Search Results for: BOTEC

The Future of Marijuana Policy: MJNN’s Exclusive Q&A With BOTEC’s Mark Kleiman

By David Rheins

It’s time for marijuana policy, and marijuana policymakers  in this country to get serious.  Over the past twenty years medical marijuana has grown wild and wide, with a patchwork of 24 different state policies, no two alike.  Adult-use marijuana has been legalized in four states, plus DC, and here too each local market has its own set of regulation, and levels of taxation.

Legal marijuana accounted for some $5.4 Billion in 2015, and current tax revenues in Colorado, Washington and Oregon are being measured in the hundreds of millions.  Voters in some 14 additional states, including California, Arizona and Nevada, are considering legalization of pot in 2016, and in this presidential election year, rescheduling or de-scheduling of cannabis has gained support among savvy politicians who seed the tide of prohibition has finally turned.

That marijuana prohibition is ending is widely accepted. How best to unwind it, is a subject for debate.  To consider the best way forward, some of the top policy minds in legal cannabis — scientists, journalists, academics, lawyers and industry leaders — will gather in New York for the Cannabis Science and Policy Summit, April 17-18. The meeting will serve as an ideal opportunity for the industry’s stakeholders to take stock, evaluating what the past two years of legal recreational marijuana has looked like, and charting a path forward.

MJNewsNetwork had the opportunity to ask Mark Kleiman, BOTEC’s chairman and event chair of the Cannabis Science and Policy Summit, to give his perspective on the state of the state of legal cannabis. Here is our exclusive Q&A:

It’s been nearly 2 years since Washington State opened its first recreational marijuana market, how well have your market estimates held up? 

That depends on what you mean by our market estimate.  In terms of market share, our prediction of a roughly even split between commercial, medical, and illicit markets seems to be holding true.  In terms of price, we predicted a significant drop, which has occurred at the production level but hasn’t occurred at the retail level.  In terms of overall size, no one was sure what would happen, so our very broad prediction of between $0 and $2 billion has held true with the latest figures from the WSLCB putting I-502 revenue at roughly $460 million last year.

What new insights have you had about the legal cannabis market since you first issued your report?

I’ve been surprised at the strong movement towards edibles and concentrates in the recreational market.  The interaction between alcohol and cannabis (or to be more accurate, the lack of interaction) was also surprising.  I expected more that users would substitute cannabis for alcohol, and thus we would see alcohol consumption drop, which hasn’t been the case.

Who is the typical recreational cannabis consumer? How much do they consume?

There is no “typical” recreational cannabis consumer.

The typical consumer (in sense of median consumer) uses cannabis about once a month and as such really consumes a negligible amount of it.  The average consumer, on the other hand, consumes about $1,000 dollars of cannabis a year.  If you ask users how much they spend, you find that there are actually very few people spending $1,000 per year.  Instead, you find lots of people who spend a negligible amount on and a few people who spend well over $1,000 per year, which is what pulls the mean up.

Interestingly, we have no idea if this use pattern holds true for consumers of recreational cannabis, as there has yet to be a study of only users of legalized recreational cannabis.

Washington’s marijuana excise tax is 37% Colorado’s is 25% and Oregon is 17%; why such a wide disparity between the legal recreational states?  What should the right level of taxation be?

These differences stem from the fact that cannabis legalization has been a piecemeal process that heavily relied upon horse-trading to reach enough votes to become law.  Thus, the tax rates we see are the results of political negotiation, not rigorous analysis.  What they ought to be, however, is the same everywhere and based on the THC content, not a percentage of price.

What are the greatest challenges to the legal cannabis industry?

The single biggest challenge is dealing with the incoming price collapse.  Everyone involved in the cannabis industry have based their financial projections on being able to continue selling a licit product at illicit prices, which can’t continue forever.  This is a challenge that both industry and government have to worry about, as falling prices mean reduce profits and increased problematic use patterns, which is a public health issue.


 

The single biggest challenge is dealing with the incoming price collapse.  Everyone involved in the cannabis industry have based their financial projections on being able to continue selling a licit product at illicit prices, which can’t continue forever.  This is a challenge that both industry and government have to worry about, as falling prices mean reduce profits and increased problematic use patterns, which is a public health issue.


