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Marijuana Policy Is Not a Binary Choice Between Prohibition and the For-Profit Commercial Model

• Marijuana policy should not be viewed as a binary choice between prohibition and the for-profit commercial model we see in Colorado and Washington. Legalization encompasses a wide range of possible regimes, distinguished along at least four dimensions: the kinds of organizations that are allowed to provide the drug, the regulations under which those organizations operate, the nature of the products that can be distributed, and price.
• Vermonters likely consumed between 15 and 25 metric tons of marijuana and spent between $125 million and $225 million on marijuana in 2014.
• There are nearly 40 times as many regular marijuana users living within 200 miles of Vermont borders as there are living inside Vermont.
• Under a scenario in which Vermont legalized marijuana, taxed aggressively, suppressed its black market, and consumption increased by 25 to 100 percent, tax revenues from sales to Vermont residents could be in the range of $20 million to $75 million annually.
• Vermont also could end up supplying large numbers of out-of-state users, directly via marijuana tourism or indirectly — unless and until other states in the Northeast also legalized marijuana. That flow could then reverse if those states imposed lower taxes, undermining revenues from taxing Vermont's own residents. The likelihood of cross-border commerce could engender a federal government response, making all revenue projections highly uncertain.
• State and local governments in Vermont likely spend less than $1 million annually prohibiting marijuana for those ages 21 and older. Regulatory costs associated with legalizing production and retail sales would likely exceed that level.

Marijuana legalization is a controversial and multifaceted issue that is now the subject of serious debate. Since 2012, four U.S. states have passed ballot initiatives to remove prohibition and legalize a for-profit commercial marijuana industry. Voters in Washington, D.C., took the more limited step of passing an initiative to legalize home production and personal possession. In December 2013, Uruguay became the first country to experiment with legalization nationwide. In May 2014, Vermont Governor Peter Shumlin signed a bill into law that required the Secretary of Administration to provide a report about the consequences of legalizing marijuana. This report was produced for the Secretary of Administration in response to that legislation.

The report does not make a recommendation about whether Vermont should change its marijuana laws. The goal is to inform, not sway, discussions about the future of marijuana policy in Vermont and other jurisdictions considering alternatives to traditional marijuana prohibition.

The principal message of the report is that marijuana policy should not be viewed as a binary choice between prohibition and the for-profit commercial model we see in Colorado and Washington. Legalization encompasses a wide range of possible regimes, distinguished along at least four dimensions: the kinds of organizations that are allowed to provide the drug, the regulations under which those organizations operate, the nature of the products that can be distributed, and price. These choices could have profound consequences for health and social well-being, as well as job creation and government revenue.

• Chapter One

  Introduction

• Chapter Two

  The Marijuana Landscape in Vermont

• Chapter Three

  Consequences of Marijuana Use

• Chapter Four

  Supply Architectures

• Chapter Five

  Taxation and Other Sources of Revenue

• Chapter Six

  Regulation

• Chapter Seven

  How Legalization in Vermont Could Influence Tax Revenue, Consumption, and Public Budgets

• Chapter Eight

  Closing Remarks

• Appendix A

  Evidence Concerning Substitution and Complementarity

• Appendix B

  Business Deductions and U.S. Code Title 26 Section 280E