing Fruit Loops and Domino’s Pizza for stoners afflicted with the disorder colloquially labeled “the munchies.” Saving the populus from that dread malady not only makes money, it serves humanity, too.
But legalization will change the playing field entirely. Once John Q. Public can get fed and get high simultaneously (the possibility exists three blocks away from this keyboard), that's evolutionary progress for mankind!
Precedence exists for edibles in the Food & Beverage industry's pre-history.
The name “Coke” isn't a coincidence. The popular soft drink once contained an estimated nine milligrams of cocaine per bottle, but it was removed in 1903. Most people don’t make the connection. Carbonated elixirs containing THC are already sold in dispensaries. It’s only a matter of time before they’re cloned and commercialized.
Legalization will also provide a quick pick-me-up for the candy industry. The common lollipop will enjoy a resurgence, if the popularity of that form factor at dispensaries is any indication, as will “fruit squares,” judged by the same criteria.
M&Ms may as well stand stand for “marijuana and munchies.”
You can conveniently carry these confections to the movies (or possibly buy them at the movies) and thrill to Avatar's 3D effects without offending the churchgoing family next to you. Nice.
We’ve just futurized a little about what Big Food and Beverage could “bring to the table.” What about “Small and Medium Food and Beverage,” consisting of regional suppliers, restaurants, clubs, and coffee houses?
This industry could really use some good news; in recent years, economic reality has forced many people to cut down their fine dining habits. Here it is: for citizens thriving under the influence, stimulating the palette in the now takes precedence over storing nuts for the winter. If you stop by Broadway Wellness for some herbal releaf, there's only going to be so many bistros you can pass up on your way home, even if you wind up blowing your utilities bill on dinner for two.
It's pretty hard to argue against the fact that marijuana makes ordinary food taste good, good food taste great, and great food taste out of this world. That makes strapping on the old feed bag a necessity, not a choice. The food and beverage industry reaps the rewards.
At some point, restaurants will begin offering cannabis cooked in the food or in sauces — the equivalent of a “brandy sauce” — or au natural, for use in reserved rooms, mimicking heavily-ventilated cigar rooms. Did you want cream, sugar, or THC with that coffee?
Additionally, clubs and coffee houses à la Amsterdam will be getting into the act. Being able to take in some entertainment while "medicating" on site is a civilized pastime missing from "medical marijuana" clubs in the states. Prohibition has kept the emphasis on "patient care" to the exclusion of recreational use. Once that's lifted, send in the clowns — night life is going to undergo psychedelic alteration.
"Out there" cannabis clubs don’t seem to have interrupted the fabric of daily life in Amsterdam. Far from it, they’ve added allure to the city’s desirability as a prime destination for cannabis tourism.
Eating will always play a main role in cannabis tourism. Just as surely as people travel to Sonoma and France for wine, and Scotland for single malt, they'll be off to Alaska for the Matanuska harvest and to Humboldt County, CA, and Paonia, CO, for the fall festivals. Flitting from bud tasting to bud tasting, it's hard not to work up an appetite. Count on some hefty tabs at fine dining establishments poised to capitalize. And some nice sales tax gains for local coffers.
Big Food and Beverage – not to mention Small & Medium Food and Beverage – talk about an area ripe for taxation! If this industry can operate freely, it will create all sorts of economic stimulation that doesn’t require a dime from Washington. Let’s “err on the side of caution” and rack up another $1 billion.
That figure looks silly low on this screen.
Big Agra taxation
Even without its star sibling, hemp alone could make agriculture sexy again. Hemp's a variety of cannabis that contains minute traces of THC, 0.3% or less, not enough to “get you high” unless you take extraordinary measures . . . like hyperventilating in a burning field.
The hemp industry has unlimited upside because hemp has unlimited uses – from clothing to rolling papers to rope. An acre of hemp produces four times as much pulp as an acre of trees. It produces 250% more fiber than cotton, and 600% more fiber than flax when grown on the same land. It's great for clothes, cosmetics, and oils.
During WWII, the US government produced a propaganda film called Hemp for Victory, which encouraged farmers to grow as much as they could.
A simple Google search quickly ascertains that most of the founding fathers were hemp growers. With so many apparent benefits, so much glowing testimony from colonials who autographed the Declaration of Independence, and so little possibility of “copping a buzz,” hemp is a peculiar crop to ban. I can only think of one thing to do with a rutabaga, and it’s not banned.
Now, I'm not suggesting you tear up your lawn, plow furrows, then farm hemp to balance the family budget. I'm just pointing out it's a handy substance with multiple virtues — one of which is producing taxable income.
Poteconomists disagree on hemp's upside. Jeff Miron: “Hemp has had to be subsidized by every country that’s ever grown it.” Max Chaiken: “Hemp could become a major agricultural staple in addition to marijuana, creating even more jobs and generating higher levels of productivity ... certainly these effects should be significant.”
Space prohibits debating hemp pros and cons to the nth degree; let’s just say there’s much glowing testimony to both its wonders and its potential for profitability and taxation.
Hemp is hopeful; as for large-scale commercialized marijuana "plantations" (greenlands?) ...well, the sky's the limit.
State universities will compete with Marijuana University, Oaksterdam University, and Greenway University (another revenue area, “Cannabis Academics,” could be created), offering students a specialized curriculum in commercial farming. Recently, the State of New Jersey asked Rutgers University to grow all the state's medical marijuana. The school turned down that twist on higher education.
As for the "maragra" graduates . . . will they run massive outdoor plantations, in which case they'll have to purchase tractors and every manner of farm machinery, stimulating those industries; or will they opt for indoor operations, in which case they’ll need lights, hydroponic supplies, and so much more. What about a combination of both? In that case, the greenhouse industry will move a lot units, too.
With dispensaries already coexisting nicely alongside hardware stores, it wouldn’t take much for folks in rural areas to embrace the idea of growing a miracle crop. Most farmers can do the math: tobacco = $4,000 an acre; cannabis = $4,000 a plant if you get the right plant in the right outdoor soil.
Think about the effect legalization will have on real estate values in rural areas, places where there is little or no upward pressure buoying raw land values. If you're Farmer Jones in certain red states with prime agricultural land, perhaps a tripling of your property values, along with the sudden and welcome appearance of actual prospective buyers, piques your interest? It’s OK to be pro-life and pro pot. You won’t be the first, as we'll find out in Part 10.
Large scale commercialized operations will be launched. They may be supplied by seed-company-from-the-dark-side Monsanto, not a company fond of sharing the wealth or playing nice with competitors – but an entity adept at creating taxable profits.
Hemp cultivation, commercialized cannabis farming operations, agricultural education, land sales . . . what’s all that worth? Think of it this way: how many farmers do you know? You’ll know a bunch when folks can start planting acres of kush as high as an elephant’s eye.
And this is all worth? I’m going really easy here since I’m not attempting to “prove” guesstimates via dozens and dozens of footnotes. Let’s stay ultra-conservative. Tack on another $1 billion. I'm not used to being this conservative. It's like walking around in plaid pants.
Big Tobacco taxation
Does anybody really believe that Philip Morris, Brown & Williamson, R.J. Reynolds et al will abdicate the potential weed windfall to a bunch of hippies, Deadheads, and stoners? Don’t bet on it. Here’s an industry that knows everything there is to know about growing a brand. Free to train its guns on the cannabis crowd, Big Tobacco’s corporate psychologists will devise imagery and iconography every bit as seductive, insidious, and persuasive as the Marlboro man.
Get ready for the "Marlijuana Man" riding the range 'round sunset. The tobacco industry is notoriously tight-lipped. No other industry makes employees sign more non-disclosure agreements. That's a good business practice when your industry's been accused of selling addiction, disease, and death. While that's all true, it's also true that the former Tobacco Institute comrades grow it, package it, market it, and profit from it awfully well.
Farm-minded Jon Gettman is from Virginia, a major tobacco producing state, and he hasn’t heard any leaks from Big Tobacco – to this point. Tight-lipped or not, it’s a given the cannabis question has been broached in Big Tobacco boardrooms. Every tobacco company has a fiduciary agreement with its shareholders to maximize profits. So forget the idea that rolling trillions of cannabis cigarettes in the machines it already owns is too controversial.
Marijuana has important implications for the tobacco industry in terms of an alternative product line. Tobacco companies have the land to grow it, the machines to roll it and package it, and the distribution to market it – a 1976 report prepared for the Brown and Williamson Tobacco Corp. by Forecasting International, Ltd.
The industry already has allies in state governments:
The National Conference of State Legislators last month said states were facing combined deficits of more than $40 billion in 2009, and increasing tobacco taxes "is one way some states are trying to make up the shortfall," The New York Times reports. Last year, states collected more than $19 billion in cigarette taxes. Ten states increased their cigarette taxes in 2007, and more states are considering increases this year.
The government "has become a financial stakeholder in smoking, some would argue, even as public health officials warn people about its deadly consequences." –Stephanie Saul, TheNew York Times, 8/30/2008, “Government gets hooked on tobacco tax billions.”
My money’s on Big Tobacco growing into a primary source of taxation revenue. Cigar makers could aid the cause, expanding their product lines by introducing “big phatty” cigars – perhaps in collector cigar boxes. Cannabis Commerce will monitor Big Tobacco as it transitions from black lung to green rush.
I’ll break from the conservative mold on this one. If, according to The New York Times, states made $19 billion from cigarette taxes in 2008, chalk up at least $2 billion a year for "industrial" cannabis. That's just from existing tobacco companies. New marijuana-only manufacturers will rise up to compete with them. The transition will take a few years, and then it'll be onwards and upwards.
But hold on – some economists, the ones that don’t smoke, don’t grow, don’t book passage on icebreakers to follow the Grateful Dead to Antarctica, and don’t live anywhere near a dispensary, will scream “that’s not more demand, or more tax money; that’s revenue from people switching from unpackaged bulk buds to packaged "cigarette' cartons, or from beer drinkers shifting some outlay from alcohol to cannabis.”
OK, since when has the tobacco industry not demonstrated an uncanny knack at recruiting new victims . . . I mean customers, even without the benefit of advertising? Since never. I have a lot of faith in this industry cause it takes a little more finesse to sell what is sells than Girl Scout Cookies.
I’ll stick with the $2 billion. That seems excruciatingly frugal, but so be it.
Import/export taxation
Think Dos Equus, Chivas Regal, Sapporo Draft . . . and substitute Panama Red, Thai Sticks, and Afghani Skunk.
Speaking of the last strain, the US government appears determined to prevent Afghani “insurgents” from raising poppies (heroin) to finance “terrorism.” These people might prefer being repurposed as cannabis cultivators to obliteration.
Cannabis cultivation has been a cornerstone of their traditional economy for centuries. "Skunk" derivatives are valuable native crops that tribespeople could export and we could import . . . charging them import taxes for the privilege.
Other countries closer to home could benefit from that sort of trade arrangement, too.
There might be some interested parties in Canada and Mexico. Mexican president Felipe Calderone, tired of the costs and violence associated with taking on drug cartels, is already posturing to legalize all drugs. Canada, on the whole, is a live-and-let-live place which takes national pride in its BC Bud.
Working out a trade agreement between North American countries is in everyone's best interest. Of the big three, Mexico particularly can ill-afford to keep forfeiting the tremendous amount of export taxes it loses on bales and bricks of ganja that cross its northern border on a daily basis.
What if import taxes were placed on all the marijuana currently coming into the USA from countries with shared borders? That’s around 10,000 to 15,000 metric tons times whatever the rate would be . . . it’s dizzying. What if import taxes were placed on half that amount? That could be a positive development, indeed.
Central American countries are quite capable of growing world class product too. They could all use the export taxes that could be generated by shipping choice strains to the US and Canada. They already do well with the coffee trade. International cannabis commerce will help them even more.
Regarding exports, consider our nation actually taking the lead in at least one segment of the modern-day spice trade — a novel thought. According to the Commerce Department, the 2008 US trade deficit on international trade in goods and services was a staggering $677.1 billion. Marijuana exports could only reduce the trade deficit so much, but why not get the ship heading in the right direction?
Here’s a chance to do just that. We’ve got the technology. We’ve got the know-how. Remember “American ingenuity?” How about just plain sensibility — taxing exports to countries that hop on the legalization bandwagon, too?
There’s a possibility that we could be exporting choice strains and importing choice strains. It’s a wide world of the unknown. Where could it go? How much could we get at the border for imported product and how much could we get when it’s sold at retail level. Really, there’s some potential there. –Max Chaiken
What’s that worth in dollar amounts? This is a potentially lucrative area that will take time to ramp up. It also requires international cooperation, an oxymoron. Let’s call it $250 million – a drop in the bucket compared to what cartels are making in the illicit market. It's insane to let imports and exports go untaxed a moment longer.
Revenue from leasing lands and government initiatives
Are there precedents for Big Government competing with the same private sector it taxes? Think T-bills. Think US Savings Bonds. Think leasing lands for cattle grazing. Think leasing lands for oil and gas exploration. Think state lotteries.
Gettman’s work is notable for its revelations about the many Johnny Weedseeds sowing clandestine plots on national forest lands. If you can’t fight ‘em, why not join ‘em? Just go the other direction entirely, offer security services for growers ponying up to farm government-controlled fields.
Don't burn it, make some money from it! BLM, the Bureau of Land Management, already has the infrastructure in place. National Guardsmen could provide the security.
State parks could use the extra income too.
Even if prohibition is repealed, there would still be jail time for growing on public lands. Wouldn't it be worth paying a fraction of the profits for a get-out-of-jail free card? I'd make that trade in a heartbeat.
While it’s unlikely to happen, what if the federal government decided to raise its own brand? The visage of Uncle Sam sternly declaring “I Want You” from a coffee-can sized cannabis canister screams appeal. Growing an Uncle Sam brand, or the State of Wyoming’s Old Faithful brand, may be unnecessary, because, as Jeff Miron points out, the feds can just tax operations without having to do the work. But if they want to do the work, the profits are potentially greater than the tax revenue.
In case the concept of growing money instead of paying out $15 billion a year in farm subsidies seems like too much of a “pipe dream,” it shouldn’t. The US Government already maintains “the Ft. Knox of dope” at The University of Mississippi in Oxford, and has done so since 1968 under the auspices of the National Institute of Drug Abuse. Its Research Institute of Pharmaceutical Sciences is the only legal marijuana plantation in the United States. The Institute maintains seven acres of indoor and outdoor crops, rolling its harvest into cigarettes using machines appropriated from the tobacco industry.
