Two Ways for States to Make Money from Marijuana Sales

Pat Oglesby of newrevenue.org has just posted his analysis of two competing proposals to legalize marijuana in Oregon, focusing on the very different revenue generating models espoused by each proposal.

One proposal proceeds along the lines of what Colorado and Washington have done. It would tax marijuana sold by private vendors, though the Oregon tax would be based (loosely) on the THC content of the marijuana (or more precisely, a heuristic approximating THC content).

The second proposal would be quite novel for marijuana, though states have tried something similar regarding sales of alcoholic beverages. Namely, it would give a state commission a monopoly over the sale of marijuana. Since the state would set the price of (legal) marijuana and would cut out the middle-man (i.e., private dealers), this proposal could generate more revenue for
the state than the more common tax model (especially one with a low tax rate). However, as I’ve explained before (p. 25 and 34) – and as Pat notes – a law creating state owned and operated marijuana stores would probably be preempted by the federal Controlled Substances Act, so this novel proposal might be a non-starter for Oregon. Pat’s analysis is short, insightful, and accessible – well worth the read.