Selling Out and Getting High

Let me state upfront that from a personal standpoint, I do not care what anyone does in the privacy of their home as long as no one gets hurt, especially children.  If you want to spend your day getting high on marijuana, that is your business.  But, if the known deleterious effects of your use starts to impact my life such as decreased worker productivity, increased use of social services, and government-subsidized health care costs as a result of your pot use, then it does become my concern.

The legalization of recreational marijuana in Colorado and other states in the near future is being sold as a financial boom to state tax revenues.  Initial reports from Colorado indicate that the state has taken in over $10 million in new tax revenues and fees as a result of their legalization efforts.  Great for Colorado.

But, the legalization of marijuana being used as a financial panacea to cure the fiscal woes of states is much like the reliance of states on gambling for the same purposes.  At one time, New Jersey had a monopoly on East Coast casino gambling.  It was sold as a new means of tax revenue to keep down state income taxes and local property taxes, to help senior citizens with prescription drugs, and my favorite, “a unique tool of urban renewal.”  No one can deny that casino gambling was a financial boom for the state- while they had the monopoly.

Without getting into the reasons they did not capitalize on that monopoly, suffice to say that when competition opened in neighboring states, it had an effect on New Jersey.  And as more jurisdictions began allowing casino gambling, New Jersey suffered in business and state tax revenues.  State income taxes have gone up (not down), New Jersey is notorious for their ridiculously high property taxes and Atlantic City itself has hardly been “renewed” except in a very few areas.

Today, the initial analysis of Colorado’s legalization of recreational marijuana has hints of the same things we heard when New Jersey approved casino gambling.  All the focus was on the state tax revenues.  And while Colorado has that monopoly, they can expect to see these tax revenues every year.  But, as more states experiment with legalizing pot, those figures will gradually decrease until a lower baseline is reached and revenues level off.

Oddly enough, one thing about Colorado is a phenomena called pot tourism- people going to Colorado to partake of the legal offerings.  That is just bizarre, but it also indicates that as more states legalize it, that tourism will drop off.  Recent news stories illustrate one unintended consequence of the “experiment” thus far- out-of-state people (mainly young people) going to Colorado to purchase pot and then eventually ending up in homeless shelters.   Consider this: you go to Colorado as a pot tourist, you are not gainfully employed (since you end up at a homeless shelter), your money eventually runs out.  What’s a pothead to do?

The result is reminiscent of what one sees today with gambling.  An  underclass of panhandler and petty thief emerges who hang around casino entrances begging for money or who walk through looking for cash credits left on slot machines when they are not outright stealing them and picking people’s pockets.  Legalization proponents are touting the fact that burglaries are down 11% in Denver over the same period last year and then using that data to prove that pot legalization has decreased the burglary rate.  That is a quantum leap in cause-and-effect logical reasoning.  Any number of factors could cause that decrease in home burglaries, most likely NOT the legalization of pot.

As this experiment continues, we will likely see more of these “unintended consequences” popping up.  And this begs a bigger question: should a state rest its financial stakes on the vices of the population?  Prior to its legalization in Colorado, there was a study released comparing Colorado on a variety of metrics before and after medical marijuana was approved in the state.  At every juncture- the most important of which was youth use- the statistics refuted virtually every argument of legalization’s proponents.  Just with the approval of medical marijuana, youth use increased, the number of youth referrals for testing at schools increased, the number of traffic fatalities with marijuana implicated increased, etc.

With recreational marijuana approval, we are likely to see even more increases in Colorado.  Its proponents will trot out a statistic in their favor- decreased use of rehabilitation services.  This is to be expected since most rehabilitative efforts regarding marijuana are court-ordered.  Very few people seek help themselves for marijuana dependency and it is usually done under the threat of the law.

To me, the state sees only dollar signs in its eyes.  My advice to Colorado is to take full advantage of those dollars now.  When the initial hoopla wears off and when other states approve recreational marijuana sales, you will lose your monopoly.  And then when that happens, get ready for the complaints of the marijuana industry that they are over-taxed and over-regulated and it is creating a competitive disadvantage with other states.  So, the politicians will loosen the regulations and minors will slip through the cracks and they will decrease the taxes or licensing fees and this will decrease the revenue.  Eventually you will end up like New Jersey and gambling- just another state with an amenity offered by most others.  And the dream of building state-of-the-art schools will be but a promise of the past.  Yet, you’ll be left with the homeless, the petty thief, the itch on the back of local law enforcement, and the people taxing your social service infrastructure.  You will come out a net plus in the end, but the plus will not be a large as originally projected.  A government cannot solve its fiscal woes on the vices of its population.  That has been proven with the proliferation of casino gambling.