Marijuana Law, Policy & Reform

Editor: Douglas A. Berman
Moritz College of Law

Tuesday, August 5, 2014

Rules for the Marijuana Industry or Preventing Marijuana From Becoming Big and Bad

 Do you want legalized marijuana to replicate the harms caused by tobacco and alcohol use? Do you want the marijuana business to become the new "Big" as in Big Tobacco? Assuming your answer is no,  Vikas Bajaj's "Rules for the Marijuana Market" published  in yesterday's New York Times offers some policy recommendations for preventing these results. 

This excerpt from Bajaj's opinion piece outlines the policy goals for regulating legal  marijuana:

Beyond keeping marijuana out of the hands of minors, a good regulatory system has to limit the increase in drug abuse that is likely to accompany lower prices and greater availability after legalization. It should protect consumers from both dangerous and counterfeit products, reducing the physical risk from a psychoactive substance. And a well-regulated system should undermine and eventually eliminate the black market for marijuana, which has done great damage to society.

Another goal not stated in this discussion is to prevent marijuana monopolies.

Bajaj offers three recommendations. The first recommendation is to tax marijuana "to curb use." This recommendation is not new but Bajaj suggests an interesting twist:

Colorado and Washington have imposed high tax rates that are based on price, much like existing sales taxes. But Mark Kleiman, a public policy professor at the University of California, Los Angeles, rightly warns that those taxes will lose their bite when prices inevitably decline as marijuana businesses become more efficient at production. A better approach would be to tax the drug based on its potency — which can be measured in various ways, including by the amount of the component THC in a batch — and increase the rate over time to keep up with inflation.

Bajaj's second recommendation is "don't market to minors." This recommendation is also generally accepted but important to avoid even the appearance of emulating Big Tobacco which Project SAMS builds on in its recent ad [see Doug's post ] 

Finally, Bajaj recommends that "growers shouldn't be sellers"  "to ensure that the industry does not evolve into a group of politically and financially powerful vertically integrated businesses."  ASA's report on state laws, summarized in a post by Alex, supports  Bajaj's recommendation but this "seed to sale" model is used by New York's new MMJ law. 

I found Bajaj's insights into how Big Alcohol was and is regulated interesting and informative. And his suggestion about the potency tax is intriguing.  Any comments on this recommendation pro or con?

Taxation information and issues | Permalink


I think the point about a potency tax is interesting, but Pat Oglesby and I have made the same point elsewhere--see, e.g.,

Posted by: W. David Ball | Aug 5, 2014 5:55:30 PM

I think the potency-based tax is a great idea in that it will implicitly prevent over-indulgence. To achieve a desired level of high, or to become "super high," one must buy stronger weed, or buy a larger quantity of weaker bud. In either case, the consumer pays more tax, thus limiting the frequency he/she opts for this higher level of high [sic].

Posted by: Scott Meyers | Aug 7, 2014 6:42:32 AM

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