Another well-known model of government investment in typically private enterprises could work. Consider the “lottery model” put forth by attorney Richard Evans, writing for cantaxreg.com:
Consider not a commodity, but an activity, and a recent and well-tested model springs to mind. Historically, nearly all forms of gambling have been prohibited in America. Starting with New Hampshire in 1964, however, over forty states have created their own lotteries. State employees run them and all earnings, after expenses and prizes, go to the public coffers. Competitors remain illegal. Only certain functions, like providing the software, are contracted out to private companies.
Applying the lottery model (a public monopoly) to cannabis, one can visualize farms and greenhouses owned by the state, sending their product to processors, thence to distributors, thence to retailers, all staffed by state employees. The retail price would nimbly rise and fall with the market.
It’s difficult to predict how active various government branches would be. Governments can always “farm out” leasing and/or growing operations to private concerns, as in the lottery model.
Things could take a surreal turn if marijuana became legal and the government subsidized farmers not to grow it!
Leasing lands definitely has considerable upside. The concept of government grown herb may never see the light of day, but it has upside. There’s some tax money to be gained here: another $1 billion doesn't strain the imagination.
Licensing fees and renewals
Chaiken mentions these in passing, no mention at all from the better-known poteconomists.We’re talking about licensing income for cities, counties, and states.
The magnitude of this income is contingent on whether medical marijuana models stay in place under legalization. If they do, those $100 or so medical marijuana licenses represent a swell source of “petty cash” for state coffers. The 150,000 (and counting) license applications the State of Colorado's received add up to around $13.5 million at $90 per license per year, or the equivalent of around 3,750 teachers’ salaries. Of course those licenses will be annually renewed, keeping those teachers in the classroom.
If the constructively compulsive Jon Gettman is correct, that there were 41.8 million users in 2007, and if I am correct, that the tremendous amount of free advertising and publicity cannabis commerce has received since 2007 (which is documented in the next three parts of this report) amplifies this number at least 10%, then there are around 46 million “users” in the USA.
If half of them applied for medical marijuana licenses, at around $100 per license, that’s $4.6 billion right there — three quarters of the way to the $6.2 billion total MPMTR forecast by Jeff Miron and the RAND corporation team of Caulkins and Pacula!
Is it conceivable that a high percentage of marijuana consumers would pay $100 annually in exchange for immunity from incarceration? That’s a pretty good tradeoff. Will some of these people be buying “a license to party?” Why, yes. And exactly what is wrong with that? There’s a valid medical argument for legalization, and there’s a legitimate recreational, “right to party,” argument.
Buying a license to kill fish and game is recreational, not medical. I fail to see why one is currently legal in every state, while the other is partially legal in a few states.
Then there’s a nice little revenue stream selling dispensary licenses, which mimic the model of liquor licenses. Dispensaries pay the city of Denver $2000 just to apply and another $3,000 (annually renewable) if their application is approved.
That's just for the City of Denver. With HB 1280, the State of Colorado has seen the light. It's already extracting dispensary licensing fees, too.
Here are some sample State of Colorado dispensary licensing annual fees:
0-300 patients = $7,500
301-500 patients = $12,500
501 or more patients = $18.000
Cultivation License (per location) = $1,250
Infused Products (license to sell edibles) = $1,250
The state has frozen the number of dispensaries at around 700 for a year, pending further "study" (or shenanigans; read Part 11 for the inside scoop). Let's say each one pays an average of $13,000 a year in state fees alone. That's about $9 million right there — and that's with the number of dispensaries frozen, and with many populated areas of the state effectively banning dispensaries locally, despite the fact the state recognizes their ability to exist. That $9 million could only swell once the freeze is lifted and the rest of the state gets with the program.
Predicting licensing fees is confusing because, depending on where you live, sometimes there may be local (city) fees, there may be county fees, and there are may be state fees.
Check this abstract wording from the California Department of Public Health:
The state portion of the Medical Marijuana Identification Card (MMIC) application fee is currently set at $66.00 per card for non Medi-Cal patients and $33.00 per card for Medi-Cal patients. The counties then add their administration fee to the state cost. Both the state and counties have authority to cover their expenses through application fees, therefore, established fees will vary by county. Please contact your county program to find out what the total cost for a MMIC is in your county.
In LA proper, under a plan approved in April 2010, dispensaries will have to pay almost $1,600 in fees in order to operate legally. Included is $688 for building and safety permits, and $151 for a police background check.
With respect to the present incongruous situation, that is, the random medical marijuana regulations reigning in the fourteen states that presently permit at least some type of cannabis commerce, it would take a power higher than human prognostication to accurately predict how much revenue licensing fees could produce.
Additionally, no one really knows if the dispensary (aka collective, co-op, club) or medical marijuana models will survive in a legal, regulated landscape. That’s OK, because if those models are abandoned, in all probability, a new series of fees will take their place, or coexist alongside them. For instance:
Restaurant licenses
Café licenses
Licenses for supermarkets and big box retailers
Licenses for convenience stores
Liquor store licenses for “one-stop shopping”
Farming licenses
Retail distribution licenses
Personal cultivation licenses
Training certification for medical marijuana providers
And so on. There's no shortage of fees that will be assessed. Jeff Miron will begin accounting for licensing fees in his reports. “No, that (licensing fees) is not in the report. I agree,” he told Cannabis Commerce.
How much should we tack on for annual fees? I’d be shocked if there wasn’t $2 billion nationwide in a totally legal, regulated landscape. Easy.
Revenue from marijuana stocks and commodities trading
With all respect to pork bellies, with the nation prepping topsoil for America’s #1 cash crop, can anyone believe marijuana would not be one of the most active commodities traded on the exchange?
What kind of taxable income could cannabis . . . the commodity . . . actually produce? Perhaps someone(s) with commodity trading experience will chime in here. This area seems ripe. Taxation would take the form of state and federal incomes taxes paid on profits from trading. Ditto for profit taking from the appearance of marijuana stocks like Cannabis Science (CBIS), Cannabis Medical Solutions (CMIS), and Medical Marijuana, Inc. (MJNA) – wending their way from the wilds of Humboldt County to Wall Street.
I also wouldn’t be surprised to see marijuana stock funds make their appearance. These would be offered in the same manner as other “green” funds, if not combined with them.
Once again, economists can play devil’s advocate: “If people are buying marijuana futures, they’re not buying pork belly futures . . . so we’re not really generating more tax money.” OK. What if someone, who never had any interest in commodities before, decides to jump in because he’s bullish about marijuana? Then it’s not "shifting," it really is new business.
I pass, for now, on placing a dollar amount on the tax revenue marijuana stocks and marijuana commodity trading will produce. It's too early, it's too speculative, and this chapter is long enough without exploring the vagaries of commodities markets.
There’s decent potential here.
Government receipts: individual and business state and federal income taxes, payroll taxes, Social Security, Medicare deductions
Glaringly absent from The Other Green Economy. Way undervalued by Jeff Miron. Jon Gettman, to his credit, did account for these (while inexplicably ignoring sin taxes).
The “Al Capone factor” is an awful compelling reason for, let’s say, cultivators to come in from the cold and file Schedule F (for farming) tax returns – which accountants started seeing in 2010. The category is actually “grass,” as in hay.
Many well-known white papers account for individual “government receipts.” Business or corporate government receipts may be implied in their papers as “percentage of GDP.” However, as pointed out last section, we learned that some levels of wholesaling are not properly accounted for at all. Several people often make money from the same parcel of pot. Payroll taxes are factored vaguely, if at all.
Once businesses of every size get into the swing of cannabis commerce, significant amounts of business taxes will find their way into local, state, and national coffers. How significant? This area requires more study, but it has to be worth $2 billion in the short term.
Once the industry takes the training wheels off, that number could skyrocket.
Cannabis and hemp cosmetics
Creams. Lotions. Ointments. Salves. Oils. Butters. Balms. Sprays. Waxes.
If you can’t smoke it, eat it, or drink it, no problem, we know where your bloodstream is, and we're coming in.
The cosmetics industry has a nice track record, generating record sales to an increasingly fearful public. The public is increasingly fearful because the industry is practiced at scattering fear seeds far and wide, in newspapers, magazines, radio, television, and the internet. Fear of aging. Fear of being a gram or two overweight. Fear of loneliness. OMG.
Many infomercials that succeed in the “beyond their wildest dreams” category sell some form of cosmetics. Imagine teaming the right celebrity sales team with the right cannabis cosmetics and the right fountain-of-youth promotion. Therapeutic variants will be sold as anything from pedestrian “pain relief” to “astonishing miracle cures.”
I’m making fun of the expected chicanery. But there’s nothing particularly funny about the actual pain relief these products are already providing at dispensaries that offer physical therapy. Practitioners trained in using cannabis preparations for what-ails-you are already using these successfully – and patients are coming back for more.
There are already boutique cannabis cosmetic sales. I’d be surprised if ambitious and enterprising cosmetic conglomerates don’t hit the jackpot with an unending series of innovations. Someone's sure to come up with a multilevel marketing version.
Exactly why wouldn’t there be millions if not billions in tax dollars flowing from the fountain of youth? I can’t think of any reason. I'm predicting a half-billion in cannabis cosmetics taxation, leaving room for growth.
Revenue from cannabis tourism
Sorry, Rembrandt. More people visit Amsterdam for the hashish cafes than the “old masters.” Why not? Cannabis tourism is spreading to the four corners of the earth.
According to greensmokeroom.co.nz:
The fact is that many travelers don’t just come to South Africa for the spectacular scenery or to visit Nelson Mandela’s Prison Cell on Robben Island or to experience the wall-to wall wildlife – many come to sample some of its more exotic, natural produce – cannabis sativa - known in South Africa as dagga. In fact these travlelers become members of the growing cannabis tourism fraternity. Durban Poison (DP) is the visitor's choice.
Of course "the good old USA" has its own natural attractions. How far is the leap of logic from Napa = wine country to Humboldt = marijuana country? Not very!
The Bed and Breakfast industry will be rejuvenated as enterprising establishments like “Bob’s Bong and Breakfast,” adjacent to the Land Of The Giants redwood forest, offer hospitality for the happily sedated. Guests can select from menus poetically modeling single-malt Scotch descriptions at fine dining establishments. When guests tire of these charming inns, they can wander from estate to estate for tastings, just like those romantic couples touring the wine country. “Ah, yes, the west side of the budyard.”
This area pales in comparison with the previously detailed heavy hitters, but, hey, petty cash comes in handy for repairing the odd bridge or tunnel. Let’s call it a $250 million stream. Every little bit helps.
Big box retailers, supermarkets, convenience stores, entertainment events
Consider a world in which marijuana products are available at the country’s gas stations, convenience stores, supermarkets, big box retailers, and anywhere alcohol and tobacco are currently sold, including concerts and sporting events. Close your eyes and visualize Dooby Queen and Best Bud, awaiting your patronage at highway interchanges.
But is bigger better? Wouldn’t Best Bud just divert sales tax away from little dispensaries to big chains? Yes and no. Yes because it would to some extent; no, because big boxes attract a different sort of customer.
Lots of people will be ecstatic that the uplifting herb will be sold at entertainment events including spectator sports. These would likely take edible form, although it’s certainly possible concert venues and sports arenas will establish special smoking sections. How silly is not selling marijuana at rock concerts? That should be a crime. And won't Monster Truck Spectacular be just a tad more thrilling with than without?
Ah, spectator sports. I can see it now, the deluded fan running out on the field to attempt a game-winning field goal for the Broncos. “But officer, I know I could have nailed that 58-yarder!” Pot and pro sports is actually not a hallucination: for decades, the Jamaican national soccer team has been playing World Cup qualifiers in a ganja haze.
If alcohol and tobacco can be sold at convenience stores and supermarkets, do you think these consumer magnets will draw the line at marijuana? What line is that, again? I seriously doubt many owners, already in the alcohol and tobacco business, will eschew certain profitability.
Then what sort of sales tax, not to mention government receipts, could be generated by big box retailers, supermarkets, convenience stores, and entertainment venues including spectator sports? Some bullishness has to escape: $3 billion.
A special word about cannatax
I can't conceal the fact I get a kick out of locating taxation streams poteconomists have never waded in before. That said, there are certain people who should never have to be pay any cannatax. I'm talking about folks with huge disabilities and minimal incomes. They should be tax-exempt.
Also, while I believe there is every reason to assess fees for various cannabis licenses, I don't advocate setting these so high that mom & pop shops can't get in the game — or are forced out of the game, as recently happened in Colorado.
Space prohibits editorializing and strategizing further about these issues; suffice it to say the human factor must be considered, too.
Conclusion
This round-up represents some obvious taxation possibilities that have been under-discussed, to be charitable. There are more potential taxation revenue streams highly respected studies haven’t even mentioned, much less reconciled, in their forecasts. How do I know? While I've given it a mighty effort, I greatly doubt I'm brilliant enough to identify them all. So, what am I missing? All comments welcome.
As we stand, $17 billion of perfectly plausible cannatax has been counted in this section — that's been ignored by minds that don't miss much. Adding that to the Cannabis Commerce core estimate of $50 billion we established last section brings our total to $67 billion. If I was a politician sitting on the fence, that figure has a tantalizing quality to it.
Does that mean we're done? Have we come as close as possible to predicting MPMTR in Stardate 2010? No and no. This section didn't even talk about sales tax and sin tax, because these obvious pot tax opportunities have been traditionally addressed by poteconomists.
Finding more MPMTR takes moving from the left side of our brains to the right:
Coming up with more meaningful computations is going to take qualities like imagination, street smarts, vision, ingenuity, and an ability to futurize. A sprinkle of deviousness, like some of the concerns mentioned in this section capably demonstrate, won’t hurt. It’ll take envisioning a post-legalization landscape ripe for a succession of enterprising and entrepreneurial ideas – all infinitely taxable.
Futurize along with me now. Picture springtime for graphic designers, as gaily-wrapped cannabis consumables beckon from billboards. Notice alluring little packets, conveniently placed by cash registers, programmed to collect sales tax for the newly renamed Bureau of Alcohol, Tobacco, and Marijuana. Can you see yourself at a pot tasting? These will be as common as wine tastings – if they’re not already.
What else do you see arching skyward, alongside the amber waves of grain, swaying sunflower-like under an azure sky? Could it be Field of Dreams, cannabis style?
Futurizing allows us to preview a more luminous lifestyle, replete with ample funds reaped for the public good – picture the Atomic Age with good buds.
Forecasting MPMTR isn’t just about rehashing NSDUH surveys and seizure statistics, now is it?