 

What is the future of legal cannabis in the US? Will we continue to see legalization happen one state at a time, or do you envision an end to Federal prohibition in the not too distant future?

First, cannabis is here to stay.  Second, whether we see state-by-state or an end to federal prohibition depends on this election.  If Democrats get both houses and the presidency, federal prohibition isn’t long for this world. Otherwise, state-by-state will continue.

This being said, California is really the place we should be watching.  California accounts for about an eighth of the U.S. population and much more than that in terms of cannabis consumption and production.  If California legalizes, all the other dominoes start falling too.


 

Mark A.R. Kleiman, MPP, PhD, is the chairman of BOTEC Analysis and a world-renowned expert in crime reduction, justice, and drug policy. In addition to his work with BOTEC, Dr. Kleiman is a Professor of Public Policy and the Director of the Crime Reduction & Justice Initiative at New York University’s the Marron Institute, a member of the Committee on Law and Justice of the United States National Research Council, and co-editor of the Journal of Drug Policy Analysis.

Review Paper: Marijuana’s Driving Impact Less Than That Of Alcohol

CALIFORNIA: Cannabis’ impact on driving performance is generally less pronounced than that of alcohol, according to a review paper published by a pair of New York University researchers and BOTEC Analysis, LLC.

Authors reported that the use of cannabis, absent the simultaneous use of other drugs or alcohol, creates “only a fraction of the risks associated with driving at the legal 0.08 BAC threshold, let alone the much higher risks associated with higher levels of alcohol.” By contrast, they report that “the simultaneous use of alcohol and cannabis is linked to higher levels of driver impairment than either alone” – a finding that is consistent with much of the available literature.

They conclude, “The maximum risk for cannabis intoxication alone, unmixed with alcohol or other drugs, appears to be more comparable to risks such as talking on a hands-free cellphone (legal in all states) than to driving with a BAC above 0.08.” As a result, they suggest that as a matter of policy, “stoned driving alone (not involving alcohol or other drugs), should be treated as a traffic infraction rather than as a crime, unless aggravated by recklessness, aggressiveness, or high speed.”

In virtually all instances, cannabis-influenced driving is classified as a criminal rather than an administrative offense.

Investigators also argued against the imposition of per se limits which criminalize the act of operating a vehicle with trace levels of either THC or THC metabolites in one’s blood or urine. They determined: “Blood THC is not a good proxy either for recency of use or for impairment, and the dose-effect curve for fatality risk remains a matter of sharp controversy. … Moreover, the lipid-solubility of THC means that a frequent cannabis user will always have measurable THC in his or her blood, even when that person has not used recently and is neither subjectively intoxicated nor objectively impaired.”

The US National Highway Traffic Safety Administration (NHTSA) and the American Automobile Association(AAA) take a similar stance against the use of blood/THC concentrations as per se evidence of psychomotor impairment. NORML has long articulated similar opposition, stating, “Per se limits and zero tolerant per se thresholds … are not based upon scientific evidence or consensus. … [T]he enforcement of these strict liability standards risks inappropriately convicting unimpaired subjects of traffic safety violations, including those persons who are consuming cannabis legally in accordance with other state statutes.”


Full text of the paper, “Driving While Stoned: Issues and Policy Options,” is available online. NORML’s fact-sheet, “Marijuana and Psychomotor Performance,” is online.

The Clinch On Cannabis: Immature Industries Eventually Grow-Up

By Beau Whitney, Whitney Economics

The cannabis industry is still taking shape. Legislative and regulatory policies can have a profound impact on the direction the movement takes. There are many academic sources available, but what differentiates this report from others is that this author is able to combine economic rigor with direct industry experience.  The author has a background in economics, experience in high tech business operations as well as a background in the cannabis industry as a chief operating officer, a governmental affairs officer and a compliance officer. These practical experiences in the cannabis industry has further enabled the author to take the next step and assess the impact policies have on the industry and to make policy recommendations to address them.

Front Runner, an agglomerated cannabis data website, commissioned Whitney Economics to conduct an analysis of the Washington cannabis market. The initial genesis of the project was to ascertain whether or not the 222 additional retail outlets proposed by the Washington Liquor and Cannabis Board were an appropriate number based on the BOTEC analysis.

