How Taxes and Restrictions on Legal Weed Keep the Black Market Thriving

While marijuana legalization continues to become more widespread across the United States, it seems that government officials have found a way to perpetuate the perils of prohibition by imposing ridiculous levels of regulation and high taxes on the herb that prevents users from vacating the black market.

Although one of the primary selling points for legal cannabis involves pulling pot patrons out of the black market and dropping them into the civil sector, eliminating a myriad of social and public safety concerns, a recent article by Reason’s managing editor J.D. Tuccille suggests that legalization has created a unique environment where the war dogs of the drug war and the underground dealers are both winning.

Despite four states and the District of Columbia having legalized recreational marijuana, at least to some degree, “[the] warriors and dealers are doing just fine,” writes Tuccille, adding that the terms “legal” and “illegal” do not always stand before each other as arch nemesis.

“All too often, they’re just points on a spectrum,” he writes. “Something can be banned, with the law so ignored that people forget it’s there. And something can be permitted, but so restricted that everybody gets warm and fuzzy accolades for reform while underground business remains the only practical access.”

The primary reason this is happening is because regulators have made it difficult for legal markets get both legs out of the circle of prohibition. Therefore, while cannabis is technically legal in these areas, the hounds of the drug war have continued to flourish, and so have the street dealers.

The majority of the issues that simply fade the lines of prohibition but do not eliminate them altogether stem from conflicting state and federal law. One of the biggest concerns is the banking restriction imposed on statewide cannabis markets, dealings that have been marked “OK” by the Obama Administration, but still pose a threat to the industry because no definitive law has been put on the books.

However, in Washington, the financial conundrum is the least of their concern. Lawmakers there recently imposed a 37 percent excise tax and restricted the number of retail locations (161 legal pot stores statewide), putting the legal market in a state of non-competitiveness with the underground trade. A recent report from KIRO Radio indicates that all of the restrictions on Washington weed commerce “requires serious dedication” to “switch to legal pot.”

Tucille goes on to explain that the black market in Colorado has continued to thrive due to its taxing trifecta, keeping legal pot more expensive than it is on the street. Not to mention, he says, state regulators make it next to impossible for pot shops to open by forcing them to pay in upwards of “tens of thousands of dollars” just to obtain a license.

So far, Oregon seems to have implemented the smartest legal market in the nation, keeping taxes lower as well as passing legislation that will allow hundreds of medical marijuana dispensaries to begin selling recreational weed while the Oregon Liquor Control Commission hashes out the full scope of the state’s cannabis market.

However, some of those medical marijuana dispensaries complain that the yearly fees paid to the city and state to continue playing the marijuana game is making it difficult to survive.

“Arguably, the marijuana market is a new one in this country, relegalized after decades in the shadows, and with our last above-ground experience predating a popular taste for the stuff,” writes Tucille. “Officials need time to experiment and find out what works.”

“But marijuana isn’t really all that unique a product,” he explains. “It’s a substance that people consume because it makes them feel good. And it’s a product (or range of products) disapproved of by many politicians and pundits for reasons both puritanical and presumptuous. The market for marijuana, and policy toward it, closely resembles the treatment of both alcohol and tobacco. And our experience with those markets provide valuable lessons for anybody who cares to pay attention.”

In the end, or at least until the federal government gets more hands on with its approach to how the nation regulates marijuana, prohibitionists in legal states are going to find ways to enable the black market, while consumers are going to be forced to decide whether to frequent the legal or the illegal market.

On a side note, legalizing medical marijuana on a federal level, which seems to be the focus on Capitol Hill, would contribute to this problem on a much larger scale. While patients needing medicinal cannabis would finally have the appropriate access, a street market of immense proportions would undoubtedly emerge across the nation for those wanting to consume it recreationally. With that said, it is of my opinion that the only way to truly eliminate the issues outlined above is to repeal prohibition altogether and allow citizens to purchase and use the plant as they see fit.