Legal Weed's Strange Economics in Colorado
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Legal Weed's Strange Economics in Colorado
Posted by CN Staff on January 10, 2014 at 12:22:58 PT
By Brian Bremner and Vincent Del Giudice 
Source: Business Week
USA -- This is a blazing moment for American stoners. Colorado has just legalized the commercial production, sale, and recreational use of marijuana, while Washington State will begin its own pot liberalization initiative at the end of February. On Jan. 8, New York Governor Andrew Cuomo said his state would join 20 others and the District of Columbia in allowing the drug for medical purposes. Libertarians and progressives are thrilled. Addiction specialists are anxious. And economists, well, they’re a little like undergrads lost in a bong-induced thought experiment: One moment the economics of pot seem beautifully elegant, then the real-world implications suddenly become bewilderingly complex.
The champions of marijuana’s legalization have long argued that regulated sale of the drug would drive down production costs and the retail price. The availability of cheaper, legal cannabis would generate precious tax revenue and refocus drug enforcement efforts on more socially harmful narcotics such as cocaine, heroin, and crystal meth. “On the black market, a lot of folks are compensating drug dealers and everyone else in the supply chain for the risk of arrest and incarceration,” says Beau Kilmer, co-director of the RAND Drug Policy Research Center. “If marijuana were fully legalized and you could grow it outdoors like any other commodity, the production costs would plummet over 90 percent.” Standing in the way, Kilmer and economists say, are variables including state tax policies, the shifting behavior of buyers and sellers, and contradictory drug laws nationwide. In Colorado, where authorities have levied a 15 percent wholesale and 10 percent retail tax on marijuana transactions, the price of legal commercial-grade pot has doubled to $400 an ounce since the start of the year, says Aaron Smith, executive director of the National Cannabis Industry Association. That’s twice the price for medical marijuana at state dispensaries that require a doctor’s prescription. On the black market, high-grade offerings are fetching $156 to $250 an ounce, according to data compiled by Narcotic News.That prevailing $400-per-ounce price is no doubt inflated by limited inventory and pent-up consumer demand that may fade over time. To optimize profits, though, enterprising pot retailers will still have an incentive to go high-end, specializing in more potent grades, promoting add-ons such as vaporizer refillable cartridges that can be used for pot consumption, and conjuring up new products (cannabis-infused chocolate lava cake, anyone?). “I don’t think we should expect the legal price to be that different from current [black market] prices,” says Harvard University economist Jeffrey Miron. “People will want to pay more for a quality product.”For policymakers, the challenge is getting the taxes right, says Kilmer at RAND. In Washington State, authorities will impose a 25 percent excise tax on every phase of the newly liberalized market: production, processing, and final sale. That’s on top of standard state sales tax of 8.75 percent. A consulting firm hired by the state projects these taxes will add 37 percent to the price. In Colorado’s Western Slope region, Gregory Viditz-Ward, owner of a pot retailer called the Telluride Green Room, says he thinks “the black market is going to come back extremely strong,” due to what he considers the high state cannabis tax.Back in 2010, California considered pegging taxes to marijuana weight before a failed ballot initiative to legalize pot. (The Golden State is still home to a big legal medical marijuana market.) Critics said the approach would encourage producers to sell more potent products to lower the tax hit. Kilmer suggests states consider taxing pot based on its level of tetrahydrocannabinol (THC), the psychoactive ingredient in the drug. “Just as some states differentiate among the alcohol levels of beer, wine, and spirits, you could set a tax based on the amount of THC,” he says.There may be a positive net fiscal impact for states from legal marijuana. A 2010 study by the libertarian Cato Institute, co-authored by Harvard’s Miron, forecast that states could save $17.4 billion annually from reduced drug enforcement costs and increased tax revenue, assuming marijuana production and sales were legal nationwide.Those gains could be eroded, however, if an expanded market started to displace alcohol sales, which are also taxed. A more worrisome scenario: What if more people consumed marijuana and alcohol together—and in greater amounts? The trend might contribute to more traffic accidents and other health costs, says Kilmer.Perhaps the biggest unknown is law enforcement. How seriously Colorado authorities police unlicensed sellers will shape market supply and pricing trends—or determine whether legal Colorado cannabis is illegally sold in other states that still ban the drug. (On Jan. 5, local Colorado police raided a pot-growing operation of 1,200 plants.) The production, sale, and use of marijuana has been illegal at the federal level since 1937. The U.S. Department of Justice recently announced that it would not challenge state legalization laws. Who knows if the next administration will be so accommodating, or if a majority of public opinion, as a late-2013 Gallup poll showed, will still support marijuana legalization? “We don’t know what’s going to happen in two years, five years,” says Miron. “Pendulums swing in both directions.”The bottom line: Pot prices have doubled to $400 an ounce in Colorado, which has just legalized marijuana use among adults.Bremner is an assistant managing editor for Bloomberg Businessweek.Del Giudice is a reporter for Bloomberg News in Denver. Source: Business Week (US)Author: Brian Bremner and Vincent Del Giudice Published: January 9, 2014Copyright: 2014 The McGraw-Hill Companies, Inc.URL: bwreader businessweek.comWebsite: -- Cannabis Archives 
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Comment #3 posted by HempWorld on January 10, 2014 at 14:55:47 PT
Incarceration, i.e. "Caging" (The GCW)
is a very effective form of anti-conception, indeed!