Next section preview
Not accounting for obvious tax possibilities in the legal, regulated landscape is a factor limiting current pot tax predictions. Another is failing to account for the thriving cannabis commerce already occurring in medical marijuana communities, in states fortunate enough to have retail dispensaries, cultivation shops, and other emerging forms of commerce. Some areas have surpassed "already occurring" and "emerging." There's only one word for them: exploding.
Take my hood, for instance ...
7 The Retail Explosion
I can pinpoint the exact moment I realized I was living in the epicenter of a retail explosion. It was a winter night in February 2010. Driving to my cannabis cultivation class, along the usual route down South Broadway, I encountered a phenomenon so startling I screeched to a halt in the middle of the thoroughfare: on three of the four corners where South Broadway crosses Asbury, green-neon cannabis leaves probed the nighttime cityscape.
A week earlier, the crumbling blacktop currently hosting Walking Raven Medical Collective, Little Brown House Dispensary, and The Green Depot stood vacant, a deteriorating vestige of a bygone era abandoned by the previous lessors, out-of-business car dealerships. Now the intersection was reborn, a highlight on South Broadway’s burgeoning dispensary row.
In a delicious irony, the shining star of today’s economy has supplanted the mainspring of last century’s economy. Think the owners of these deteriorating lots are glad cannabis commerce saved their ass-ets?
Urban renewal, cannabis style
Little Brown House Dispensary, former used car lot office, before adding its postmodern $50 million Frank Gehry designed wing.[/caption]
Faced with the prospect that South Broadway, minus its used car dealerships, was descending into blight, Denver’s Urban Renewal program has been slowly but surely transforming the artery into a pedestrian-friendly boulevard with a treed median strip. In theory, fresh pours of concrete attract fresh mercantile ventures.
Were an ever-increasing number of medical marijuana outlets what the city fathers had in mind to fill the void? Well . . . extending the antique district was probably closer to the original intention. Alas, in 2010 public ardor for Victoriana lacks traction to fuel a commercial renaissance. There’s just not that much demand for feathered bonnets and fainting couches.
So, what is there plenty of demand for? It turns out to be dispensaries. And dispensary row seems to be working out for all concerned.
25 in 1
In my “hood,” nobody’s oblivious that twenty-five dispensaries have moved into a one-mile radius with an unprecedented assault on retail hearts and minds. Finally afforded an opportunity to strut its stuff, cannabis has penetrated more storefronts than coffee and wireless put together. This conquest took all of six months.
Was I brilliant enough to predict that? No. Did anyone I know predict that? Er, no. It just sort of happened. Twenty miles to the west, even the most optimist cannabis commerce fans would have a hard time believing that in Boulder, the ratio of dispensaries to pharmacies would skyrocket from 0-16 to 100-16 in the same six months!
Hundreds of dispensaries have put down roots in and around Denver’s fertile, pro-marijuana – and not just for medicinal purposes, thank you – climate.
Additionally, the previously wilting Classifieds section of Denver’s Westword has been rejuvenated (ditto for LA Weekly), swelling with page after page of retail cannabis commerce ads. Get your doctor’s note here. Cooking With Cannabis classes here. Rent grow space in a secure warehouse here. Buy your grow tents right here.
Retail history didn’t happen overnight
This explosion is unprecedented in the history of retail. The Chamber of Commerce is stumped. When have 25 shops offering anything – animal, vegetable, or mineral – established root so rapidly in any neighborhood? Retail cannabis commerce, in the form of dispensaries and spinoff businesses, has rearranged the status quo in the Queen City of the Plains. What’s next, dispensary tours on double-decker buses? Close. The Boulder Bud Cruise operates a single-decker conveyance.
Twenty-five dispensaries in a one-mile radius didn’t happen overnight . . . although it seems like it did. After Colorado voters passed Amendment 20, Medical Use of Marijuana, in 2000, Denver’s dispensary scene germinated for the better part of a decade. California passed the Compassionate Use Act four years earlier, in 1996; it took time to boil there, too. What halted the parade of progress?
The delay can be traced mainly to the lack of uniformity in medical marijuana laws. In Colorado, each city was given leeway to apply, not apply, or interpret as it best deemed fit, the medical marijuana laws vaguely etched into the Colorado State Constitution. Counties, too, can add or subtract their own ordinances, though they haven’t yet made their presence felt to the full extent counties in California have. State laws collided with longstanding federal drug laws, creating legal gray areas – and lots of billable hours for pro-pot attorneys.
It took time for all those local regulations to work through “the system.” Doctors had to be certified to prescribe cannabis as well. That was another agonizing process. In 2009, legalese on a page finally materialized into brick and mortar dispensaries on a corner.
Regulations were and are even more confusing in California. There, the state also allows each municipality leeway to interpret the law. Counties further obfuscate the process by tailoring their own regulations – and collecting their own fees. That’s one big reason it took four years longer for the first dispensaries to emerge in the Golden State. No one ever said overcoming the forces of prohibition would be easy. It wasn’t. But activists ultimately carried the day.
A wonderful day in the neighborhood
In Colorado and California, at least, the medical marijuana gods are currently granting wishes to an appreciative if still incredulous populus. Let me go down my own list and check off the retail wishes that have been granted so far:
In less than five minutes, I can walk to a store that will sell me the High Times centerfold buds that have been verboten my whole life. Now I can buy as little as a pre-rolled joint for $10 that I can milk for four days. Check!
I can walk to a cultivation store, where well-trained attendants will instruct me on the most efficacious methods of conducting botany experiments in the comfort of my own home. Check!
People now happily working in retail cannabis commerce establishments are contributing epic taxation payoffs to local, state, and national governments, and public welfare projects are being funded with the proceeds. Not quite! Got the first part, not the second.
But an awesome start, nonetheless!
Muscle Beach Medicine
The Queen City of the Plains has competition in the dispensary sweepstakes. The City of the Angels has both a head start and a much bigger population base to support its 584 dispensaries in May 2010 (not for long, if the LA District Attorney’s office has its way; the whole industry is presently in a constant state of flux).
Amidst the familiar sites along Muscle Beach – the rollerskating guitar players, the guy juggling a bowling pin, a ping-pong ball and a chainsaw, the Korean-owned t-shirt shops – a dozen or so dispensaries have blended into the boardwalk freak scene. Sandwich-board clad barkers announce to passersby that “the doctor is in,” ready to prescribe and sell like they’ve been there forever.
What does this tell us? It tells us that pent-up demand for cannabis, whether it’s called “medical marijuana” or “the dank,” is somewhere between vast and infinite. That demand had to be satisfied on the retail level.
Cannabis sativa vs. coffee arabica
Can you name a retail phenomenon that has exploded like this perfect storm? I can’t. Coffee comes closest. But cannabis sativa vs. coffee arabica is not a fair fight. Sure, lots of coffee shops have opened all over the USA – over the course of 20 years, or since homo americanus discovered java comes in varieties that are considerably more upscale than Maxwell House in a can. But a cup of joe still costs around a buck fifty, and a pound of “Holiday Blend” costs like 12 bucks.
Contrast this with joints (marijuana cigarettes) selling for ten bucks, with pounds changing hands for $4,000 plus. That’s a little more impactful. Where is the ripple effect of coffee? There are no indications that folks are growing, or planning to grow, their own beans to trade with friends or sell the “overgrow” to the Starbucks on Evans and University. There is no commerce in coffee seeds or clones.
So, while coffee shops are ringing up a buck fifty here and twelve dollars there, medical marijuana dispensaries are ringing up twenty bucks here and 400 bucks there. All day long. Think some of these proceeds might benefit the community taxed at local sales tax rates? Platte Park could put up a marble post office.
In Denver, the Santa Fe art district boasts dozens of galleries in about an eight-block strip. Things get pretty vibrant on "First Friday" art walks. That's a strong retail showing. However, the rest of the month can get a little sleepy. When things get tough economically, non-essential purchases like fine art are the first to go . . . while dispensaries are the first place people go to.
If you see it, you will want it
Human Nature 101 dictates that if you can see it, you will want it. First step is discovering that an actual dispensary has moved into your neighborhood, in between the barbershop and the pizza “joint.” Step two is setting foot inside.
The Miron mantra, “demand will stay the same after legalization,” disregards the longing, emanating from the human psyche, when twenty succulent strains of ganja, groomed and preening in a display case, compete for affection like puppies in a pet shop.
It’s true that if you don’t like tobacco, it doesn’t matter if 5 or 50 cigarette shops move into your neighborhood. But, if you never tried tobacco, wouldn’t you want to know what the fuss was all about?
Further stimulating the public’s curiosity, it’s hard not to notice quite a few head shops and cultivation shops adding sparks to the retail firestorm. The success of grow supply stores has forced the Home Depots of the world to carry an extensive selection of grow lights and fertilizer, too. Basically, the public has demanded plenty of convenient outlets to indulge its predilection for cultivating and consuming cannabis. And that wish has been granted. Big time.
Gonzo for ganja
Compare this heretofore unheard of availability, and the craving it inspires, with the wish to procure even one sight-unseen strain of exotic, from a friend of a friend, for a one-time buying opportunity. That’s the Neanderthal modus operandi which defined the ganja acquisition process until a year ago – and remains in effect outside of the enlightened communities that permit the operation of medical marijuana dispensaries. In areas where dispensaries are in full swing, the cannabis purchasing process has simplified to the point where it’s as painless and mindless as buying Rice Krispies.
If you have a hankering for a particular example of “the kind” there’s every chance one of your favorite outlets will have it. You can select your strain (I almost said “brand,” but that’s still to come) from a dispensary’s display of sativa and indica just like you can pick your favorite single malt from a liquor store’s display of highland and lowland Scotch. Civilized.
What does all this mean in terms of pot-ential taxation revenue? One meaning is clear: underestimating a public gonzo for ganja is a mistake. All evidence points to a great deal of upward pressure on the retail sector. There’s another economic indicator experiencing upward pressure.
Creating jobs We Really Like
There are “job” jobs; then there are jobs we really like. Some jobs put food on the table. That’s helpful. Then there are jobs that uplift us and make us feel more alive. They're even more helpful.
In his campaign, President Obama talked about creating millions of green jobs in alternative energy. Haven’t heard much about those lately. But I’m always hearing about new and different avocations in the cannabis industry, from budtenders to ladybug ranchers – apparently the orange assassins eat spider mites plaguing indoor plants.
By and large, people in the cannabis industry appear uplifted to be working in their preferred industry. That said, financial markets value the number of jobs that are being created more than how uplifting these jobs may or may not be. They also distinguish between “new jobs” and “job shifting.” Are these opportunities in cannabis commerce “new jobs,” or do they represent “job shifting?”
In other words, would the same people be working at Jack-In-The-Box flipping burgers if they weren’t working at dispensaries rooting clones? If so, according to economists, that would be “double counting” the same jobs. They’re entitled to that traditional view.
I see things a little differently; I say, jobs we really like should count double. That’s what Albert Einstein had in mind when he said, “Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted.”
Conclusion
I’ve set out to cover the full spectrum, the enormity of the 2010 pot phenomenon, above and beyond survey results and seizure statistics, in an effort to identify all the factors that go into calculating MPMTR (maximum pot-ential marijuana taxation revenue). The higher the figures, the more persuasive the figures. What are persuasive figures? Figures that persuade politicians to get off the fence and push through legalization. What else is there?
What does the retail explosion have to do with persuasive figures?
Let’s envision the Bay Area, LA, and Denver as test sites for cannabis commerce vis a vis the dispensary model. Imagine everything that’s happened in the last year and half as if its one big “product launch.” It’s pretty hard to dispute the preliminary results from these test markets. The public has embraced buddage beyond anyone’s wildest dreams.
At the end of Part 6, our running tally of MPMTR stood at $67 billion. In response to the overwhelmingly positive response in every retail market cannabis has been tested, Cannabis Commerce attaches the value of +10%, or $6.7 billion, adjusting our forecast to $73 billion.
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Like water finding its own level, the job creation, economic stimulation, and retail explosion I’ve described are examples of natural selection at its finest.
But there’s another highly calculated factor at play, conceived and executed by master psychologists that know everything about persuasion. It’s a triumvirate of advertising, marketing, and publicity rolled into one unrelenting, inescapable, hypnotic force. This all-pervasive force already champions the cause for free! What could it be?
8 Hollywood, Inc.: Cannabis Commerce's Champion
Decades ago, in Up In Smoke, Cheech Marin pranced about in a pink tutu, singing, “Mama try to tell me, try to tell me how to live, but I don’t listen to her, cause my head is like a sieve.” Peoples’ eyes bulged out of their heads.
Nowadays, five minutes don’t go by on an episode of Entourage, without some gleeful housemate slipping into sinsemilla-assisted satori. Each episode is a veritable infomercial for the grandeur of ganja.
The pitch can be condensed into five words: things go better with pot.
That’s advertising!
HBO
Would you concede, that in 2009, HBO had its fingers on the pulse of a nation?
Building on the success of Entourage, HBO's latest series offerings, Hung,Eastbound & Down, and Bored to Death, compete with it for the “Series Which Most Glorifies Cannabis” Emmy.
The preeminent cable network provides us a textbook example of cannabis commerce in action. It hawks a “Bored To Death Weed T-Shirt” at its online gift shop. They say every little bit of merchandising helps.
HBO continues its variations on a theme, as even the vampires of True Blood exhibit a bloodlust for psychotropic vegetation. Apparently, these undead are omnivores.
Showtime
"What is a weed? A plant whose virtues haven't been discovered yet." —Ralph Waldo Emerson[/caption]
Showtime returns fire with Weeds. Sparks fly between a sexy suburban horticulturist and an accommodating DEA agent – among equally imaginative pot-lines, I mean plotlines. Lots of high-quality yuks on this one. It's no surprise Weeds is Showtime’s highest-rated show.
Californication capitalizes on herbage as much as cleavage.
Not content confining its leafy outreach to weekly series, the cannabis-conscious channel took dead aim at HBO’s many excellent documentaries with In Pot We Trust, a paean to medicinal cannabis.
Networks large and small
Anyone else have a hard time remembering network TV without pot topicality?
Once interracial and gay themes became commonplace, pot was the lone taboo left to exploit. NBC’s The Office is one of numerous network offerings to do exactly that.
Prominent cable channel CNBC offers a continuing Marijuana and Money series.
On a more guerilla level, enterprising potworks such as the fascinating Cannabis Planet TV, with its convincing newsroom and winning anchorpeople, POT-TV, and Cannabis Common Sense, vie for viewers’ hearts and minds.
In an ingenious bit of programming, on Thursday and Saturday nights, LA independent KJLA presents Cannabis Planet — immediately following its telecast of the nascent Lingerie Football League. Apparently the station can read minds.
