Monday, March 17, 2014
Financial news outlets are increasingly paying attention to marijuana businesses. As a result, they've also taken an interest in marijuana laws. This weekend, for eample, the Motley Fool ran a story under the headline "Your State Could Legalize Marijuana Sooner Than You Think."
There has been no end to the wild speculation over the amount of money legalized marijuana sales would bring in. And with no data to report, speculation is pretty much all anyone could do. But now with Colorado's recent announcement that it took in $2 million in tax revenues on $14 million in sales, the great debate over the economic merits of legalization is about to heat up to another level. With numerous U.S. states still saddled with crippling budget deficits, this could be a huge opportunity for them to generate some extra cash to turn things around.
For example, Pennsylvania's Senate Bill 528, which would legalize and regulate recreational use of marijuana, is currently in committee, and I'd be willing to bet that Colorado's revenue has come up in recent discussions. The state is currently facing a budget deficit of more than $1 billion due to other tax changes, and could really use any help it can get to bridge the gap.
I wonder to what extent this sort of outlook helped to drive the explosion in marijuana stock prices at the beginning of the new year (which has since been dialed back considerably over the past few weeks).
As a marijuana legalization supporter, I'd be glad to see state legislatures embrace reform more quickly than anticipated. And I can see how investors might look at polls showing more than half of voters favoring legalization (in combination with tax revenue numbers) and conclude that this is what will happen.
But let's not forget: even though support for medical marijuana has hovered around the 75% range for 15 years or so, less than half the states have medical marijuana laws.
There are certainly reasons that the pace might be faster for legalization than it has been for medical marijuana. The political tide has now turned decidedly against the drug war, so politicians who shied away from marijuana reforms in the past may begin to realize there is political value in supporting them. And the fact that investors are taking interest could itself help to move the chains by expanding the world of people actively seeking reform beyond advocates driven exclusively by public policy concerns.
Still, the fact that California Governor Jerry Brown still hasn't caught on makes me very skeptical that the Pennsylvania legislature will be backing legalization this session or the next. So although I think we'll see legalization take hold more quickly than medical marijuana has (assuming current political trends continue), it's important to take account of the unique politics of drug policy in general and marijuana in particular before reading too much into the impact that current polling and Colorado tax revenue numbers will have on elected officials.