Once the research commenced, the project extended beyond the initial scope and examined such topics as; the total demand forecast for the market, the total supply available to support the market, the elasticity of demand, taxation and how to maximize the conversion from the black market to the retail market. The data used in this report cites multiple sources, includes original analysis and forecasts, as well as data taken directly from the Washington Liquor Control Board (WLCB) and BioTrackTHC. The empirical data was analyzed and the findings contained herein are an interpretation the impact of policy decisions have on the Washington cannabis market.

The data assesses the empirical results from January 2015 through March 2016 and extrapolates into the 2016 fiscal year and beyond.The methodology was to examine specific aspects of the market to ascertain if the Washington market was able to be sustained at the proposed retail levels, whether the current policies support the development of the market, what policies need to be changed and what indicators to examine moving forward.

The conclusions derived from the data were meant to answer questions about the market that are fundamental to the foundation of economics. For if the data cannot support the most basic fundamentals of economic theory, then the data or policies must be viewed with skepticism.

The findings of this report are simple. The consumer is extremely price sensitive. The black market plays a large role in the marketplace and without a reduction in tax, the market will not realize its true potential. The level of demand is able to support the retail expansion, but without converting the demand over from the black market, the retail system will face challenges in growth. The allocation of the retail outlets can support the demand, but the allocation by county needs adjustment. The supply of product in the market is appropriate for now, however the amount of supply capacity is well in excess of what the market will bear. This, in turn will lead to further commoditization of prices, compression of retail margins and maintain a vibrant black market.

The insights contained in this report are much more applicable to an investor, a policy maker or a regulator than many previous works and that is what differentiates this report from others currently available.The report also provides a list of indicators to track on a regular basis that will allow the investor or regulator to ascertain the health of the industry and the success of the public policies as they currently exist.

DOWNLOAD full white paper

LCB Says Licensed Marijuana Canopy Enough To Meet WA Recreational And Medical Marijuana Market Demand

WASHINGTON: The amount of marijuana allowed to be grown by state-licensed producers in Washington is enough to satisfy both the medical and recreational marijuana markets, a University of Washington study finds.

The state Liquor and Cannabis Board (LCB) tasked the UW-based Cannabis Law and Policy Project (CLPP) with calculating the “grow canopy,” or square footage, required to supply the state’s medical marijuana market as it becomes folded into the state’s retail system, as required by the 2015 Cannabis Patient Protection Act. The group’s report estimates that between 1.7 and 2 million square feet — or the equivalent of 30 to 34 football fields — of plants is needed to satisfy the medical marijuana market, and concludes that the 12.3 million square feet of canopy currently approved by the LCB is enough to supply the state’s total marijuana market.

Beau Whitney, a leading economist in the cannabis space, has looked into the proposed expansion of the retail stores thinks that is misleading, “Sure on the surface, there is enough supply to support the expansion, but the system is unsustainable at the current tax level of 37% + 9% local tax. With such high levels of taxation, we are looking at sustaining over $320M in black market demand-based activities. The only way to ensure a viable retail system is by lowering prices, through reduced taxes, and driving more people into the regulated systems.”

Mr. Whitney recently published a white paper on the Oregon retail market, and will publish a Washington retail white paper in early June. He is also the VP of Regulatory (Compliance) and Governmental Affairs for Golden Leaf Holdings. 

Medical marijuana dispensaries must either obtain a state license or close by July 1, 2016. Of the 343 retail stores licensed by the LCB, approximately 81 percent have sought endorsements to their license to sell marijuana to authorized medical patients.

“It was important to design this study the right way and engage in careful empirical research reaching out directly to medical dispensaries and growers across the state,” said Sean O’Connor, principal investigator for the report, CLPP faculty director and Boeing International Professor at UW Law.

CLPP Executive Director Sam Mendez described the survey process: “There’s no master list of these dispensaries, so we used a variety of resources to identify as many as possible. Once the survey was complete, we applied the findings to other published research regarding averages of marijuana output per square foot, outdoor and indoor growing market share and amounts used for edibles and concentrates to reach our estimates.”