The silver screen
And movies? It would be a lot harder to isolate recently released films which don’t feature marijuana themes than ones which do. Need I name names? OK, recent examples of “Stoner Cinema” include Knocked Up, Pineapple Express, Humboldt County, Harold and Kumar Escape From Guantanamo Bay, The Wackness, The 40 Year Old Virgin, American Beauty (not that recent, but it’s an Oscar winner – Best Picture, no less), Rolling Kansas, Road Trip, and Forgetting Sarah Marshall.
As you know, highly compensated Hollywood execs comb through piles of screenplays, until they find one they feel can rock the world. But it will only rock the world if it follows a simple formula: give the public what it wants.
Savvy execs know that one surefire way of giving the public what it wants is “green-lighting” scripts rife with reefer madness.
This equates to the “art imitates life” part of the “art imitates life, and life imitates art” axiom. In this case, Hollywood imitates you and me, who imitate Hollywood, which imitates you and me, and so on.
Going one step further, the same mass-psychology-conscious executives who insure writers, actors, directors and producers mimic the public’s current fascinations, know that the inverse is also true – the public turns to the silver screen for behavioral cues about how to conduct every aspect of their lives.
People copy how actors look, and how they react in certain situations. If their day is a little dull, they do what Entourage's "Turtle" would do – hit the local collective for an eighth of Blue Rhino.
That would be the “life imitates art” part. These days, there appears to be quite a bit of it.
And what effect does life imitating art have on MPMTR (maximum pot-ential marijuana taxation revenue)? Read on.
Before we leave art, can anyone name one movie or TV series which portrays pot in a negative light?
Well, let's see . . . what about Reefer Madness? OK, that's one. The morality tale was released in 1936!
Celebrity consciousness
Hollywood Inc., with over a century to master the art of manipulation, has brainwashed the public to maintain a heightened sense of celebrity-consciousness. Therefore, if Joe Q. Public sees Ted Danson toking up before a big book release party on Bored To Death, it’s only natural for him to wonder if a few well-timed bong hits might take the edge off that rehearsal dinner with the in-laws.
Celebrities that would seem to be doing a lot more than leaning toward legalization include . . . sorry, it’s too easy, you can pick just about anybody you want! If a face is splashed on a gossip magazine, it was probably immersed in a vaporizer before or after the photo shoot.
Conclusion
To avoid further exposure to Hollywood Inc.’s unceasing canonization of cannabis-related escapades, you’d have to seek out reruns of the PTL Network.
Does this trend show any sign of abating? Er, none that I can see.
Is there indication that Hollywood, Inc. keeps getting better at both reflecting and inducing cannabis consumption? Why, yes. Plenty. Like everywhere you look.
As we’ve seen, the most powerful marketing force on earth is presenting legalization as a fait accompli. So, how does this new reality effect pot-ential tax revenue?
It would take an incredible orator to argue it has no effect whatsoever. An incredible orator by the name of Jeff Miron has argued exactly that, in Part 2 of this report and in his April 2010 interview with Cannabis Commerce. I'm not persuaded.
In a monkey-see, monkey-do world, Hollywood Inc.'s unflagging support exerts constant upward pressure on MPMTR projections — the last figure was $73 billion, after blending in "Obvious Tax Opportunities Oddly Unaccounted For."
I’d estimate this pressure ratchets that number up another . . . I want to say "at least 5-10 percent."
I'm not going to. With respect to Jeff Miron's cautious approach, I’m filtering my natural enthusiasm, and typing 2%. That looks silly low. But there it is.
We’re staring at $75 billion.
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Hollywood, Inc. has a huge influence on public tastes. But it has allies, strong allies, motivated by the mutual need to keep cannabis consciousness in the public eye. Traditional media – radio, TV news, newspapers, magazines – isn’t giving way to social media, not without a fight.
And social media – Facebook, MySpace, Twitter, LinkedIn – with its ability to go viral, has the ammunition to fight back.
What field provides a natural battleground for traditional media and the internet to duke it out in? The fertile marijuana field. Just try and get through a daily newspaper, or a half-hour web surf, without taking a little detour. . . to the dank side...
9 The Internet and Traditional Media Light Up
Hollywood, Inc. has help.
Cannalove hasn't escaped the ever-vigilant eye of newspapers, magazines, radio, and TV news. Before it’s tweeted into oblivion, traditional media clings tenaciously to life: herbal life, that is. Ironically, the internet — communications protocol of the future, once-faint military signal bulked Hulk-like into global homgenizer — conspires with the traditional town criers of the past to co-promote cannabis commerce today. Trumpeting pot topicality, the internet and traditional media are competitors and allies. The strange bedfellows churn out an "avalanche of publicity."
How ironic is it that the pungent, skunky substance basking in notoriety had led a suppressed existence, denigrated as a "lowly weed" if not "the devil's weed" — until its recent meteoric rise to prominence. The former bit player has snatched a starring role in "The Green Rush." Signals heralding the magic herb's arrival are received by everyone from Wall Streeters to cellphone-carrying Masai.
Surely, the end game for the “The Green Rush” must be true legalization and huge gains in cannajobs and cannatax? Well ... the process is still playing out. Until the final act, free-flowing ink, bytes, and broadcasts vie for our hearts and minds.
Pulp non-fiction
Even if you no longer subscribe to a daily newspaper, you know which herb is the headline writer's darling. After years of ignoring the controversial plant matter, the pulp old guard is suddenly infatuated with it. On slow news days, major metropolitan dailies actually run editorials endorsing legalization.
Why? Legalization sells. Conversely, resisting legalization brands your paper a fossil, just begging to be left in the dust by the newer, hipper internet.
Here’s what it’s come down to:
The tobacco industry, which once bought as many full-page newspapers ads as any big business, now receives zero ink about the inroads it’s making attracting new users in low income areas.
If the fast food industry rates any ink for the gleaming new Jack-In-The-Box opening over on Speedway Boulevard, it’ll be a paragraph somewhere in the Local News section.
New car reviews get buried somewhere in the back of the Sports section, not splashed in 30-pt. type on the front page — even though the automotive industry still forks over a princely sum for full-page ads and two-page spreads.
But if a dispensary takes over a storefront from a mom and pop hardware store that was KO’d by a nearby Home Depot ... lo and behold ... front page news and screaming headlines.
Go figure!
On the national level, even the venerable AP fans the firestorm with “Arnold Schwarzenegger Says Pot is Not A Drug.” Whether your political bent is conservative, liberal, or moderate, that headline's just plain irresistible.
The previously shriveling pages of metropolitan weeklies are swollen with page after page of classified ads for dispensaries, collectives, and cooperatives. The same weeklies churn out one pro-pot story after another, the better to meet their audience where it lives. Until tablet readers evolve to crush books like cell phones crushed pay phones, pulp publishers of every ilk will continue to exploit cannaculture.
Potcentric magazines proliferate
On the glossy side, ever-slimmer versions of Time, Forbes, and Business Week — just to name a few — have jumped all over legalization topics. These include Time’s “Why Legalizing Marijuana Makes Sense.” Hmm. Exactly why didn't it make sense five, ten, fifteen, twenty years ago?
High Times now has company in magazine racks. Numerous national publications have gotten in on the game, like Skunk, Cannabis Culture, and Weed World.
Kush has a nice empire going, followed closely by Post420 — they’re localized for the area they’re distributed, and are often found in waiting rooms of dispensaries and collectives.
A host of eager local zines like Most Hi and Marijuana Magazine have jumped in, too.
Boulder’s Rooster magazine changed its theme from beer 'n babes to doobs 'n babes ... and doubled its circulation in a month. In the Denver-Boulder area, about a dozen other print publications have emerged to quench a thirst for all things marijuana.
A nice side benefit is that the cannabis craze has provided a lifeline for graphic designers, harkening back to a time when counterculture iconography mesmerized a generation through concert posters, album covers, and comic books.
A hip makeover
Perhaps the most recognizable brand in pulp media has adapted to its cannabis-conscious readership. To its credit, as pressure mounts on maintaining a daily newspaper, The New York Times just keeps getting hipper and hipper. One of the ways it keeps getting hipper is by running pot features.
The Times could change its slogan to "All The Pot News That's Fit to Print."
Mindful that the decomposing carcasses of former "great metropolitan dailies" like the Rocky Mountain News are scattered from sea to shining sea, the Times’ survival strategy makes sense.
Features like “Marijuana Fuels a New Kitchen Culture” are breezy and inviting. The lead photo of “Where Capitalism Meets Cannabis” features an arty and alluring calling card: a Strawberry Haze bud shot through a magnifying glass. “In Colorado, Pot-Selling Pioneers Try to Turn a Profit,” vies for your affection — and wins.
Coverage of city council meetings collides with cannabis commerce
City council meetings have long been mainstays of newspaper, radio, and TV news reportage. Conveniently, city council meetings tend to heat up whenever and wherever local medical marijuana regulations are “hashed out.”
Battles over how “Our Town, USA” deals with dispensaries, collectives, and cooperatives are godsends for reporters. "Knights of the keyboard," accustomed to dozing off at city council meetings, get all bright-eyed and bushy-tailed when regulators tackle contentious, pot-related issues.
Skirmishes over how many feet away from daycare centers dispensaries can locate are always ripe for reporting pyrotechnics. The formula's simple: the more contentious the meeting, the higher the ratings.
9 News to the penitentiary
One Denver man was so flattered that 9 News field reporters featured his highly-profitable home plantation as a lead story, he couldn’t resist bragging on camera about what a great country this was — where a little guy like him could grow a half-million dollars worth of weed in a suburban basement.
The 9 News camera crew, serving the public as always, showcased his operation — in all its shrubby splendor.
There was just one problem. DEA agents watch TV, too. Although told to stand down by the Commander in Chief as long as medical marijuana caregivers follow local regulations, the DEA had one big question: did this happy homeowner have the required medical marijuana paperwork to support the scope of his grow operation?
Essentially, a “caregiver” (read grower) could (emphasis on past tense; regulations have changed since I began writing this section!) grow six plants for every patient that named him a caregiver. The grower had the requisite paperwork for fifteen patients, meaning he could legally raise fifteen times six, or ninety plants.
The day following the broadcast, the DEA made a showy arrest, making sure their man was in custody if it developed the numbers weren’t in his favor. They weren’t. He was growing 150 plants. Whoops!
Of course, 9 News cameras were there to capture the arrest and seizure, too! The neighbors were aghast, contributing more dramatic video. After all, what if little Ashleigh and Duncan stumbled into that basement Little Shop of Horrors, never to be seen again?
Never would have happened if traditional TV news wasn’t all over the story.
Marijuana radio
One is less likely to unexpectedly encounter potcasts on the radio than newspapers or TV, but the medium contributes its fair share of reportage. NPR in particular has probed this area in depth.
Much of the action takes place in the burgeoning field of internet radio, exploited by the likes of marijuanaradio.com, PureTHC.com, and a host of contenders.
“Stoner Radio” stations program playlists tailored to the listening tastes of the like-minded.
An internet love affair
I'm tempted to tell you the magic herb has taken over the internet. Which it basically has. However, it’s not numero uno. King Porn still is, with its huge head start in number of sites and surfers.
Porno people outnumber "stoners." That may never change.
However, where it really counts, pot pummels porn in gross annual sales, $113 billion to $13 billion.
Sites like 420girls.com feature bud damsels in undress, keeping “abreast” (my bad) of both internet crazes. Want to see lithesome nymphs, strategically covered in purple buds? Wish granted. Forum members add to the mirth, sending in photos of themselves in similar garb, striking equally langorous poses.
Internet forums provide a perfect medium for learning how to grow, what to grow, and where to grow it. Should you grow hydroponically, aeroponically, or in soil? Which nutrients should you purchase? GrowAssistant.com can clear that up for you.
Want to know how to raise hydroponic indica, perhaps a soothing strain like White Rhino? Head on over to YouTube.com and take in the videos. Or just Google “hydroponics.” The search results will keep you going for days.
If you're into forums about any and every aspect of marijuana, you could do worse than grasscity.com. If that doesn't work for you, the forums on 420magazine.com probably will.
Needless to say, the social media triumvirate of MySpace, Facebook, and Twitter, pounds the drums for all things marijuana 24/7.
“Stoner pages,” like cannabis.com, 420pot.com, and marijuana.com, to pick a few out of untold thousands, offer tempting morsels of canna-knowledge.
On Legalization Day, expect mail order via the internet to go stone cold crazy as amateur and professional growers send away for every form of gardening supply from seeds, clones, lights, fertilizers, and containers to Rototillers. What a boon for UPS and FEDEX — even the creaky old post office.
Doubling the fun, the internet now hosts online versions of virtually every newspaper and magazine.
There’s really no end to it.
Conclusion
Although their stature as arbiters of taste has digital competition, daily newspapers, weekly newspapers, magazines, radio news, talk radio, and TV have all pitched in to promote the cannabis cause.
On the internet side, too many web sites, blogs, and forums to count paint landscapes of greener pastures.
With this communications combination cranking out infinite bits and bytes, virtually all of it free exposure, it’s easy to be bullish about herbal bullion.
Acceptance by the internet and traditional media means you now know “you’re not alone.” The stigma of being a “pothead” has been forever erased from mass consciousness — even as marijuana somehow remains classified a Schedule One drug, despite the best efforts of legalization advocates like Jon Gettman.
Exactly how does this juggernaut's support affect cannatax , $75 billion at last count?
Keeping with our sober projections, let’s say it’s already included in the measley 2% increase we credited Hollywood, Inc. last section.
I suspect nonstop free advertising and publicity from Hollywood, Inc., the internet, and traditional media affects cannatax way, way more than 2%; it feels a lot more like 10%.
Yet the cautionary words of the poteconomists who blazed the trail, Jeff Miron and Jon Gettman, temper my natural enthusiasm.
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Cannabis Commerce in the USA caught its breath this section. It had to, after all the ground we’ve covered. But don’t get too relaxed: things build to a climax in the power-packed, “Political Implications of Cannabis Commerce” — coming right up!
10 Political Implications of Cannabis Commerce
For the foreseeable future, the “other green economy,” medical marijuana, and the effort to propel legalization forward will profoundly effect every political election held in the United States. Make no mistake about it – marijuana proponents make up a significant voting bloc.
While arch-conservatives may balk at full-on legalization, many have softened their resistance to medical marijuana. In the court of public opinion, medical marijuana’s palliative effect on those suffering from terminal illness has graduated from conjecture to fact – in the minds of liberals and conservatives alike.
What does the war in Afghanistan have to do with cannabis commerce?
