Pubdate: Wed, 11 Feb 2009
Source: Slate (US Web)
Copyright: 2009 Washingtonpost.Newsweek Interactive Co. LLC
Contact:  http://www.slate.com/
Details: http://www.mapinc.org/media/982
Author: Jeff Segal
Bookmark: http://www.mapinc.org/find?420 (Cannabis - Popular)
Bookmark: http://www.mapinc.org/people/Michael+Phelps
Bookmark: http://www.mapinc.org/decrim.htm (Decrim/Legalization)

THE AUDACITY OF DOPE

Could Legal Marijuana Save California's Economy?

Olympic swimmer Michael Phelps has made marijuana a popular topic. He 
was photographed smoking from a bong, lost corporate sponsorships, 
and was suspended from the sport as a result. But celebrities aren't 
the only ones thinking about dope.

Some legislators in California have pot on their minds, too. That's 
because the government of the biggest economy in the United States is 
facing a massive budget deficit whose pain would be alleviated by 
decriminalizing marijuana.

California's current deficit stands at a whopping $15 billion and is 
expected to reach $42 billion next year. And the state run by Gov. 
Arnold Schwarzenegger has virtually run out of cash. It recently 
delayed $3.5 billion of payments to taxpayers and counties.

While nearly all U.S. states currently face budget shortfalls, 
California's deficit is more than one-third of its general fund. 
That's largely due to its dependence on income taxes, which slide 
during a recession. And the state can't easily borrow due to the 
government bond-market freeze. Moody's even warned it may downgrade 
the state's rating.

There's no easy fix to the problem, as any solution likely requires 
cutting benefits and social services-tough political choices for 
Schwarzenegger. But the state does have an abundant natural resource 
it may be able to draw on for help.

Marijuana is California's largest cash crop. It's valued at $14 
billion annually, or nearly twice the value of the state's grape and 
vegetable crops combined, according to government statistics. Indeed, 
a recent report pegged marijuana as two-thirds of the economy of 
Mendocino County, a ganja hotbed north of San Francisco. That's not 
surprising-it costs $400 to grow a pound of pot that can sell for 
$6,000 on the street.

But the state doesn't receive any revenue from its cash cow. Instead, 
it spends billions of dollars enforcing laws pegged at shutting down 
the industry and inhibiting marijuana's adherents. Of course, there's 
a reason for that. Marijuana's social costs may include addiction and 
rehabilitation treatment and lost productivity. Yet these are minute 
compared with the extensive social costs of alcohol or tobacco.

Of course, just legalizing pot wouldn't automatically harvest 
revenues for the state. An organized system of regulating sales and 
collecting taxes would need implementing. And it's possible that 
general drug use could rise, though the debate that pot is a gateway 
drug to harder substances is inconclusive.

There's also the question of whether or not taxing marijuana would 
simply create a black market that would again skimp the state on 
taxes. The best corollaries here are cigarettes and alcohol. Rises in 
"sin taxes" on them have decreased consumption-a positive-but don't 
seem to have destabilized the legal market. Decriminalization could 
lead to some job losses in law enforcement, though the countervailing 
argument would see these forces put to work stopping harder crime.

So what are the numbers? A national legalization effort would save 
nearly $13 billion annually in enforcement costs and bring in $7 
billion in yearly tax revenues, according to a study by Harvard 
University economist Jeffrey Miron. Since California represents 13 
percent of the U.S. economy, those numbers suggest the state could 
save $1.7 billion in enforcement costs and nab up to $1 billion in 
revenues. That doesn't include any indirect revenues as, for example, 
rural farming communities grow or marijuana tourism, which has been 
lucrative for the Netherlands, takes off.

Put it all together, and California could potentially wipe some $3 
billion off its budget deficit by letting its people puff and pay. 
That still leaves it with a gaping $39 billion hole to fill, so the 
state's problems go far beyond what a new cash crop can fix. But 
anything to help soothe the state's chronic fiscal pain-even if 
unpalatable to some-is worth considering.
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MAP posted-by: Jay Bergstrom