The report found that:

  • There were an estimated 273 medical marijuana dispensaries in Washington in January 2016
  • Dispensaries sell an average of 9.55 pounds of marijuana flower monthly
  • The average price of marijuana per gram sold by these dispensaries is less than $10
  • Marijuana flower comprises 60 percent of sales at dispensaries, followed by concentrates (22 percent) and edibles (18 percent)
  • The potential market value based on 10 million square feet of canopy is more than $8 billion

Study Methodology

Determining the size of Washington’s medical marijuana market was no easy task for the UW team, since dispensaries and collective gardens have gone mostly unregulated until recently. The UW researchers, which included five law students, started by compiling a list of possible Washington dispensaries using the databases of three websites — leafly.com, weedmaps.com and headshopfinder.com — among other sources. They came up with 467 possible contacts and called them for phone surveys in January and February 2016.

Interviewees were asked whether the dispensary grows its own marijuana, how much marijuana it sells, the average price of various products and what proportion of sales are flower, edibles, tinctures and concentrates, among other questions. Some refused to participate. Others did not appear to be affiliated with a dispensary or seemed to be out of business. The researchers also posted an online survey, sending it to all applicants for recreational marijuana retail licenses and promoting it widely through social media. All told, they found 273 likely dispensaries.

A report released in December 2015 by BOTEC Analysis Corp. estimated that the state’s marijuana market is divided roughly into thirds for medical, recreational and illicit use. Since February 2014, as an interim policy, the LCB has restricted marijuana producers to a single license. That decision will later be put into rule.

The Cannabis Law and Policy Project was launched in 2014 to provide thoughtful leadership on the responsible development of recreational and medical marijuana industries in Washington State and across the country. The group, which is based in the UW School of Law, but draws on experts in various other departments, focuses on advising the state on regulatory issues related to marijuana.

 

The report’s lead authors are O’Connor and Mendez, with contributing law student authors Ada Danelo, Harry Fukano, Kyle Johnson, Chad Law and Daniel Shortt. Dr. Nephi Stella, a professor in the UW School of Medicine, was a consultant on the report.

The Wink In Weed: Evolving To Better Serve The Marijuana Marketplace

By David Rheins

Businesses are living organisms that follow a natural lifecycle. From conception as an idea in the mind of the entrepreneur, through each phase of development, the rough edges of each business are honed, shaped and sharpened by market realities. We learn and evolve as we grow: adding employees, encountering and overcoming competitive challenges, exploring opportunities, and servicing our customers. The marketplace is unambiguous about what it wants — voting with money and mindshare – and in that way influences the trajectory of every business participant.

The idea for the creation of the Marijuana Business Association came back in early 2012, before recreational marijuana was legal in either Washington or Colorado. We saw that there was a tremendous support for creating a legitimate cannabis industry among would-be licensees and consumers, but practically no institutional support or infrastructure to help them.  We built our core services in direct response to the common needs and concerns voiced from the literally hundreds of activists, dispensaries, growers, topical-makers, and entrepreneurs we spoke with as we were refining our business plan.

Blue Line Protection Group Inc. said it's opening a new 12,000-square-foot facility in Denver that will be able to house its armored vehicles, count companies' cash, and store cash in vaults. It's scheduled to open in the first quarter of next year, the company said.

Getting and staying informed is one of the biggest challenges for our business members — licensed growers, processors and retailers, and the many ancillary business professionals who support them.  State regulations are dynamic, and ever-changing. Most first generation cannabis businesses are ill-informed, and under resourced.  They have an ongoing need for reliable information about getting licensed and staying compliant, and the technical challenges of their new profession as a grower, or processor or retailer.

The Marijuana Business Association was created to provide participants in the newly legal cannabis industry with three core values: Reliable Business Intelligence, Professional Community and Commercial Opportunity.   Three years ago, MJBA began publishing MJHeadlineNews on Facebook as a social forum for aggregating the day’s most important cannabis news from both the mainstream media and the pot press.  The site immediately generated tremendous response, and attracting a national audience. Today the MJHeadlineNews page boasts 160,000 Likes with robust community engagement.