If policing the planet, with a particular emphasis on Afghanistan, is as important to the administration as it appears to be, it might be wise to placate liberal, peace-loving, pro-marijuana voters, who put a Democrat in the White House, by ending prohibition. Policing the planet is impractical when you’re no longer in office.
In November of 2008, there was only one candidate marijuana proponents could consider voting for – Obama, the candidate who admitted he enjoyed marijuana, and had no conscientious objection to its controlled use as medical marijuana. Conversely, opponent John McCain was videoed blatantly ignoring pleas for reform by patients in wheelchairs.
The decision was clear; if you were for marijuana, you were for Obama.
During his campaign, candidate Obama listed pressing issues as reviving the economy, crusading for health care reform, reining in big business and Wall Street, and, oh by the way, redeploying troops from Iraq to Afghanistan. He’s done all that. You can’t say the man’s not honest.
It’s that redeployment that may prove to be Obama’s undoing. His liberal electoral base hoped all that posturing about Afghanistan was just campaign rhetoric, designed to show he was tough enough to lead the nation. Unfortunately, according to Andrew J. Basevich, writing for The Boston Globe, Obama has perpetuated the Bush administration’s effort to reprogram the Arab world with “homeland values:”
Little evidence exists to suggest that US exertions, whether aimed at liberating, transforming, or dominating the Islamic world, are achieving success. No matter: Washington shows no sign of relenting. In Congress, new appropriations to fund the war in Afghanistan are pending (June 2010) – $58 billion – with passage assured.
In addition to increasing the depth of military expenditures, Obama has expanded the breadth of operations. According to The London Times, “Covert operations conducted by US Special Forces have escalated from the 60 countries we were operating in under the Bush administration, to the 75 we’re secretly operating in now.”
Military madness, yes — civil liberty, no
There's a problem with that tact, as it relates to Obama’s political direction, the path of the nation, and the fate of the legalization movement. Pro-marijuana types, who voted Obama in, tend to like things peaceful in their home environments, their communities, and the world at large.
The more they graze in the grass, the less they're inclined to support Special Forces operating covertly in 75 countries.
The military mindset just doesn’t jibe real well with this voting bloc.
What does?
Freedom to smoke, eat, or ingest marijuana products for either medicinal or recreational purposes.
Freedom from being harassed and/or arrested by agents of the “war on drugs” when purchasing, growing or ingesting marijuana.
Freedom to profit from cannabis commerce in ingenious ways.
Freedom to pay marijuana taxes to fund social programs.
In fairness, there has been some progress in some of those areas under Obama.
But only a fortunate few Americans can take advantage of that stumbling progress. And they wouldn’t be able to if they didn’t have chronic diseases, or were pretending to have them, in order to purchase herb in the safety and convenience of dispensaries and collectives.
Even though uniform access to marijuana is presently the most glaring civil liberty denied the American public, Obama has made it clear he believes states and localities should decide the fate of marijuana. Therein lies the rub. Quite a few voters would like the Chief Executive to exhibit more initiative. Ending the hypocrisy of allowing tobacco and alcohol use for all — while prohibiting the use of marijuana for most Americans — fits the bill.
Choices, choices, choices
Options for about-to-be former Obama loyalists, turned off by the country’s role as self-appointed world policemen, and disappointed that only the chronically ill can purchase “meds” in a few places, in a few states, include:
Waiting around until 2012, or sooner for local elections, and voting Obama and other lukewarm Democrats out. This could actually include a political first: the pro-pot bloc voting for Republicans bold enough to seize the “higher ground.”
Expending a great amount of effort on the local and state levels, for who knows how long, trying to effect total legalization without presidential mandate.
Marching on Washington, DC and demanding legalization.
People get ready
Now it’s year two of the Obama regime. Has repealing marijuana prohibition become the biggest issue facing the USA in 2010? Probably not, but, as we’ve seen, it’s an issue that gets an awful lot of publicity – and begs for resolution.
Even though repealing prohibition would have a vitalizing effect on the economy, Obama doesn’t view collecting marijuana taxation revenue as a worthwhile strategy for growing the economy. We know that's his stance. However, the rationale is presently MIA (missing in action).
As we’re only halfway through year two, with the economy still stuck in quicksand, for the time being most pro-pot liberals have given President Obama the benefit of the doubt. However, come year three of the Obama regime, when the DC atmosphere gets a little steamy in the summer of 2011 – people get ready, there’s a train a-coming. Get ready for what, you ask?
The march on Washington – a highly effective tactic
The March on Washington is a time-honored, highly effective tactic historically employed by disenfranchised groups of all creeds. When large, unified groups feel discriminated against by the federal government, that may be the only action left to take. Especially when it’s proved so successful in the past.
Marches on Washington have worked like a charm for effecting Women's Rights, Civil Rights, Native American Rights, Gay Rights, and Pro-Choice Rights — to name a few. Ask the ghosts of Lyndon Johnson and Richard Nixon if marching on Washington altered public opinion, their political careers, or the course of the Vietnam War. There wouldn't be a Martin Luther King Day if Dr. King didn't deliver the "I have a dream" speech at the 1963 March on Washington for Jobs and Freedom.
One of the best phrases in King's speech was "the tranquilizing drug of gradualism." He was referring to the federal policy of gradually allowing each state and locality to come around (or not come around) to allowing "negroes" to vote, just as states and localities can get around (or not get around) to legalizing marijuana in 2010. Gradualism, or marching on Washington: those are your choices.
Dr. King & Co. made the proactive choice. What decision will we make, fifty years later, when the right to have, grow, and trade marijuana is a basic civil liberty that should be guaranteed by the federal government and isn't? Standing down while states and localities slosh it out is no different than allowing localities like Selma, Alabama to decide which races can and can’t vote. Without a rethink, things are going to heat up.
For an incumbent president, when millions of people improvise a tent city on the Capitol mall . . . rest up . . . then parade down Pennsylvania Avenue, brandishing banners and placards, that can be a little disconcerting. When your name and image is carried through the streets by people convinced you’re the one blocking them from getting what they deserve . . . the temptation to rethink your position takes on added urgency.
The message marching sends is simple: “OK, Mr. President, you know what we want, you’ve shown no desire to give it to us, even though you’re aware public opinion polls conducted by agencies from The New York Times to The University of Cincinnati's Institute for Policy Research indicate that the majority of Americans are pro-legalization. You’ve been hoping we’d just go away. But not only are we not going away, let’s see you ignore us, while millions of us bellow ‘Legalize It’ through bullhorns – a wrought iron fence away from the White House lawn."
It’s easy to ignore what you can’t see. Marches on Washington, perfect fodder for The History Channel, are impossible to ignore. Assuming the embittered souls are willing to accept arrest in the shadow of the Washington (hemp grower) Monument – with every camera on earth beaming the confrontation to the far corners of the globe – things tend to work out in their favor.
Would students swell the ranks?
Traditionally, students have stood at the forefront of political protest movements. These are not traditional times. Those of us ancient enough, and coherent enough, to remember civil disobedience at it height, have to shake our heads at the political apathy demonstrated by students in 2010. Taken as a group, today’s students appear disinterested in antiwar demonstrations, massive or minimal.
But just try to take away a right students hold inalienable: the right to party! In a peculiar twist, the same apolitical students aren’t the least bit bashful about congregating in support of their beloved herb.
Smoke-ins celebrating 420 (April 20, Earth Day) are held all over the country. In April, 20,000 students toked up as one organism on the Colorado University campus in Boulder. There were so many of them, resolutely flaunting big phattys, campus regents who had threatened intervention chose instead to “let it be.”
So, it stands to reason that the “leaders of tomorrow,” who want their buds and want them now, will show for a march on Washington. In droves.
Flashbacks to civil disobedience
“High hopes” for the success of a march on Washington depend on boomers (those born in the ‘50s and ‘60s) mentoring today’s students in the way of the demonstration. Quite a few citizens in the boomer demographic look forward to the comfort of their retirement years – sans restrictions on certain magic herbs with proven medicinal benefits.
Boomer memory banks recall holding rallies and practicing civil disobedience. Berkeley in the sixties springs to mind. They know the value of impassioned speakers. They’ll put out the call for music tastemakers, always delighted to perform gratis at epic events held before millions of pot-ential CD buyers.
And boomers know demonstrations actually work, because they’ve worked in their lifetimes. And maybe . . . just maybe . . . a whole bunch of them wouldn’t mind one last crack at political activism before their Social Security benefits kick in.
Walking a tightrope
President Obama has to realize he’s walking a tightrope. Surely, his advisors point out the gravity of the situation. So, what gives?
Well . . . what if Obama wants there to be a march on Washington?
If that form of civil obedience occurs, with anywhere near the turnout I foresee, Obama can save face with prohibition proponents. He can rightfully state it wasn’t my idea to "legalize drugs.” No, he was forced to. As a good chief executive, he was just responding to the “will of the people,” as per his presidential mandate.
Makes perfect sense. Obama has said, “If the voters make that decision (to legalize), that’s fine.”
Well, two million marchers translate to two million voters marching to the polls to enact legalization. And these marijuana-minded millions won’t be marching for crumbs – that is, restricted dispensary, collective, or caregiver access for a minority with chronic illnesses – they’ll be beating the drums for medicinal, recreational, and professional use for everyone. And they’d get all of it.
A reverse Boston Tea Party
In a sense, marijuana minions will be marching to enact a reverse Boston tea party; instead of demonstrating against taxation without representation, supporters will be marching to insure representation with taxation. They’ll be marching to insure that a promising, multi-billion dollar industry, will be taxed like any other multi-billion dollar industry, with one enticing exception: pot can be taxed even more than other multi-billion dollar industries, because it’s in everyone’s best interest to enforce a small, but significant, excise tax.
The Cannabis Commerce prediction: if President Obama continues fence sitting, a March On Washington will take place in the summer of 2011 or 2012. It will be a major media event, dominating headlines before, during, and after. At that point, if Obama continues standing down on marijuana prohibition while policing the planet without letup, walking a tightrope morphs into walking the plank.
Opportunistic Republicans can seize the higher ground
Some of the opposition looking to seize the “higher ground” from the Obama administration will be Republicans!
That is not a misprint. You read that correctly. I typed it, I meant it. I’ve considered it long and hard. Allow me to present my case. If you still want to fit me for a straightjacket, go ahead.
First of all, the “higher ground” play has going for it a tremendous element of surprise. It will work if you’re a Republican candidate for Chief Executive, congress, or dogcatcher. I know what you’re thinking. “Come out in favor of pot? A Republican? Oh, no. That would never happen!”
Is that so? In a country where a pro wrestler became governor of Minnesota, a comedian became senator from Minnesota, two movie stars became governor of California, and someone who spent his formative years in Indonesia became president, tell me again why it could never happen? This isn’t Iran. This is the "land of opportunity," where politicians come out of left field (or in this case, right field) all the time.
Question: who is the highest-ranking government official that has been consistently favorable to cannabis commerce?
Here’s a hint: Pumping Iron.
Yes, it’s none other than “The Governator,” Ah-nold Schwarzenegger, who is most assuredly not a Democrat. The same Governor of California who told GQ “That is not a drug. It’s a leaf.” The guy’s done everything but meet the press in a guinea-t revealing leaf tattoos.
It’s fair to say Schwarzenegger knows something about taking advantage of opportunities.
California bankruptcy schmancruptcy, here’s a human, or uberman, that has proven he can do anything. Anyone who can pump up as Mr. Olympia seven times, smash all box-office records in Hollywood as an action star, and become governor of our most populous state is equally capable winning the presidency.
It seems Schwarzenegger’s classic torso, no less chiseled than Michelangelo’s David, and his onscreen Popeye-like heroics have been delighting stoners forever. Really, what’s the difference between toking up to Commando or The Inaugural Address? Good theater is good theater.
Alas, native-born Austrians can't be Commando in Chief.
Nonetheless, Schwarzenegger’s openness toward cannabis commerce has fostered an atmosphere of sanity. When the Governator authorized the state BOE (Board of Equalization) to study how much potential tax revenue could be generated through marijuana taxation, California’s dalliance with legalization went into overdrive. So far, California is the only state to have conducted such a study. Traditional media reported it far and wide.
Schwarzenegger is also the first governor to preside over a November ballot initiative to control and tax marijuana. His stance on that is virtually a duplicate of Obama’s, as if they share the same politically correct speechwriter: “I’m not in favor of legalization, but if the people want it, so be it.” If passed, the initiative would essentially make the golden state the first to legalize cannabis.
The state might have to erect a 700-mile fence to keep stoners out.
Other pro-pot Republicans
The “Austrian Oak” won't be transitioning from LA to DC. But other opportunistic Republican hopefuls won’t mind trying on the olive wreath. If you’re into cannabis tourism, Air Force One is a nice perk.
A bold and determined Capitol Hiller or governor, presently off the national radar, could fly into radar range swiftly enough on the wings of cannabis commerce. Kind of like Dumbo.
Former New Mexico (Republican) governor Gary Johnson doesn’t hide his presidential aspirations. He doesn’t filter his pro-pot advocacy either. There’s no slipping into political-speak for the national stage. The San Francisco Chronicle Politics blog reports:
The former Republican Governor of New Mexico stopped through San Francisco yesterday (May 31, 2010) to talk about marijuana. Specifically, former Gov. Gary Johnson was in the state in support of the measure on California's November ballot to tax and legalize cannabis. You gotta love a governor – who is a former marijuana smoker – who can dish out a punch line like: "You smoked some LSD weed when you should have smoked some beer weed."
Johnson wants the federal government to tax and regulate the magical herb. Oh, yeah, and he's putting his toe in the presidential campaign waters. But you didn't hear that from him. Yes, we'll repeat that. Republican former governor advocates legalization/taxation of marijuana and wants to run for president. No, we are not indulging in an illegal substance before our Memorial Day barbecue.
And the blog’s first comment from a Bay Area reader:
Gary Johnson is that rare Republican who gets it – in the Ron Paul mold, but much more pragmatic and telegenic. If he does run for president, I'm backing him immediately. – reader “bugmenever.”
Ron Paul, the aforementioned Texas Republican congressman, favors the use of marijuana as a medical option. He was cosponsor of HR 2592, the States' Rights to Medical Marijuana Act. Note Paul’s otherwise conservative bent – he’s pro-life all the way. Building a 700-mile fence along the Mexican border is his idea of a helpful deterrent against "illegal aliens."
When disease strikes your loved ones, and THC offers those loved ones greater pain relief than pharmaceutical cocktails, the reaction of the spouses affected crosses party lines.
Connecticut Representative Penny Bacchiochi, who found inspiration for marijuana advocacy after losing a husband to cancer, and former Maryland representative Don Murphy, are both members of Republicans for Compassionate Access, a patients’ rights advocacy group. Both have introduced medical marijuana bills in their respective states.
