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State Analysis Says a Marijuana Tax & Fee Would Raise $1.4 Billion

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At the THC Expo last month in downtown LA | Photo by atomicshakespeares via LAist Featured Photos on Flickr

At the THC Expo last month in downtown LA | Photo by atomicshakespeares via LAist Featured Photos on Flickr
If marijuana were to be legalized for recreational use, it would raise nearly $1.4 billion for the California, announced a state tax board yesterday. The numbers were from an analysis of a bill, AB390, introduced earlier this year by San Francisco Assemblymember Tom Ammiano.

Under the legislation, which was originally estimated to raise around $1 billion, those aged 21 and over could purchase marijuana for recreational use. It would be sold with a $50 per ounce fee in addition to sales taxes. Based on that structure, here's what the California State Board of Equalization said in their report:

  • $990 million would be raised from the $50/ounce fee and would fund drug education and rehabilitation programs.
  • $392 million in sales taxes would be raised.
  • The two above numbers are "based on the estimated 16 million ounces of annual consumption in California and several assumptions," states the report.
  • Those "assumptions" were drawn "law enforcement estimates and academic studies." Translation: the estimated 16 million ounces includes illegal use.
  • The outcomes of the "assumptions" include the street price of marijuana decreasing by 50% and consumption increasing by 40%. But to confuse the issue, the report next says "the imposition of the $50/ounce tax would then lead to reduced consumption of 11 percent."
  • They also cites "a 'substitution effect' toward marijuana and away from cigarettes and alcohol," therefore less taxes collected on the latter products.
  • If passed, the law would allow for people to grow up to 10 marijuana plants, but would have a minimal effect on revenue, according to the report.

Anything left out? "Not included are savings in law enforcement costs for investigating, arresting, prosecuting, and imprisoning marijuana offenders, which are estimated to total some hundreds of millions per year," states a press release from the California Chapter of the National Organization for the Reform of Marijuana Laws.

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To read the full state analysis, it is embedded below:

Analysis of Marijuana Tax and Fees in California -