Legalize It!
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Comment #2 posted by HempWorld on January 10, 2014 at 13:55:06 PT
From Mr. Huxley (see wikipedia)
Does this sound familiar anyone?"The lowest strata are reproducing too fast. Therefore… they must not have too easy access to relief or hospital treatment lest the removal of the last check on natural selection should make it too easy for children to be produced or to survive; long unemployment should be a ground for sterilization.""socially harmful?"And then Margaret Sanger, founder of Planned Parenthood:"Eugenics[edit]An advertisement for a book entitled "Woman and the New Race". At the top is a photo of a woman, seated affectionately with her two sons. Sanger's 1920 book endorsed eugenics.
As part of her efforts to promote birth control, Sanger found common cause with proponents of eugenics, believing that they both sought to "assist the race toward the elimination of the unfit."[73] Sanger was a proponent of negative eugenics, which aims to improve human hereditary traits through social intervention by reducing reproduction by those considered unfit. Sanger's eugenic policies included an exclusionary immigration policy, free access to birth control methods and full family planning autonomy for the able-minded, and compulsory segregation or sterilization for the profoundly retarded.[74][75] In her book The Pivot of Civilization, she advocated coercion to prevent the "undeniably feeble-minded" from procreating.[76] Although Sanger supported negative eugenics, she asserted that eugenics alone was not sufficient, and that birth control was essential to achieve her goals.[77][78][79]In contrast with eugenicist William Robinson, who advocated euthanasia for the unfit,[note 9] Sanger wrote, "we [do not] believe that the community could or should send to the lethal chamber the defective progeny resulting from irresponsible and unintelligent breeding."[80] Similarly, Sanger denounced the aggressive and lethal Nazi eugenics program.[75] In addition, Sanger believed the responsibility for birth control should remain in the hands of able-minded individual parents rather than the state, and that self-determining motherhood was the only unshakable foundation for racial betterment.[77][81]Sanger also supported restrictive immigration policies. In "A Plan for Peace", a 1932 essay, she proposed a congressional department to address population problems. She also recommended that immigration exclude those "whose condition is known to be detrimental to the stamina of the race," and that sterilization and segregation be applied to those with incurable, hereditary disabilities.[74][75][82]"
Race Purification! i.e. Marijuana/Cannabis Phrohibition!
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Comment #1 posted by HempWorld on January 10, 2014 at 12:50:49 PT
Another beautiful piece of yellow journalism!
Sorry everybody, it's me again and I have spill my guts again, barf, barf:"The availability of cheaper, legal cannabis would generate precious tax revenue and refocus drug enforcement efforts on more socially harmful narcotics such as cocaine, heroin, and crystal meth""socially harmful?" Eh, what?But, why don't we start with the biggest killers, tobacco?Don't you love that pleasant smell of a burning cigarette while trying to get some fresh air outside, knowing full well that even this much inhalation of the deadly tobacco smoke can lead you to have health problems.40,000 Americans die from 2nd hand smoke, 450,000 a year from 1st hand smoke.This is the elephant in the room!And the perpetuated notion that we arrest marijuana smokers because marijuana/cannabis is bad for you? We have MEDICAL AND MEDICINAL marijuana/cannabis, it is medicine and has been in China for the last 5,000 years.Try this with tobacco, good luck, but hey, they are still legal as heck!
Where is the Hemp?
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