According to The Marijuana Policy Project:
"In an impassioned plea to his 21 colleagues, Murphy said:"
There are 21 different reasons to vote against the bill, but there are five million good reasons to vote for it," referring to the approximately five million people who live in Maryland. He argued that Maryland is a high-risk state for cancer, and that any one of them who gets cancer might need to use marijuana as a medicine.
When the measure was defeated, Murphy didn’t give up.
As far as I'm concerned, the medical marijuana bill will be House Bill One next year.
Representative Bacchiochi, a card-carrying NRA (National Rifle Association) member, introduced Connecticut HB 6156, for medical marijuana, in 2009. Once again, conservative in mindset, but outfront about marijuana reform.
No longer mutually exclusive
Evidence abounds the Republican state of mind is a political choice, not a lifestyle choice. Previously, people naturally assumed that conservatives, who could care less about slaughtering spotted owls or prairie dogs in the name of progress, held similar disdain for the fate of medical marijuana patients. Not so. In 2010, such beliefs are no longer mutually exclusive. Consider the following:
Even if they don’t go all-in on total legalization, it’s no longer a given that politicians or voters with conservative beliefs are automatically opposed to medical marijuana.
The fact someone’s all for drilling for oil in pristine wildlife habitats doesn’t mean they’re unsympathetic to cancer patients managing their suffering with THC.
It’s not a given that if you believe less government is more government, you believe marijuana is “a gateway drug.”
It’s not a given that if someone is politically conservative, that conservatism extends into every area of their life. Take the sex life area, for instance: political conservatives, usually Republicans, have starred in one lurid scandal after another. If they’re not linked with male Senate pages (Florida Representative Mark Foley), they’re busted wearing adult diapers at brothels (Louisiana Senator David Vitter), or they’re discovered flying down to South America for trysts with their mistresses (South Carolina Governor Mark Sanford).
Red states that more than pull their weight in the metric tonnage sweepstakes include Texas, West Virginia, Kentucky, Kansas, Alaska and Hawaii. And the US government marijuana plantation is in Oxford, Mississippi. That suggests many growers are “good ‘ole boys” . . . that is, “good ‘ole boys” with a proclivity for cultivating clandestine pot plots.
People who buy into the Republican ethos aren’t necessarily opposed to revenue generation through marijuana profiteering.
The point is, unlike the partisan politics toxic to seismic issues like health care reform, there is no guarantee partisan politics will come into play over marijuana reform. Cooperation could actually rule the day.
One issue alone – a page from the Republican playbook
Every fifty years or so, even a proven performer like the GOP can use an injection of fresh thinking. How about utilizing a strategy which borrows a page from their own playbook?
For Republican political aspirants, the “one issue alone” play works like this: I’ve already got a powerful force in my pocket – all the pro-life (anti-abortion) voters, often poor folks, whose needs aren’t really served by our agenda, but who’ll vote for me anyway because their belief in this one issue alone is so strong.
What if I could add to this advantage the following voting bloc: all the pot-loving liberals, whose needs aren’t really served by the rest of our agenda, but who may vote Republican anyway, if I come out strongly pro-pot, because of this one issue alone?
Is the object of the “one-issue alone” play effecting a mass defection of liberal, pot-smoking Democrats, who traditionally abhor anything red? Hardly. Plenty of elections end up 51% to 49% or 53% to 47%. In what seemed like a landslide victory, Obama won only 52.9% of the popular vote in 2008. So what percentage of liberal, pro-pot Democrats must be converted to turn defeat into victory? Less than 3%! That requires converting less than one person in thirty. I would be sorely tempted. How about you?
Let’s go one step further. Imagine you have leukemia. The only way you can make it through the day is with access to your “meds.” The Democratic candidate for your district’s congressional seat is lukewarm on patients’ rights.
Surprisingly, a Republican candidate, some guy you never heard of, who seems progressive and pragmatic, unequivocally states that “anyone with a chronic illness should never have to worry about access to meds again.”
Would you choose against saving your own life?
And what if that same dynamic candidate went further, going beyond expressing a personal favoritism, beyond okaying medical marijuana, actually pledging to initiate legislation for total legalization? He or she could wind up with way more than one out of thirty converts.
“Just say no” – fading away?
Despite all this evidence, you may still think no self-respecting Republican would ever come out pro-pot; the lingering imagery from Nancy Reagan’s infamous “Just Say No” campaign remains just too vivid.
OK . . . If you voted for the Reagans, and if you remember the former first lady’s notorious contributions to marijuana lore, you’re over fifty. Ronald Reagan was elected in 1980. To be old enough to vote, you had to have been born in 1959, making you 51 today.
Well, not every Republican is over fifty. To younger Republicans, Reagan-era values belong to the haze of history. For them, voting Republican has everything to do with voting for less government interference in their business — and nothing whatsoever to do with just saying no.
Even if you are a Republican over the age of fifty, you might still love the idea of transacting at a local dispensary.
Statistics – Republicans increasingly favor legalization
Let’s move from sentiments to statistics. We’ve talked about Republican politicians. What about Republican voters?
Medical marijuana’s support among voters in New York State is so solid that even a substantial majority of Republicans favor its legalization, according to a Quinnipiac University poll released Thursday. The poll found that 71 percent of voters supported medical marijuana, including 55 percent of registered Republicans. –Andy Newman, The New York Times, “Republicans Favor Medical Marijuana, Poll Shows,” February 4, 2010.
About six-in-ten (61%) Republicans favor permitting medical marijuana in their state compared with 76% of independents and 80% of Democrats. Conservative Republicans are the least likely to support legalization of medical marijuana; still, 54% favor this while 44% are opposed. At least three-fourths in all other partisan and ideological groups favor this. –The Pew Research Center, April 2010.
You get the idea. There are plenty of similar results in other polls. Basically, most Americans know it’s silly that they can glug “the devil’s brew” and smoke two packs of cigarettes a day – while citizens with the same right to life, liberty and the pursuit of happiness, are prohibited from their chosen pleasure. And they’re not necessarily morally opposed to correcting the inequity.
Legalization – in sync with Republican ideals
If Conservatives are for less government intervention and individual responsibility, would it not make sense for them to be the loudest proponents of marijuana legalization? –David Carlson, Unitedliberty.org
Poteconomics is in alignment with the basic Republican tenet that no government equals good government, because it creates economic opportunities for people naturally, without government having to lift a finger.
Marijuana activist Jon Gettman agrees:
“I think in many respects marijuana legalization is more in sync with conservative political ideology than liberal ideology.” Cause conservatives are much more free-market oriented than liberals are. Conservatives tend to reject the “nanny state,” the idea that government should decide what’s best for us, and make decisions for us, because we’re not capable of making those decisions for ourselves. That’s a pretty standard conservative statement of their values.
But when it comes to the ideology and the economic impact of this, it’s very consistent with conservative policies and many of the policies of the Republican Party.
Prohibition in some respects is a progressive policy. It came out of the progressive era of the 20s and 30s. It was based on the premise that marijuana is bad for people so we shouldn’t be allowed to use it or sell it. We call it prohibition for a reason. It followed alcohol prohibition. Alcohol prohibition was put into effect during the presidency of Woodrow Wilson, at the high water mark of the progressive politics in the early part of the 20th century. It is a “nanny state” policy.
It would strain credulity to state a pro-pot movement is spreading like wildfire throughout the GOP. However, what we’ve seen so far indicates certain progressive Republicans are already seizing the higher ground.
It wouldn’t surprise me at all if an assortment of fresh Republican hopefuls come out pro-legalization. Stranger things have happened on cannabis planet.
Breaking News
A few months ago, researching pro-pot Republicans was a daunting porposition. Now the stories are coming out of the woodwork. Take “Medical Marijuana Good for Colorado Springs? Yes, Says Mayor,” from Denver’s Westword:
Lionel Rivera, the Republican mayor of Colorado Springs, says his city has a chance to resurrect itself from pummeling budget cuts brought on by the recession and the state's tax law that limits the city's ability to fund its coffers. "You just have to make a case," Rivera says. "I think people in this community, if you make a case, and you believe it will help, they'll vote for it (legalization)."
Colorado Springs is home to more fundamentalist ministries than any city in the American West!
Conclusion
President Obama can overcome a rocky start and go down in history as a man of the people, the chief executive who worked as tirelessly for marijuana rights as LBJ worked for civil rights. It should be noted that before he took office, LBJ demonstrated zero sympathy for civil rights.
That said, by concentrating on everything but marijuana reform during the first 18 months of his term, President Obama has left himself and his party vulnerable on several fronts:
He’s inviting a march on Washington.
Republican hopefuls seizing the “higher ground” could derail Democratic incumbents.
He’s “just saying no” to $75 billion a year.
Next section preview
Will Cannabis Commerce in the USA close with a Hollywood ending? Is everybody going to be happy? Will legalization bring about heaven on earth? Will we all be leaping for joy on Legalization Day, which then becomes a national holiday, the day a nation bonds with its vaporizers, watching Cannabis Planet TV on 85” LED screens? Hold those thoughts. First, let's ponder the implications of medical marijuana...
11 Smile, You're On Cannabis Camera
Once upon a time the word “medical” was associated with physicians, and the word “marijuana” was associated with psychedelics. In 2010, with “medical” and “marijuana” married, any study of cannabis commerce must address the ramifications of “medical marijuana.” Not everyone accepts the new world order. For many herb lovers, the word “marijuana” connotes freedom, romance, serenity, positive vibrations, artistic pursuit, and even love. Place the word “medical” in front of it ... and images of endless legislative wheel spinning interrupt the reverie. The arrival of medical marijuana is both heartening and frustrating.
Medical marijuana’s upside:
It’s the tip of the spear targeted at prohibition.
Cannabis the commodity receives more publicity cast as “medical marijuana” than “marijuana.”
Politically correct for candidates to embrace.
Wins over conservatives in a way marijuana never did; their resistance to recreational use could soften, too.
Accessibility: persons lucky enough to live near retail outlets can walk three blocks and pick their poison medicine.
Medical marijuana’s downside:
It's one step forward, two steps back on the road to legalization.
It keeps activists distracted by short term developments — will the town of Lafayette, CO reverse its dispensary ban — instead of focused on the long term goal of repealing prohibition nationwide.
It’s created a schism within the legalization movement. “Patients” with chronic illnesses, their immediate support groups, and organizations which look after their rights fixate on gaining safe access to medical marijuana. Once that’s been achieved, justice has been served. Period.
Serving justice is expensive. Patients’ rights groups seldom have funding left to crusade for recreational use, even if they wanted to.
Healthy herbal rights supporters wonder why marijuana requires an accompanying adjective. This faction naturally believes recreational use is every bit as valid as medicinal use.
It restricts cannatax to a trickle. While cannatax and fees are already being generated, the sporadic amounts being collected here and there comprise a fraction of the pot-ential windfall that could be collected if the magical herb was 100% legal nationwide.
It fans regulatory brushfires from city greens to the White House lawn.
That’s a lot to juggle in one chapter. Or it would be, if a microcosm of the skirmishes playing out all over “the home of the free” wasn’t occurring right before my eyes. A regulatory saga, with all the elements of a great literary work, has been unfolding in my own “hood.” It's a bizarre and engrossing tale about a strong monarch, in a position of absolute power, in times of great upheaval. An undertone of fear and foreboding lurks beneath the surface. Sound a little Shakespearian? It is.
It could be called:
I am Big Brother
Matt R. Cook is the Senior Director of Enforcement for the Colorado Department of Revenue, which includes the Medical Marijuana Enforcement Division [MED, get it?]. His brainchild, Colorado HB 1284, contains 60 pages of highly publicized regulations and fees which sent shock waves reverberating throughout the medical marijuana community.
Prior to the bill’s passage, the medical marijuana community was establishing its own economic equilibrium. Incidents resulting in collateral damage to customers, competitors, or the community at large were few and far between. The mood was onwards and upwards. Was some regulation called for? Probably. But a little would have gone a long way. Instead, Cook and Co. introduced HB 1284, the “Colorado Medical Marijuana Code,” as “an exercise of the police powers of the State for the protection of the economic and social welfare and the health, peace, and morals of the people of this state.” It's a safe bet that having their morals policed isn’t exactly what 150,000 card holders or industry workers had in mind.
Evidently, George Orwell’s 1984 figured prominently on Cook’s summer reading list. The book’s key slogan is “Big Brother is watching you.” Mutual love for video surveillance (coming right up) link Cook and Big Brother as kindred spirits. Read the following quote Cook gave Denver weekly Westword, then decide if you’re OK with a decade or so of similar legislative ingenuity ... or whether forcing the issue via Marijuanamarch 2011 strikes you as a saner proposition:
"This product needs to be tracked from seed to sale. So, how do we do that? We decided the way to do that is to account for virtually every gram of this product, from the point it's put into the ground until it’s put into the hands of the customer. If they pull a plant that weighs a pound, you have to account for a pound of product. All of it will be under video surveillance, so I can manage the integrity of the process."
Credit where credit is due: Cook packs all that misinformation and hypocrisy into one deliciously fascist paragraph!
Analysis follows below.
This week's episode: Seed to Sale
“This product needs to be tracked from seed to sale. All of it will be under video surveillance.”
Here, Cook has conjured up Cannabis Camera, a permanent reality show. The laird of the lens plans to track every stage of a plant’s journey from “seed to sale.” Why draw the line there? Why not go all the way from "seed to smoke?" Might as well fast-forward to a time when cameras are in every living room, too.
There’s precedence for extensive video surveillance in the gaming industry, another Cook fiefdom. Alas, gaming is not a commodity. Alcohol is. Tobacco is, too. There is no such scrutiny of these sin-taxed substances from “seed to sale.”
Are cameras going into the Breckenridge Brewery anytime soon, to determine if mold is contaminating the hops? No, they are not.
Kudos to Mr. Cook for his out-of-the-box thinking. Not to mention the political dexterity it took to ram his vision through the state legislature in record time. However, Cook might as well have said, “all of it will be under video surveillance, so I can drive the market back underground by making people feel as uncomfortable as possible, as I micromanage free enterprise to death.”
If having your face captured on state storage devices gives you the willies, what are the alternatives?
Option one is a good ole Texas two-step with Jack Daniels.
Buying from the same underground sources you frequented before dispensaries came into existence is option two.
