It’s a war that has been waging for approaching half a century, and one that governments have shown little enthusiasm for ending. However, gradual moves in recent years by a number of US states to legalise the sale of cannabis is not only damaging the profits of drug cartels, but also bringing in much needed tax revenues (see Fig. 1).
Despite these positive results, there still remain many critics of this relaxation of laws, with fears over the impact on people’s health, and in particular the possibility of cannabis acting as a gateway vice towards harder drugs. Should governments around the world legalise cannabis as a means of tapping into new tax revenues, or is it one step too far towards a morally decadent society?
During the US midterm elections in November, two more states joined the growing number of regions that are allowing the sale of marijuana. Both Oregon and Alaska passed legislation that legalised the use of recreational marijuana for people over the age of 21. Oregon was in fact the first state to decriminalise the possession of small amounts of cannabis as far back as 1973. It would later be the first to legalise the use of medical marijuana in 1998.
The victory for legalisation campaigners was echoed in other parts, with voters in Washington DC approving laws that would allow the possession of small amounts of cannabis. The news comes two years after both Washington State and Colorado legalised recreational use, and shows signs that attitudes across the US are sharply changing in favour of a softer approach to the drug.
Supporters for the legalisation efforts have come from a variety of interested parties, including billionaire investor George Soros, whose Drug Policy Alliance (DPA) donated around $800,000 to the campaign in Oregon. However, despite the trend of states moving towards legalisation, federal laws remain in place against cannabis use. It seems unlikely that there will be a countrywide lifting of the ban while there remain so many conservative states – predominantly in the south and Midwest – that oppose legalisation. However, with presidential elections on route in 2016, many other states are looking at proposing similar legislation during the vote. California, Massachusetts, Nevada, Arizona and Maine are all thought to be the next wave of states to relax their laws.
Bumping-up tax revenue
Many supporters of legalisation point to the huge amount of potential tax revenue that could be brought in. According to some analysts, if all of the US’ 50 states were to legalise and regulate marijuana; tax revenues of more than $3bn could be achievable each year. That figure was predicted by online personal finance website NerdWallet, which says that if the flat 15 percent tax rate used in Colorado was applied, $3.1bn would be put back into the government’s coffers. Another study in 2010 by Harvard economist Jeffrey Miron predicted that law enforcement agencies would save $8bn each year if marijuana were legalised.
All this new money for local and national governments could, in theory, be spent on boosting public services in the same way that revenue from alcohol and tobacco taxes do. A number of advocates have said that the potential health issues arising from more marijuana smokers can be addressed through vastly increased funding for health services.
Jill Harris, the DPAs director of strategic initiatives, told reporters that this shift in attitudes meant that drug problems would be treated as a health matter rather than one of crime. “It’s pretty clear the American people support marijuana legalisation by decent margins and there’s been a shift toward reform in less punitive, more health based attitudes to drugs in general, and certainly with respect to marijuana.”
One recent consequence of the relaxation of marijuana laws in parts of the US is the harm it is doing to the business of Mexican drug cartels. According to reports in May, cannabis farmers in the region of Sinaloa have stopped planting because of the dramatic collapse in the price. According to The Washington Post, the wholesale price has dropped from $100 in 2009 to just $25 in 2014. One Mexican farmer told the paper that there was no alternative way of making a living in the region, but that, “It’s not worth it anymore. I wish the Americans would stop with this legalisation.”
Speaking to Vice News, former federal agent Terry Nelson said legalisation was severely harming Mexico’s drug gangs. “Is it hurting the cartels? Yes. The cartels are criminal organisations that were making as much as 35-40 percent of their income from marijuana. They aren’t able to move as much cannabis inside the US now.”
Growing pains
There are seemingly many benefits towards legalising cannabis, ranging from financial to social. Treating drug users not as criminals but as patients will relieve a huge amount of pressure on prisons and law enforcement agencies, while the tax revenues will help to fund new health services designed to stop people becoming addicted to drugs in the first place.
Other countries that have long been fighting the war on drugs are watching the US with great interest. While successive British governments have rejected calls for legalisation, it is thought that many politicians privately feel it would be the right move, but are too afraid of upsetting constituents and the media by ever proposing it. Cannabis law reform group CLEAR recently estimated that the British economy would gain £6.7bn were it to tax and regulate marijuana, for example. However, whether politicians are brave enough to offer the electorate a say – as many US states have – remains to be seen.
While the industry in the US is thought to be heading towards a value of around $10bn by 2018, the experiment in fostering a legal cannabis market has not been without its problems. Many banks have been reluctant to house money from legally run marijuana businesses, fearful of federal laws. This also means it’s difficult for new marijuana businesses to get started. However, it’s clear that the experiments started in Colorado are spreading, and with every new state that legalises, the US gets closer to a federal-wide reform of the laws.
It is an industry that is growing by the day, and could potentially rival that of the tobacco and alcohol industries in how it contributes to the economy. Those two industries provide a combined $17bn in federal tax revenues each year. With government budgets so constrained, it would seem inevitable that sooner rather than later, prohibition on marijuana will come to an end in the US.
