Why Economics Will Eventually Lead to Pot Legalization

Why Economics Will Eventually Lead to Pot Legalization

Democrat control of Washington has led to some pretty serious discussions about marijuana legalization in recent months. There is plenty of support in the House of Representatives. In the Senate, Democrats are having trouble finding a Republican cosponsor for a legalization bill. Even if they don’t get it done this year or next, federal pot legalization is coming. It is only a matter of time.

What will be the thing that finally pushes it over the finish line? Economics. The combination of potential tax revenues and the exorbitantly high cost of pot in conservative states, like Utah, will eventually convince lawmakers that the only viable solution is complete decriminalization. At this point, the only real question is how long it will take them to get there.

Medical and Recreational Use

We are only discussing federal decriminalization because so many states have jumped on the marijuana bandwagon. At the time of this writing, thirty-six states had medical marijuana laws in place. Among them, seventeen also allow for recreational use. Whether Washington likes it or not, the weed industry is now alive and well in most of the U.S. And yet, its economics are still problematic.

It has been suggested that weed is very similar to alcohol in terms of the amount of revenue it can generate. Whether or not that’s true remains to be seen. But let us assume for a minute that it is. Washington and the states derive a tremendous amount of revenue from alcohol sales. Every time someone goes into the liquor store for a bottle of wine and a pint of whiskey, state and federal coffers get a deposit.

Imagine what government coffers would look like if the same thing applied to marijuana. Every visit to a weed dispensary would add a little bit more to the bottom line. That is more money Washington and the states have to spend on their endless pet projects. How long can politicians resist the temptation?

Relief for the States

The economics of weed affects the states much more directly. This is clearly demonstrated in Utah, where medical marijuana laws are among the strictest in the country. If you want to legally buy medical cannabis products there, you can only do so through a weed dispensary. But you cannot just walk in and buy. You need to have a medical cannabis card.

But wait. If you want to know how to get a medical marijuana card, you can find the necessary information on the state website. But you still have to visit with a qualified medical professional to get your card. That individual has to verify that you suffer from a qualifying condition and that marijuana is an appropriate treatment for it.

There are many other regulations in Utah that space will not allow for in this post. The point is that Utah’s strict regulatory environment artificially inflates retail prices. Medical pot is extremely expensive in Utah. It is going to stay that way as long as regulation remains strict.

Some assume that federal decriminalization will offer some relief to the states by reducing the need for tight controls. For example, federal decriminalization could open the door to transporting marijuana across state lines. Out-of-state competition could encourage states like Utah to loosen up a bit, thereby facilitating price reductions.

As things currently stand, weed industry economics do not add up. The only way to change that is through federal legalization. The sooner Washington lawmakers come to terms with that, the sooner they will move to decriminalize marijuana. Keep your eye on it because it is coming one way or the other.

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