It's either that or submitting to this Orwellian twist on progress (quote from his classic 1984):
"There was of course no way of knowing whether you were being watched at any given moment. How often, or on what system, the Thought Police plugged in on any individual wire was guesswork. It was even conceivable that they watched everybody all the time. But at any rate they could plug in your wire whenever they wanted to. You had to live — did live, from habit that became instinct — in the assumption that every sound you made was overheard, and, except in darkness, every movement scrutinized."
Evidently, that scenario sounded damn good to the Chief Enforcement Director, who supplemented it with some innovative framework of his own. If heavy eavesdropping via video surveillance was good, wouldn’t assigning one inspector for every ten dispensaries be even better? Hell, yes! In other words, Big Brother will not only be watching you, he’ll be providing up close and personal scrutiny, as he regularly drops in on your dispensary to insure every aspect of your business is meticulously maintained according to the Medical Marijuana Enforcement Division's stringent standards. The one-to-ten ratio is consistent with the 1984 edict, “it’s pointless to resist.”
But why stop there? Why not rewrite history, too?
What if the Division of Revenue Thought Police purged all vestiges of the positive vibe prevailing pre-HB 1284 — after all, wasn't that way too Woodstockian, with way too much non state-sponsored free enterprise going on — by disallowing all further references to the term “dispensary?” Done. "Dispensary" has been superceded. “Medical Marijuana Center”[MMC] is now the official, state-ordered designation.
The need?
"This product needs to be tracked from seed to sale."
Why, exactly, is this a “need?” I don’t know everything, but I was under the impression that air, food, water, and maybe sex qualify as “needs.” Why is producing Cannabis Camera, a show that will be expensive for both dispensary MMC owners and taxpayers a “need?” What exactly was broken with the old system, a textbook example of free enterprise in action?
Apparently everything.
Why doesn’t the Department of Revenue need to track goods which generate State of Colorado sales tax from cotton seed to sale? What if Rosa Martinez, of Bailey’s Uniforms and Designs in Poncha Springs, CO, has been slipping hemp fibers into "100% cotton" Broncos jerseys? What then? Without cameras crammed into every nook and cranny of the factory, how can we determine whether Bailey's is bamboozling the public?
With federal prohibition firmly in place, each state is free to come up with similarly mischievous and equally hypocritical regulatory quirks, a dismal proposition if ever there was one.
Integrity
"... so I can manage the integrity of the process."
Hmm. In less capable hands, might a camera be placed at an incorrect angle ... or be subject to tampering? Would someone else be remiss ... by failing to insist upon HD quality? Uh-oh. It could all go to hell in a handbasket in a hurry.
It’s noteworthy that the word “integrity” has not previously been associated with the concept of absolute state control. Most readers come away from the pages of 1984 thinking “Mussolini, if the Axis powers won,” not “Wow, that Big Brother oozes integrity.”
1984 describes the ultimate nanny state. Cook aspires to be the ultimate nanny. We are his children who can’t be trusted to think for ourselves. Cook’s telling us that if we submit sheepishly, we have integrity. If we disagree that every plant “needs” monitoring from seed to sale, we lack integrity. Got it.
Who will pay for the surveillance systems and the technicians to run them? We will. In this instance, the children pay the nanny.
Where is medical marijuana grown?
“ ... accounting for every gram from the time it’s put in the ground ... ”
Most "patients" put grams in the bong, not the ground.
But all joking aside, Cook doesn’t seem to know that virtually all medical marijuana is grown inside, in containers. Seed for commercial weed grown in Mexico, or plants destined for clandestine plots on national forest land, is put into the ground.
Buds from those illicit plants don’t wind up all neatly hand-trimmed in small, oftentimes popcorn-sized buds like the ones enticingly displayed in ... ahem ... medical marijuana centers. You’d be hard-pressed to find a single gram of outdoor weed sold in any of them.
Evidently, terms like “hydroponics” or “aeroponics” must not be bandied about the MED’s break rooms.
Unintentionally, Cook’s vision of outdoor plantations has a lot of upside. Colorado’s hot days and cold nights are favorable for nurturing “donkey dicks,” gigantic 8” to 10” purple buds which dazzled “stoners” back in the day. These have been replaced by the more potent, if downsized, buds of today. Why? Cannabis connisseurs prefer a purer, aphid-less smoke.
Just one question: how does Cook propose to maintain the “needed” video surveillance of all the acreage in Colorado? Will he launch a special surveillance satellite, the Matanuska I? Will he commission Google Earth? How many people will be doing the surveillance work? What will their salaries be? Where will the budget come from to pay their salaries and to design official MED uniforms?
Once the system’s in place, will drone planes penalize growers who lose track of a gram by drenching their fields with Agent Orange? Will they be taken to 1984’s “Room 101” for permanent reprogramming? Is public stoning appropriate? Stay tuned. You won’t want to miss next week's episode.
This imagery is quite creative. It will certainly incinerate all the cannatax dollars that could be earmarked for communities desperate for the income.
Why do we have to account for every gram?
“ ... accounting for virtually every gram of this product ... "
What if a Whole Foods produce gal lops off a bit of leaf from a broccoli stalk? Why doesn’t that have to be accounted for until it’s “put into the hands of the consumer?” What if she pockets it? What if she has swine flu? Why isn’t that gram important? Why doesn’t every gram of barley malt or tobacco require similar metrics? Kinda makes you wonder ...
Giving good weight
“If they pull a plant that weighs a pound ... ”
Cook's talking about total weight, not the actual yield. HB1284 requires cultivators to weigh three separate totals in full view of his cameras:
Fan leaves, stems and stalks: these are unsmokeable, unedible, and usually thrown away.
"Sugar:" The medium size leaves sticking out of the flowering buds. Sugar is often extracted to make medibles. It's not pretty, but it's potent, just not quite as potent as ...
Flowers or "buds:" the neatly manicured "show buds" sold in dispensaries.
These weights have to be recorded in notebooks. It's an aggravating process. Why has the cannabis plant been singled out for persecution? Because we voted for MMJ and we forgot to repeal prohibition. That's why.
I, Mattius
“... so I can manage the process.”
Narcissist alert: note Cook’s use of the personal pronoun, “I.” This statement lets us know there’s a single sheriff, as opposed to a team of overseers, with built-in checks and balances. How does Cook get away with it? Because Washington gives the Matt Cooks of the world carte blanche to get away with it. The feds categorize cannabis as a federally prohibited Schedule One drug, along with heroin and Oxycontin. US Attorneys don't care how much power the Colorado head honcho temporarily seizes. They'll crush whatever innovative regulations Cook devises when they're good and ready.
The inquisition
There’s room for one more tidbit from Cook’s Big Bag of Big Brotherisms, reported by thecoloradoan.com:
"The Medical Marijuana Enforcement Division will be conducting an exhaustive check of arrest records, business associations, and tax returns for anyone who applies for a medical marijuana license. Anyone who lies on their Colorado medical marijuana center application will be arrested, and charged for filing a false instrument."
Oh, by the way, the state application is twenty-two pages long and asks for bank account numbers, education, and marital information. Are polygamists disqualified?
"I don't even know what my high school diploma has to do with providing medicine to patients, but apparently it's one of the requirements,” Carl Wemhoff, president of Herbal Remedies Inc. in Westminster told thecoloradoan.
In addition to prior felony drug convictions, there are several other automatic disqualifiers for holding a license: if you haven't paid student loans, or are in arrears for your taxes or child support.
What if your lawn isn’t mowed? Is there a limit on how long you can keep your Christmas lights up? What if a dispensary owner doesn’t practice proper tire rotation? What then? Room 101 could be a busy place. Is it any wonder Sensible Colorado attorneys predict 40% of the retail outlets formerly known as dispensaries will be abandoned? Oh, (big) brother.
Thriving under the influence
We’ve peeked at some phantasmagoric implementations of totalitarian cannabis control. And an enjoyable romp it was. For us. Maybe not such a joyride for the doomed mom and pop dispensary owners who poured their blood, sweat, and tears into businesses they loved.
But the situation's not all doom and gloom by any stretch of the imagination.
The upside to establishing Big Brotherish control is that the persons and entities who contrive it, seize it, and maintain it, generally do so for the long haul. Why go to the length of establishing all that mind control if you don't plan to exercise it indefinitely?
That suggests MMCs, the ones who avoid Room 101 and don't object too much to being ruled with an iron fist, could be with us a while.
Yes, we can always hope for more — like full-on legalization. Right now, that's like a nerd hoping to land in the backseat with a homecoming queen. But at least the present situation allows "patients" [MMJ-speak for "people] to make retail purchases, a pretty radical development when you consider that prohibition is still in force. In the overall scheme of things, that's pretty sweet!
There’s also no doubt the surge in medical marijuana availability in some localities, in some states, is a wonderful development for people with chronic diseases, if they’re fortunate enough to live in hothouse hotbeds.
It’s also proven equally wondrous for persons without chronic diseases living in “the retail states,” California and Colorado. Sympathetic doctors think nothing of writing “recommendations” for persons whose stated maladies requiring marijuana mitigation fall a little short of “I was run over by a threshing machine, and my body is wracked by constant pain.”
In the shadow of Boulder’s flatirons, or on the boardwalk in Venice Beach, “Mr. Rider was permanently traumatized by a bout of poison ivy in 1978; his fragile ego would decompensate without the palliative properties of Blue Rhino,” has proven sufficiently card-worthy.
Under the letter of the law, the latter scenario is technically “fraudulent,” to borrow the term of one Sensible Colorado attorney who seemed somehow shocked Cannabis Commerce guesstimates 75% of Colorado’s 150,000 card holders don’t qualify as the walking wounded. Hello!
Will Mr. Cook be tempted to overregulate scrutiny for allotting medical marijuana cards? In other words, will “patients” of the future have to undergo a battery of Mayo Clinic-like tests, at their own expense, of course, to obtain their cards? We’ll find out soon enough if Big Brother decides to kill the golden goose he’s already throttling by the neck.
Conclusion
While there are surely other power-crazed regulators running amok from sea to shining sea, Cook's autocratic take has a lot going for it. It’s tempting to editorialize ad nauseum about legislation like HB1284. I could go on about how it’s just not fair, how it encourages bigger fish to swallow little fish, how it accelerates consolidation by larger and larger entities leading up to, say, Big Tobacco. But I’m not taking the bait. We’ll see what the November legalization vote brings in California. We’ll wait and watch as the excitement mounts for Marijuanamarch 2011 next summer. There’s every chance Marijuanamarch 2011 will force the issue — and we won’t have to keep reading about legislative wheel spinning for a decade. Without forceful action, separating “medical” from “marijuana,” will be about as easy as dividing Siamese twins.
Next section preview
More missives were exchanged between yours truly, Chief Inspirational Officer of Cannabis Commerce, who graduated magna cum non-laude, and Jeff Miron, Miron, PhD, Director of Undergraduate Studies and Senior Lecturer in Economics at Harvard University — the most quoted man in marijuana. Dr. Miron, you may recall, appeared in Part 2, “The Enigma.”
The quotemeister from the Ivy League ivory tower also conceded our bet recounted near the end of Part 2 ... and actually offered to send me my winnings in coveted Red Sox tickets! That constitutes an admission he's actually capable of human error. The unexpected concession adds zest to Miron’s most self-assured dismissal of his critics yet.
What he had to say will shock and astound you!
It’s all detailed for your reading pleasure in Part 12, as we take a last look at the cannatax forecasts of the stars.
12 Miron Redux
A few paragraphs into David Segal’s recommended New York Times piece, “In Colorado, Pot Pioneers Try to Turn a Profit,” I came across the obligatory quote from Jeff Miron, first-call cannabis consultant for mild-mannered reporters at great metropolitan newspapers (Miron also stars in Part 2, “The Enigma”). I’ve read plenty of those. They’re all pretty much the same. But this one was different. Way different.
“Americans spend roughly $25 billion a year on marijuana,” according to the Harvard economist Jeffrey Miron, which gives some idea of the popularity of this drug.
It’s a little peculiar that the all-the-pot-news-that’s-fit-to-print Times went with “drug,” as opposed to “herb,” although the term is technically correct. “Drug” sticks out, but it’s nothing compared to “$25 billion.” The same, reliable $10.5 billion annual cannatax figure Miron has recycled for a decade — despite criticism that it’s beyond ultra-conservative — had finally changed. It headed due north, up a whopping 250%. Shocking.
Reading between the lines
$25 billion. What’s shocking about that?
Miron, undisputed world #1 poteconomist, has long contended that his potential cannatax figure, [if federal marijuana prohibition was repealed] for all the marijuana purchased and consumed within the USA annually, has held steady at around $10.5 billion since 1999. It’s the same figure he gave Cannabis Commerce, a mere four months ago. In that hour-long interview, Miron was adamant: even with all the activity documented in this report (refer to Part 7, “The Retail Explosion," Part 8, "Hollywood: Cannabis Commerce's Champion," and Part 9, "The Internet and Traditional Media Light Up," public demand for the pungent passion had not increased. His figure was set in stone. If Miron revised his figures to more bullish numbers, there’s been a lot more cannabis commerce going on than he cared to admit. Amen. But I could scarcely believe he would do that, his tone had sounded so authoritative.
Anatomy of a number
First, I had to find out if $25 billion was real or a misprint. I asked David Segal where he got the Times’ figure. He responded:
"I actually got my number from Jeffrey Miron, in an interview. Surprised to hear this isn't the number he typically uses. I remember him describing this as his best estimate; one that he said was higher than the drug czar's."
My next email went to Miron’s inbox in Cambridge, Massachusetts.
"After you held the line at $10.5 billion for so long, including our April interview, I was surprised that you changed your tune for David Segal of The NY Times. $25 billion?"
I guess, "I continue to read other people’s estimates, and think about whether or not I should change my view, and they maybe nudge me that I’m 20 or 50% too low ..." was reconsidered. Drastically.
I went on: "Since I spent quite a bit of time analyzing your figures, and I haven't posted the Conclusions chapter of Cannabis Commerce in the USA, I'll offer you the last word."
I couldn’t resist adding: "Do you need an address for those Red Sox tickets? The ones I won from our bet about the source for "America's number one crop?"
Miron got back to me quickly:
My statement to The New York Times was something like, “I can imagine that the true number might be something like $15-25 billion.” Which became $25 billion. So, I did not change my tune for Segal, just admitted to scientific uncertainty, which I think I did with you as well. In any case, I have worked on this a lot more, and revised my actual number a bit, so I am now at $18 billion. That’s granting all the somewhat dubious assumptions made by my critics, but doing so correctly. Does not seem so different from $11 billion. I may still be way wrong, but in my judgment, there is nothing credible out there to convince me that I’m wrong. So, I guess I don’t see any need to revise or amend anything I’ve said. What was our bet?"