"Forcing businessmen and businesswomen who are operating legally under Oregon state law to shuttle around gym bags full of cash is an invitation to crime and malfeasance," said Sen. Jeff Merkley, D-Ore. "It's time to let banks serve these legal businesses without fearing devastating reprisals from the federal government."

Increasingly we’ve seen the mission of our MJNewsNetwork.com as not only disseminating the news from other sources, but also the creation of our own original content.  We’ve now published hundreds of original videos from MJBA events and other industry happenings on our Marijuana Channel One on YouTube. And are in the process of building out our suite of web sites, professional educational programming and publications to deliver even more value.

MJBA Meetups have become a reliable monthly occasion where cannabis professionals can share news, and engage in professional networking in an ideal environment for establishing one’s professional and personal brands. We’ve grown, from monthly meetings in Seattle, to supporting regular MJBA meetups in Spokane, Bellingham, Tacoma, Portland, Denver and New York. Thousands of industry professionals have attended our job fairs, vendor fairs and professional education seminars, and tens of thousands more have watched the 300 original videos we’ve captured from MJBA and other cannabis industry trade events.

As the needs of the marketplace have evolved over the past three years, MJBA has evolved our offerings to map to the changing needs of our membership – partnering with leading business intelligence firm TetraTrak/Front Runner to host Professional Education Seminars for producers, processors and retailers, and hosting business boot camps with NWMJ Law that provide members with access to leading attorneys, CPAs and other business experts.

[youtube http://www.youtube.com/watch?v=h8rOgEvxQ2Y&w=560&h=315]

Two years ago, we launched the MJBA Women’s Alliance to provide a forum for cannabis businesswomen to build their personal and professional lives.  More than 100 women-owned or operated cannabis businesses have joined in the MJBA Women’s Alliance, participating in our many a Seminars, VIP Speaker Luncheons and Charitable Events. This Spring we decided that the Women’s Alliance had achieved enough scale and momentum to sustain it, and so we have spun it off as a separate new entity: The Cannabis Women’s Alliance — a social purpose corporation with Morgan acting as CEO and Roxanne Taylor as COO.

Team MJBA

MJBA Women’s Alliance

It does my heart proud to see this project take flight on its own. As a parent of a recent High School graduate, I feel the same familiar mix of pride at achieving the significant milestone, and sadness that this precious first chapter of our organizational is ending.

With California, Nevada, Arizona and a dozen or so more States voting for marijuana legalization in November, 2016 represents an inflection point for the legal cannabis industry. Our grand experiment has met with enthusiastic response from eager consumers, and a begrudging realization among politicians that end of prohibition is inevitable so they might as well have a part in crafting what comes next.  I remain excited about what comes next for the industry and the MJBA.

Stay tuned to this space…

WSLCB To Close Marijuana Retail License Application Window March 31, 2016

WASHINGTON: The Washington State Liquor and Cannabis Board (WSLCB) will stop accepting marijuana retail license applications March 31, 2016 at 5:00 p.m. The WSLCB began processing retail applications on Oct. 12, 2015 to accommodate additional demand and provide additional access points before the medical and recreational marketplace are merged on July 1, 2016.

“We are at the point where the number of highest priority applicants will exceed the number of available retail licenses,” said WSLCB Licensing Division Director Becky Smith. “We’ll meet the retail cap with priority ones and twos that we’re already processing.”

Retail Cap
On January 6, 2016, the Board adopted emergency rules to expand the number of retail marijuana outlets to align the two markets. Based on staff’s recommendation, the former retail store cap of 334 was lifted to a new cap of 556. The recommendation followed an analysis of the entire marijuana marketplace by the state’s contracted research organization, BOTEC Analysis Corporation.

Priority System
The 2015 Cannabis Patient Protection Act directed the WSLCB to issue licenses in the following priority order.

  • Priority 1: Applicants who applied for a marijuana retail license prior to July 1, 2014, operated (or were employed by) a collective garden prior to January 1, 2013, have maintained a state and local business license and have a history of paying state taxes and fees.
  • Priority 2: Applicants who operated (or were employed by) a collective garden prior to January 1, 2013, have maintained a state and local business license and have a history of paying state taxes and fees.
  • Priority 3: applicants are those who do not meet priority 1 or 2 criteria.

