Tax could push buyers to illegal pot

The Washington state legislature quietly passed a measure last year that slapped consumers of marijuana with a 37 percent tax at the point of sale.

The main concern at the time was revenue, the Cannabist reports. State Rep. Reuven Carlyle, a Democrat from Seattle, said he was concerned that the state may rely too much on the expected revenues from the new tax, a whopping $300 million.

According to the Tax Foundation, this rate is the highest of any state that has legalized marijuana.

But seldom is the question asked: What will be the effect of this tax on consumers?

Mainstream economic thought would say that as the tax goes up, the amount of marijuana users will decrease significantly. But it isn’t that simple.

Let’s look at two test cases: taxes on tobacco cigarettes and taxes on soda.

Taxes on cigarettes in New York become so crushingly high in 2010 that dealers began to sell single cigarettes, known as “loosies,” from packs that did not have tax stamps.

This led to the infamous death in 2014 of Eric Garner, who was choked by a police officer while being arrested for selling cigarettes.

In effect, the tax became so high that it was more economically viable for people to buy from dealers on the street than from taxed retailers.

For Washington, the tax could also drive marijuana buyers out of state in addition to the streets, because Oregon’s marijuana tax is much lower.

A similar phenomenon is taking place in several cities as taxes on sugary drinks are put in place.

Advocates argue that it will discourage consumption of soda and encourage people to make healthier choices as a result. However, even if one follows this narrative, we must stop and consider who the consumer of soda is.

Gallup, a global analytic website, reported in 2013 that typical soda drinkers were young, non-white and low-income.

When thinking about effective public policy, few policymakers propose taxing poor, young, non-white people. It wouldn’t generate a lot of money and the backlash would be astounding.

Not to mention the U.S. government actually subsidizes the producers of crops that are used to make this soda, according to a July article by NPR. They point to a “disconnect” between the government’s diet recommendations and subsidies.

This leads to non-nutritious foods and drinks becoming unnaturally cheap, encouraging us to buy more of them.

So now, in order to correct its own mistake, the U.S. government proposes taxing the end product of the crops it subsidizes.

Marijuana taxes are the new, young, happening way of raising money. It’s popular widely with young people, because it allows them to consume marijuana legally, and with old people because it discourages the use of marijuana.

What we need to do is look at the more gray-haired tobacco and soda taxes and try to learn some lessons from them.

For starters, we can’t have it be too high because that’ll cause a black market to pop up, like we saw in New York City. We may have already failed step one, as our tax is the highest of any state. Now that we’re off to a bad start, we can’t send mixed signals by both subsidizing and taxing the same thing.

Washington is on shaky ground with this step as well, as a recently passed bill allowed medical patients to buy their pot tax-free, effectively encouraging its consumption, according to the The Stranger.

There haven’t been any direct subsidies, however, and the federal government refuses to support growers in the way they support other farmers.

If the government starts to rely on marijuana for revenue, this could create another unintended problem. Over the past decades, governments have been relying more and more on fines for revenue, according to an April 2016 article in the Atlantic. This can include speeding tickets and others.

The effect is traffic cops are required to meet quotas and so we get pulled over more often — and when we do, we pay higher fines. Now the government needs us to break traffic laws in order to pay its bills.

Likewise, with marijuana, the government will have to encourage marijuana sales in order to cover its costs, while also taxing it, which is exactly the same problem we ran into with soda taxes.

Certainly, we should celebrate the victory of legalization efforts across the United States. But let’s not squander this victory by believing marijuana is going to be a golden goose that’ll fix Washington’s budget problems.

Harrison Conner is a junior economics major from Stanwood. He can be contacted at 335-2290 or by [email protected]. The opinions expressed in this column are not necessarily those of the staff of The Daily Evergreen or those of The Office of Student Media.