Miron didn’t volunteer a basis for elevating his figure. That called for additional probing.
Here’s how he responded:
"I accepted that one main criticism put forward by Gettman was reasonable: that the ONDCP [Office of National Drug Control Policy] estimates do not account for undereporting. This raises the numbers about 25%."
Why it took him three years and countless readings to acknowledge Jon Gettman’s criticism in 2007’s Lost Taxes and Other Costs of Marijuana Laws, restated in Max Chaiken’s 2008 The Other Green Economy, Miron didn’t say.
I was hoping to learn more when the probe unexpectedly struck a tender spot. The man wanted to communicate something entirely unpredictable.
“I am done. I hate this activity.”
I’m both honored and flabbergasted that Jeff Miron graced Cannabis Commerce in the USA with the most sensational four-word sound bite of his distinguished career:
“I hate this activity.”
The hateful activity is forecasting cannatax. There it is. Eureka moment. Enigmatic nature demystified. Here’s the statement in context:
"$18 billion. Final offer. By final offer, I do not mean I am right. I mean I am done. I hate this activity. It is intellectually uninteresting, and I am confident it will contribute to worse rather than better drug policy, because the promised budgetary benefits will not materialize, and then all the prohibitionists will say, with some validity, “you legalizers are a bunch of liars who sold the public a bill of goods.”
Wow. What a loaded diatribe! There’s a lot of passion there. Apparently, Miron’s historic resistance to his task (documented in Part 2) has passed a lack of genuine enthusiasm and graduated to “hatred.” Hard to excel at activities you hate.
Then why does he do it?
It didn’t take Mike Wallace to dream up the next questions, answered below:
“I do this because if I don’t somebody else will, and they will make up ridiculous numbers like Gettman’s. No, I’m not doing it for the money. I have received small payments in the past from various groups; my hourly wage ends up being below minimum, so I’m not in it for the money."
How did Miron’s morale reach such a nadir? Has trying to appease both the drug czar and his critics trapped him between a rock and a hard place? Find out, as a quartet of contentious quotes is analyzed below.
Legalizers are liars
“You legalizers are a bunch of liars . . . “ It’s hard to imagine operating under a microscope, your every move magnified for the viewing pleasure of Miron’s sometime employer, the DEA, and its sister agency the ONDCP. It’s in these agencies’ best interests for Miron to forecast low amounts of cannatax; beaucoup tax bucks provide ammunition for legalizing a substance they’ve classified as a Schedule One drug. Conversely, anti-prohibition forces love finding higher cannatax amounts: potential monetary benefits promise to spread the wealth, thereby spurring legalization.
Guess who’s caught in the middle?
Welcome to Mironworld.
Living in pro-pot climes, it’s hard to picture places where prohibitionist proponents kick sand in poteconomists’ faces, teasing them mercilessly for being “legalizers.” Now imagine the singe of “legalizer,” with the incendiary “liar” thrown in to boot. That would make me squirm, too. Taking defensive measures to avoid further hazing is understandable.
Only ... who are the lying legalizers trying to sell the public a “bill of goods?” Which bill of goods was that? I don’t recall running into either while I was force-feeding myself a strict regimen of cannabis economics. Perhaps the “bill of goods” and “the promised budgetary benefits” are one and the same?
Miron has never issued the equivalent of a Carfax report in his white papers, guaranteeing that his forecast was dead-on perfect. Other poteconomists are no more likely than weathermen to guarantee their forecasts.
Under pressure, has Miron begun “tilting at windmills?”
Intellectually uninteresting
“It is intellectually uninteresting.” Did I really read that? Discovering how much cannatax is out there is "intellectually uninteresting?" That's not reassuring, coming from the go-to guy. If he’s really “done with” pot prognostication, Miron has three options:
Retiring, with his place in the Poteconomics Hall of Fame assured.
Declining comment when every reporter on earth calls for quotes.
Taking a well-earned vacation. No one would blame him for taking some time off. I hear Martha’s Vineyard’s idyllic this time of year.
It appears Miron’s choosing “none of the above” and forging on. Why?
There is nothing credible out there
Miron's rationale begins by noting that his is the only “credible” voice in poteconomics:
“ . . . there is nothing credible out there to convince me that I’m wrong.”
Regrettably, “not credible” gets escalated to “ridiculous,” as Miron uncharacteristically goes after friend and World #2 authority, Jon Gettman:
“I do this because if I don’t somebody else will, and they will make up ridiculous numbers like Gettman’s . . .”
Labeling Gettman’s numbers “ridiculous” ignores the fact that many cannatax projections, including ones from CNBC, Max Chaiken, RealNEO, and Cannabis Commerce have unearthed at least as much lost taxes as Gettman found. Miron also infers he alone is capable of performing multivariate economic calculations “correctly:”
"With due respect, I doubt those who find Gettman credible have read his papers as carefully as I have, checked his original sources, checked his arithmetic, etc."
So, the bottom line is this: since others are not credible, ridiculous, and incapable of performing calculations correctly, Miron is doing us all a favor by going through the motions. Even if he’d rather be doing anything else.
Consumed by duality, it’s no wonder he hates this activity.
Giving good weight, redux
In Part 11, we found that Matt Cook, Chief Enforcer of the Colorado Medical Marijuana Code, was confused about the weight typical “medical marijuana” plants yield. Could the man considered the greatest pot authority on earth possibly be equally perplexed? Er, yes. The giveaway’s below, contained in his justification for continuing to eschew supply-side data:
"In a few cases, there are data, which are almost certainly way misinterpreted. These estimates assume one plant yields one pound of MJ, yet a really careful [white] paper and other evidence suggests the right yield ratio is one plant yields one to two ounces. That’s a huge difference."
Really? Indoors? Outdoors? Is Miron saying supply-side data mined by his peers is off by a factor of 8x to 16x [16 ounces to a pound]? Baffling. Some of us, who’ve actually nurtured plants in the wild, urban jungles, and in sophisticated indoor grow situations, don’t need a paper, “careful” or not, to tell us what a plant yields. We already know. We've seen freshly harvested buds weighed on calibrated scales before our very eyes.
Here's how it breaks down. A novice “medical marijuana” grower will typically obtain yields of around 1-2 ounces from an indoor plant. Once he gets the hang of it, after tweaking several variables like selecting the right strains, settling on a growing method, evaluating various nutrients, and tweaking the lighting conditions, three to four ounce yields are commonplace indoors. Indoor plants raised in commercial grow facilities often yield 12 ounces or more. Outdoor plants — virtually all commercial Mexican weed, or all weed grown clandestinely on national forest land in the US — can yield a pound or more of buds per plant, under fortuitous growing conditions.
While virtually 100% of MMJ [“medical marijuana”] is grown indoors, there’s no shortage of outdoor plants sold and consumed in America outside the purview of the MMJ scene — that's according to Miron’s favorite source, government statistics — like the 2010 National Drug Threat Assessment, which cites about 15,000 metric tons of outdoor weed!
So, one “average” plant yields somewhere between one to two ounces and a pound, depending on how many indoor and outdoor plants there actually are, a figure known to neither man nor deity.
Pricing misconceptions
In addition to misconceptions about weight, Miron’s emails suggest he struggles with market pricing, too. I pointed out that prices were dropping in dispensaries. Miron wasn’t buying it.
“I am skeptical that prices will decline a bunch. I visited a dispensary in CA in February [2010] and saw prices [for ounces] in the $700-900 range.”
Golly. Miron is apparently unaware of the myriad changes that have taken place in the short time period of February to September 2010. Finding one dispensary, in one place, selling some celebrity strain for $900 an ounce, is so much the exception — rather than the rule.
In Miron’s brainspace, prices in quasi-legal “test markets,” like Denver’s, have remained unchanged from the halcyon, pre-HB 1284 days of February. In reality, $400 ounces have become $250 ounces. $8 joints have become $5 joints. Higher priced product is still available, but the downward trend is clear [I'm re-reading this November 11, 2011 — now $175 ounces are readily available -LK]. [and again in May, 2012, and we've started seeing $130 ounces!]
A different take on credibility
As I’ve implied throughout this report, forecasts from a purely academic perspective are always going to be skewed, if not totally flawed — no matter how much their authors pound their chests or are accorded credibility by A-list publications. I take a more logical approach to credibility. To become credible, a poteconomist wannabe must follow one of two paths:
If you're experienced as a buyer, seller, or grower, you have to force-feed yourself economics. This entails digesting at least The Miron Report(s), and/or Jon Gettman’s Lost Taxes, so you have some basis to speak intelligently about cannatax.
If you’re an academic with no personal interest in “the dank,” it would behoove you to go undercover and learn something about buying, selling, and growing in the real world.
Jeff Miron told Cannabis Commerce he’s always maintained a safe distance between himself and all that gooey, gunky, stony, skunky stuff – and all the souls who buy it, sell it, grow it, and revel in it. It’s almost impossible for a non-buyer, who considers cannabis just another weed and hates writing about it, to keep current with market realities.
Great news for cannatax
There’s no doubt that Miron’s pain is cannatax’s gain. His change of heart is big news on the cannatax front. When the single authority hardest to persuade finally acknowledges there’s upward momentum in the marijuana marketplace, it’s cause for celebration.
“That’s granting all the somewhat dubious assumptions made by my critics, but doing so correctly.” “Granting” is the operative word. The “somewhat dubious assumptions . . . made by my critics” is Mironese for acknowledging the aforementioned critics were right all along, that there’s always been a lot more cannatax than he’s ever uncovered performing a chore halfheartedly.
How Miron’s affected Cannabis Commerce in the USA
Jeff Miron is the leading man in this epic. He inspired me to write it. It would have been a lot poorer without all his help. Criticisms from me are directed at the behavior, not the being. Whether the conversion was grudging or not, Miron suddenly finding religion suggests that all the factors buoying healthy taxation pot-ential documented in this report are meaningful after all. That’s a positive development for a report which didn’t want to end on an anticlimactic note.
During the course of writing Part 11, I realized that medical marijuana, subject to the vagaries of local control, acted like a ball and chain on cannabis commerce. As a result, it greatly diminishes potential cannatax. Ending CC in the USA on an optimistic note required some sort of spark, an infusion of fresh data.
Voilà. Thank you, Dr. Miron.
It should also be noted that Miron’s previous stance — that is, not budging on that $10.5 billion in total sales for all the Thai sticks in Bangkok — acted as a governor, compelling me to filter my natural enthusiasm. It limited predictions made in this report. Mironesque restraint reared its head throughout, especially during Part 6, “Obvious Tax Opportunities Oddly Unaccounted For.” There I assigned numerical values to each fresh discovery previously unaddressed in literature. I bottled up the excitement, low-keying it instead.
That said, I’m not going to change the projections put forth in Part 6 for the following reason: it has been demonstrated, beyond a reasonable doubt, that price “cratering” (collapsing) occurs in a quasi-legal, competitive environment, such as the MMJ “test market” here in Denver. This phenomenon, aided and abetted by both a glut of dispensaries and a slew of regulatory restrictions, was accurately predicted by Jon Gettman in Part 3. It’s real, whether Miron acknowledges it or not. Cratering negates the higher numbers that would have emerged if I hadn’t displayed commendable restraint. So I’ll hold the official Cannabis Commerce cannabis forecast at around $67 billion for openers — that is, in a legal, regulated society, free of the manacles of prohibition.
Most-quoted man offers to pay up!
An implausible event occurred on our imperfect planet. A gentleman’s economics wager went to the mister, not the doctor.
“What was our bet again?” the most-quoted one asked.
I emailed him his own words, to wit:
"We’re being, from a tax revenue perspective, a bit hopeful that somehow this is a miracle commodity, that’s going to overtake everything else. For example, you hear this statement all the time, that marijuana is the largest cash crop in California. I challenge anybody to discover the source of that statement. I’ve been hearing that statement for decades, and I bet whoever made that statement had zero data to back it up."
This anybody took up the challenge.
“OK. Then what is the exact source of marijuana being "California's #1 cash crop?"
Here's my answer, as offered in Part 2 of Cannabis Commerce in the USA:
"The Department of Agriculture rated pot as California’s largest crop, “larger than grapes, vegetables, and hay combined,” in Agricultural Statistics 2005 (National Agricultural Statistics Service>Statistics by Subject>Crops and Plants.) NASS isn’t really known for fabricating herb lore. Dr. Miron, you can pay the bet in Red Sox tix."
Miron manned up:
I’ll concede on the bet. I dispute the accuracy of the statistics used to make the assertions about the largest cash crop, but they did have some data. Give me an address, and I’ll send you some Red Sox tickets.
Me: [canary eating grin]
"Nix sending the tix, take me to a game when I'm in Boston. Then we can debate pot tax between innings, and when relievers are warming up. Now that would make a good video!"
In appreciation for him being so willing to share his time, I offered a concillatory tack: "A request — how about some "at-ease" pictures of you? Fishing, playing with the kids, at the ballpark, whatever. C'mon, I've mentioned you 6.2 billion times ... you have to admit I'm more interested in what you say than anyone else, even if I don't agree with a lot of it".
And the “last licks:”
"It is true you are more interested than anyone!" Miron replied. "I’d be delighted to take you to a game. Give me a heads up the next time you’ll be around. —Jeff"
That one sentence, “It is true you are more interested than anyone!” made all the ups and downs I’ve experienced writing this report worthwhile. Why did the president of the Miron Critics Club find his comment so moving? I dunno — maybe I’ve become the enigma now.
Conclusion
It’s sad the exercise is utterly joyless for Professor Miron. No one else is as fascinating or fun to debate. However, when you’re the bell cow for poteconomics, you lead the herd or forfeit the honor.
I’m not in any hurry to see the last of him. I enjoy our duels, I mean discussions, though I do feel it’s “high time” reporters for large metropolitan dailies expand their Rolodexes, giving someone else a shot, too.
Why is it I can spot Miron’s lapses of logic with crystal clear acuity? Honestly, I don’t know. If I were capable of analyzing life’s other mysteries with the same acuity, I’d own my own island.
I haven’t argued Miron’s $18 billion v. Gettman’s $40 billion v. my own $67 billion v. Max Chaiken’s $212 billion to the nth degree, because it should be glaringly obvious by now everyone’s guessing. If you write a lot about poteconomics, others can and will crucify you no matter how careful you are. Numbers for illegal purchases are never real. It’s easy for economists to dismiss non-economists just as it’s easy for "laymen" working in the trenches of cannabis commerce to diss economists.
The only way to really find out how much cannatax is possible is by legalizing it and counting all the beans. But for now, we can leave Cannabis Commerce in the USA feeling more bullish than before.
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