Since it began accepting applications Oct. 12, 2015, the WSLCB has prioritized 162 priority 1 applications, 63 priority 2 applications and 879 priority 3 applications with 166 still awaiting prioritization. Once prioritized, an applicant must still pass a thorough criminal, location, residency and financial background investigation.

Next Steps
Applicants must apply for a business license before the deadline on March 31, 2016 to be considered for a retail store at this time. Currently, 29 communities are closed for processing because the WSLCB has licensed the maximum allotted stores in those areas. Each Wednesday through March, the WSLCB will post a list communities available for application on the Frequently Requested Lists page of its website at lcb.wa.gov. The WSLCB could begin accepting applications again if needed.

Priority two and three applicants who have already submitted an application may receive a refund if they withdraw their application.

Washington LCB To Increase Number Of Retail Marijuana Stores Following Analysis Of Marketplace

WASHINGTON: Following an analysis of the entire marijuana marketplace in Washington State, the Washington State Liquor and Cannabis Board (WSLCB) today heard a recommendation from staff to increase the number of retail marijuana stores from the current cap of 334 to a new cap of 556. The methodology for the cap will be part of emergency rules which will be announced Jan. 6, 2016. The allocation of retail licenses determined by the board will be published on the WSLCB website at lcb.wa.gov.

“Our goal was clear; to ensure medical patients have access to the products they need,” said WSLCB Director Rick Garza. “There will be more storefronts for patients going forward than are available today. In addition, qualified patients can grow their own or join a four-member cooperative.”

Earlier this year the legislature enacted, and Gov. Inslee signed, legislation (SSB 5052) entitled the Cannabis Patient Protection Act. The new law charges the WSLCB, the state Department of Health and other agencies with drafting regulations that integrate the medical marijuana marketplace into the tightly controlled recreational marketplace. The WSLCB is charged with licensing retail applicants using a priority-based system.

Priority Licensing System

  • First priority applicants are those who applied for a marijuana retail license prior to July 1, 2014, operated (or were employed by) a collective garden prior to January 1, 2013, have maintained a state and local business license and have a history of paying state taxes and fees.
  • Second priority applicants are those who operated (or were employed by) a collective garden prior to January 1, 2013, have maintained a state and local business license, and have a history of paying state taxes and fees.
  • Third priority applicants are those who don’t meet the first or second criteria.

The WSLCB began accepting license applications on Oct. 12, 2015. Thus far, the WSLCB has received 1,194 retail applications. Of those who have applied, 39 have been determined as priority one and 42 have been determined as priority two. Applicants must still meet all other WSLCB licensing criteria before being licensed.

Proportionate Allocation based on Medical Sales
The number of retail locations will be determined using a method that distributes the number of locations proportionate to the most populous cities within each county and to accommodate the medical needs of qualifying patients and designated providers. Locations not assigned to a specific city will be at large.

WSLCB will increase the number of available licenses in the ten counties with the highest medical sales by 100 percent. Exceptions include Yakima and Benton Counties which have bans and moratoria in all major population centers. The 100 percent increase will transfer to the next two highest for medical needs, Skagit and Cowlitz Counties. Those counties and jurisdictions not in the top ten for medical sales will receive an increase of the number of licensees by 75 percent.

In addition to new retail licensees, 70 percent of existing retail recreational marijuana stores have received an endorsement on their license to sell medical marijuana.

BOTEC Analysis Corporation Report
BOTEC Analysis Corporation provided its final report, Estimating the Size of the Medical Cannabis Market in Washington State, on Dec. 15, 2015. In its report, BOTEC provided a range of the value of the overall marijuana market in Washington State. Its best estimate of the overall market value is a median figure at $1.3 billion annually. Its best estimate on the breakdown is: $480M medical (37 percent of market), $460M state-licensed recreational stores (35 percent of market) and $390M illicit (28 percent of the market).

WA Liquor Control Board Clarifies Next Steps In Its Preparation To Issue Marijuana Licenses

WASHINGTON:  The Washington State Liquor Control Board today approved staff’s recommendations to limit the number of individual marijuana producer licenses to one and initially limit production at 70 percent, clearing a path for the agency to begin issuing producer and processor licenses.

