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Eugene

(62,627 posts)
Fri Nov 16, 2018, 06:35 PM Nov 2018

Marijuana is getting cheaper. For some states, that's a problem.

Source: Washington Post

Marijuana is getting cheaper. For some states, that’s a problem.

By Keith Humphreys
November 16 at 12:40 PM

Wholesale marijuana prices in Colorado have fallen by a third in just the past 12 months, continuing a price crash that began soon after the drug was legalized. Although this implies that some marijuana entrepreneurs are going to go bankrupt, the bigger financial hit will be felt by states that tax marijuana based on its price.

Marijuana prices are collapsing in Colorado and in other legalization states (e.g., Oregon, where the price can go as low as $100/pound) because a legal business is dramatically cheaper to operate than an illegal one. Because states generally set their marijuana tax rates as a percentage of price, their revenue per sale sinks in direct proportion to the fall in marijuana prices. Ironically, in a bid for more tax revenue per marijuana sale, Colorado increased its marijuana tax rate from 10 percent to 15 percent last year, only to see the anticipated added tax revenue wiped out by falling prices in a year’s time.

States may have failed to anticipate this problem because of misleading predictions about the effects of legalization. Pro-legalization economist Jeffrey Miron projected in 2010 that marijuana prices would only fall 50 percent when prohibition was repealed, leaving the drug at a price that would yield high tax revenue. That was clearly a rosy scenario.

A starker prediction made by drug policy analyst Jonathan Caulkins looks more prescient every day: He forecast that legalized marijuana will eventually fall in price to the level of other easily grown, legal plants such as wheat and barley, such that a joint might sell for a nickel or even become a complimentary item akin to beer nuts at the bar. If that comes to pass, taxes based on a percentage of price might not even cover the costs of the government’s regulatory system for legal marijuana, meaning that rather than helping states’ bottom line the industry would be an outright drain on the public purse.

-snip-


Read more: https://www.washingtonpost.com/business/2018/11/16/marijuana-is-getting-cheaper-some-states-thats-problem/
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Marijuana is getting cheaper. For some states, that's a problem. (Original Post) Eugene Nov 2018 OP
govt as the new cartel model is not going to work. great for users! nt msongs Nov 2018 #1
It's bound to get cheaper workinclasszero Nov 2018 #2
If the price to consumer declines, consumption will increase, offsetting Hoyt Nov 2018 #3
That makes sense to me. BigmanPigman Nov 2018 #5
I'm not so sure pscot Nov 2018 #6
As cheap as beer nuts? Woohoooo Bradshaw3 Nov 2018 #4
wash state is the only state in legal land where any home grow is still illegal unless.. samnsara Nov 2018 #7
anyone who didnt see this coming is a fool. mopinko Nov 2018 #8
today my son in law got an oz of Blue Dream for 28$ in Seattle... samnsara Nov 2018 #9
 

Hoyt

(54,770 posts)
3. If the price to consumer declines, consumption will increase, offsetting
Fri Nov 16, 2018, 06:55 PM
Nov 2018

some of any decline in tax per gram. That will increase demand, increasing prices in shortrun. And, if suppliers cut back, or go bankrupt, price and resultant tax receipts will increase. Then, according to the Cobweb Theory of agricultural products, the cycle begins again. At least that what I remember after decades of smoking weed.

pscot

(21,037 posts)
6. I'm not so sure
Fri Nov 16, 2018, 10:03 PM
Nov 2018

I find it tends to be self limiting. If it were cheaper i might smoke better weed but probably no more than now.

samnsara

(18,281 posts)
7. wash state is the only state in legal land where any home grow is still illegal unless..
Sat Nov 17, 2018, 11:02 AM
Nov 2018

..you have a MMJ card. I can see this as the reason and I bet other states will start reeling in the home grown. I mean if the states are legalizing it to make $$ how can they do that if no one has to buy it?

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