Drug money, part II

Will dope bring in as much as promised?

“Build a better mousetrap, and the government will build a better mousetrap tax.”

— Laurence Peter, psychologist

As far as the quote above goes, our opinion on it is: Maybe. But then, we never bought into his Peter Principle, either.

For discussion today, the topic is drug money. If We the People vote to legalize marijuana for recreational use next month, will the state be able to tax it to our collective prosperity?

An economic team has estimated that the state could see $460 million over the course of five years if marijuana is legalized and taxed.

Taken that number as read, we imagine many Arkansans would still vote against the proposal because they consider the futures of their children, and not just their children, to be worth more.

But what of the argument that the state will make serious money if weed is legalized?

There is a case to be made that legalizing weed will bring it into the open, where it could be legally taxed. But legally taxing it would necessarily make it more expensive than the stuff that’s on the street now, yes? And we don’t see how authorities could distinguish legal pot from black-market pot once it’s in the rolling papers or bongs. So what incentive would a user have to pony up the extra cash for the legal stuff? (Special thanks to the Hazelden Betty Ford Foundation for several links to important websites that help form our opinion on these matters.)

“With any tax, there is always some level of tax evasion that will occur depending on the ease of enforcement and the size of the incentive to evade the tax,” says a report by The Institute on Taxation & Economic Policy, issued a few years back. “Given the lack of experience with taxing marijuana, there is no way to predict the exact degree of excise tax evasion that will occur, though given most marijuana consumers’ familiarity with the black market, there is reason to believe that the potential for evasion is fairly high. “Moreover, the high level of cigarette excise tax evasion provides a warning to lawmakers that large enough excise taxes can result in a significant, unregulated and untaxed black market. In any case, state lawmakers should be careful to create a robust enforcement regime in order to limit opportunities for tax evasion.”

Create a robust enforcement regime to catch tax avoiders? Sounds expensive. So there goes some of the profit the government hopes to make.

Tax money is fungible enough, as those who study government will tell you. So let’s ask this: If legal weed substitutes alcohol for many Arkansans looking for a high on weekends, will the amount of tax raised by alcohol sales fall? And as long as we’re talking money, how would that affect government receipts?

And because of the problems banking and the federal government have with the weed business, it’s largely a cash-and-carry concern. How keep it honest, tax-wise? When it comes to cash, even the government’s mousetrap might not catch much of the revenue.

As we keep looking into the weeds, and weed, we keep coming up with more and more questions about Issue No. 4 on your ballot. And this is before the first early vote is cast.