“Today’s Board action clears an obstacle and allows the agency to begin issuing marijuana producer and processor license in the coming weeks,” said Board Chair Sharon Foster. “We believe this is the most fair and equitable way to get the market up and running.” [Read more…]

High Marijuana Taxes Could Derail Legalization Plans

COLORADO: When Congress banned marijuana in 1937, it did so in the guise of taxation, imposing a prohibitive levy on cannabis and created criminal penalties for those who failed to pay it. Marijuana taxes also played a prominent role in what may be the beginning of the end for pot prohibition: the legalization measures that voters in Colorado and Washington approved last fall.
Supporters of Washington’s I-502 and Colorado’s Amendment 64 emphasized the revenue that the government could reap by recognizing cannabis production and distribution as a legitimate business. The tricky part, as officials in both states will soon discover, is balancing the desire for tax revenue against the desire to eliminate the black market created by prohibition. Or as UCLA drug policy expert Mark Kleiman, an adviser to Washington’s marijuana regulators, puts it: “What if we gave a pot legalization party and nobody came?”

The dilemma is especially clear in Washington, where I-502 specified a 25 percent excise tax at three levels: sales between producers and processors, between processors and retailers, and between retailers and consumers. That’s in addition to the standard state sales tax of 8.75 percent.

According to calculations by BOTEC, Kleiman’s consulting firm, these taxes will make the retail cost of cannabis 58 percent higher than it would otherwise be, accounting for 37 percent of the price paid by consumers. One BOTEC projection, based on a production cost of $2 per gram, indicates the after-tax retail price will be $17 per gram, or $482 per ounce. Another projection, based on a production cost of $3 per gram, puts the retail price at $25.50 per gram, or $723 per ounce.

That’s a lot more than pot smokers in Washington currently pay. According to the website Price of Weed, which collects reports from marijuana consumers across the country, the average price for high-quality cannabis in Washington is $239 per ounce.

Some of those purchases may be from medical marijuana dispensaries, which are not explicitly authorized by state law but operate as patient and provider cooperatives. Washington’s medical marijuana rules are relatively permissive, allowing cultivation and possession by patients with a wide variety of conditions, as long as they have a doctor’s recommendation. Dispensaries in Seattle currently charge $250 or so per ounce, and medical marijuana sales remain untaxed under I-502.

In short, BOTEC’s projections indicate that the after-tax price for marijuana sold by state-licensed outlets will be something like two to three times as high as prices charged by black-market dealers or dispensaries. “That’s a big problem,” Kleiman says. “The legal market is going to have a hard time competing with the illegal market, but a particularly hard time competing with the untaxed, unregulated sort-of-legal market.”

Colorado’s constitution, unlike Washington’s, requires separate voter approval for new taxes. The price of legal marijuana in Colorado therefore will depend on the fate of Proposition AA, an initiative on next month’s ballot that would authorize not only the 15 percent excise tax mentioned in Amendment 64 but also a special sales tax of up to 15 percent. That’s on top of the standard state and local sales taxes, which in Denver total 8 percent. Meanwhile, voters in Denver, where most pot stores will be located, will decide whether to approve an additional municipal marijuana tax of up to 15 percent.

Supporters of the marijuana taxes, including Amendment 64 co-author Brian Vicente and the Medical Marijuana Industry Group, argue that they are necessary to fund an effective regulatory system, which in turn will help discourage federal interference. Opponents, led by Rob Corry, a Denver attorney and longtime marijuana activist, argue that excessively high taxes will undermine regulation by preserving the black market. “Over-taxation creates a marijuana market ripe for takeover by the unregulated, untaxed, underground market,” Corry says.

The Proposition AA campaign deems that prospect “unlikely,” saying “the combined taxes on retail marijuana sales will add about 22 percent to the retail cost of marijuana products”—less than half the impact of Washington’s taxes. That estimate does not include local taxes, which could make a big difference given Denver’s important role in the marijuana industry.

 

 

The Sober Way to Legalize Marijuana

NEW YORK:  As a general rule, Americans don’t give much thought to Uruguay, a small South American republic with a population of 3.3 million. But Uruguay has embarked on a new experiment with marijuana legalization that merits close attention.

[Read more…]