Marijuana starting to look like a new revenue source for states

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Mary Lou Dickerson had seen enough. After wrenching cuts to Washington's state drug and alcohol treatment programs, Dickerson, a Democratic representative, introduced a bill this year to sell marijuana in state liquor stores — and tax it.

Dickerson is an unlikely crusader for marijuana legalization. A 63-year-old grandmother who doesn't use it, she says money was the only reason for proposing her controversial bill. "According to the state's own estimates, it would bring in an additional $300 million per biennium," she says. "I dedicated (in the bill) a great deal of the proceeds from the tax on marijuana to treatment."

The proposal died in committee, but Dickerson, who chairs the House Human Services Committee, expects to reintroduce it. Other advocates in almost two dozen states have been making similar efforts to loosen marijuana laws.

This has been a bumper year for marijuana legislation, according to state policy observers. Crushing state budget deficits gave advocates in California, Washington, New Hampshire, Rhode Island, New York and elsewhere an opening to pitch marijuana as a new source of tax revenue. At the same time, the Obama administration gave users and distributors some breathing room by signaling in October that it would scale back on prosecuting them as long as they comply with state law.

Eighteen states discussed medical marijuana through legislation or citizen initiatives this year, an unusually high number. Most visibly, California election officials announced on March 24, that this year's ballot would include a question to allow local governments to legalize and tax marijuana, casting a spotlight on the state that first legalized medical marijuana in 1996.

While most state legislative efforts are likely to fail, a victory in California could encourage other states to follow suit just as they did when California approved medical marijuana. A 2009 poll found 56 percent of California voters support outright legalization. Estimates from California's Board of Equalization peg the amount the state could raise from marijuana legalization at $1.4 billion.

But those projections rest on shaky assumptions that the state could keep track of growers and that distributors would accurately disclose their sales, if at all. And since marijuana is still illegal under federal law, it's unclear how the Obama administration would ultimately react to more permissive state marijuana laws. Officials have struggled for years with the legal questions posed by state and federal marijuana laws that appear to be in conflict.

"The more people talk about marijuana laws the more people come to the conclusion that they've completely failed, so we're definitely optimistic here," said Aaron Smith, California policy director for the Marijuana Policy Project.

Meanwhile, opponents of legalization in California are gearing up for their own campaign, knowing that the rest of the country will be watching. "We have a lot of pressure on us," says Aimee Hendle, statewide coordinator of Californians for Drug Free Youth. She sees marijuana advocates as opportunists exploiting the state's financial distress.
"They are seeing the vulnerability of the citizens of California with the state of our state," she says.
Arizona is also going this route for new tax revenue. Senators there have already approved levying the state sales tax on medical marijuana, even though voters won't weigh in on medical marijuana until this November's ballot. In Nevada, marijuana advocates are busy collecting signatures to place a legalization measure on the state's 2012 ballot. Rather than leaving the question of legalization up to local governments, as California's initiative does, Nevada's proposal would legalize and tax marijuana statewide. Nevada voters have already approved medical marijuana.

David Schwartz, campaign manager for Nevadans for Sensible Drug Laws, will be watching his counterparts in California. "If they win, it will be a stark event in the long battle to end marijuana prohibitions in this country," he says.

In South Dakota, Emmet Reistroffer is also among those following the news from California. Last year, he took time off from the University of South Dakota to gather signatures for a medical marijuana ballot initiative. It was a home-grown effort, drawing 40 volunteers, almost no national attention and no funding from major marijuana policy groups. Reistroffer, a Sioux Falls 20-year-old, took a part-time job at a local bar to make ends meet.

While he says he doesn't necessarily support outright legalization, he wants to make marijuana accessible for patients like his mother, who suffers from lupus and rheumatoid arthritis. She has used marijuana in the past, he says.

"While I was growing up I had friends in DARE (Drug Abuse Resistance Education)," he says. I've always looked at it very differently. I've always seen this injustice and felt obligated to do something about it."

Reistroffer plans to spend his summer trying to convince voters at county fairs. In 2006, voters turned down a medical marijuana measure on a close vote, the only state that has ever done so. If the measure passes this year, it will mark a significant shift in South Dakota's attitude towards the herb, he says.

But states shouldn't count on a revenue bonanza from marijuana since distributors still risk federal prosecution by emerging from the shadows, according to Robert Mikos, a Vanderbilt University law professor. Ideally, the thousands of small-scale marijuana farm operations would consolidate into larger groups that would be easy for states to tax, but the federal ban makes that unlikely, he says.

"If you get too big, you attract the attention of the federal government. If you're a mom-and-pop marijuana distributor in California right now, you have almost no concern about the federal ban," Mikos says.

Also, states would have to keep track of growers who have paid taxes. "That's a goldmine of information for the federal government," Mikos says. "If California requires marijuana distributors to keep records of all their sales the federal government could sweep in, take that information and use it to prosecute these people."
In October, the Justice Department released a memo indicating it would back off from prosecuting medical marijuana users who are complying with state law, but the memo did not say the department would tolerate outright legalization in states, opening up more legal ambiguities.

"The federal government will continue to try to combat recreational marijuana so California is kind of getting ahead of itself," Mikos says.

But Hendle and other opponents of legalization will also keep up their fight. "Even if you say it's only for people over the age of 21, that's what they say about alcohol and look at all the underage drinking that we have," she says. "We're now going to make this a larger problem."
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