By Harris Kenny and Leonard Gilroy
Last month Colorado voters resoundingly passed Amendment 64 into the state constitution, legalizing both recreational marijuana and industrial hemp. So far, realizing the will of the voters is on track, but implementation risks threaten to undermine the intentions behind Amendment 64. Policy makers are contending with thriving black markets and gray markets (goods or services that while legal, are still traded outside of any tax or regulatory regime), so it is in their best interests to get this right—even if they didn’t support the initiative in the first place.
The most glaring opposition comes from President Barack Obama, despite his recent opaque comments in an interview with Barbara Walters about how enforcing marijuana prohibition is not a “top priority.” He has tragically escalated the policies of his like-minded predecessor, George W. Bush, for four years by taking hostile actions against legal, legitimate medicinal marijuana businesses in direct contradiction to his campaign promises. Continued hostility should be expected from the Obama administration until proven otherwise. Fortunately, Colorado voters aren’t doing this alone. Gov. John Hickenlooper recently announced a 24-member task force assigned with recommending needed legislative actions. Congresswoman Diana DeGette is sponsoring a bill (HR 6606) with bipartisan support that would prevent federal statutes from pre-empting state laws on marijuana. Voters in Washington State passed a similar marijuana legalization initiative; meaning two states are waging this fight—for now. Correspondingly, major national pollsters, including Gallup, Angus Reid and Public Policy Polling, have found a majority of Americans support legalizing recreational marijuana.
Amendment 64 allows possession and transfer without remuneration of up to one ounce of marijuana, and home cultivation of up to six marijuana plants for adults over 21. It also calls for Colorado policy makers to adopt laws taxing and regulating marijuana, a critical step towards creating a legal, commercial market. But a failure of the legislature to follow through could work to perpetuate prohibition-enabled black and gray market operations.
The best way for policy makers to avoid this scenario would be to swiftly establish the tax and regulatory components of the new system, so marijuana is regulated akin to alcohol. Unlike alcohol, though, the policies must be clear and effective on both sides of the cash register. Colorado’s regulations on alcohol are no model. The state has anachronistic regulations on alcohol, such as forbidding franchising for liquor store owners, preventing direct sale from wholesalers to consumers, and forcing grocers to sell lower concentration alcohol. Sensible regulations on both sides of the cash register terrify black market operators (like drug cartels and gangs), because it means competition from legitimate businesses. For consumers, the biggest issue will likely be additional legislation on driving under the influence of marijuana, even though it is already illegal. A bill is being written to prohibit driving with five nanograms of tetrahydrocannabinol (THC)—the main psychoactive ingredient in marijuana—per milliliter of blood. This proposal is problematic. Inactive THC can stay in one’s system for days or weeks, so the test can’t differentiate past use from present intoxication. As the bill is still being written, new language reportedly would allow drivers to prove their sobriety. Nonetheless, many remain justifiably wary.
Predictably, many are salivating at the thought of new tax revenue that hasn’t even been collected. Besides new state and local sales tax revenue, the legislature is tasked with selecting an excise tax rate of up to 15 percent. However, the Taxpayer’s Bill of Rights (TABOR) amendment to the state constitution requires voters to approve all tax increases. The attorney general has indicated the language in Amendment 64 “did not comply” with TABOR. Hence, separate voter approval of the excise tax is expected. Colorado imposes relatively low excise taxes on alcoholic spirits and beer (44th and 46th respectively, among all states, according to the Tax Foundation). Low excise taxes would be prudent for marijuana, too. The higher the excise taxes, the greater incentive black and gray market operators have to stay in business. Black and gray market operators have proven resilient throughout the so-called “War on Drugs,” while policy makers obstinately continue ineffective prohibition that squanders countless dollars and ruins lives. Instead, the people of Colorado tasked policy makers with adopting more sophisticated drug policy by legalizing recreational marijuana and industrial hemp. While early signals are encouraging, implementation risk looms large, and voters are watching.
Harris Kenny is a Denver-based policy analyst and Leonard Gilroy is the director of government reform at Reason Foundation (reason.org). They wrote this article for the Independence Institute, a Denver think tank.