Washington and Colorado pot laws and the Mexican drug trade

Keegan Hamilton has a usefully skeptical piece on the Atlantic website challenging claims that cannabis legalization in Washington State and Colorado will dismantle the Mexican drug trafficking organizations.

Overall, the piece is very well done. But the rules of the Bloggers’ Guild require me to pick out the two points where I think Hamilton got it wrong.

First, on the question of what Colorado and Washington voters actually did, the piece makes the same mistake most of the press made and keeps making, both before and after Election Day:

The notion that legalizing marijuana will cripple Mexico’s brutal drug cartels has gained steam in recent years, and finally boiled over last month when Washington and Colorado became the first states to legalize marijuana for recreational use. Adults 21 and over in both states will be allowed to possess up to an ounce of processed pot, reversing a prohibition policy that stood for the better part of a century. It’s unclear whether the federal government will tolerate the repeal, but if legal pot remains the law of the land, it is widely assumed that Mexican drug cartels will be out several billion dollars in annual revenue.

[emphasis added]

The highlighted clause is true, but it tells much less than the whole truth. Just allowing adults to possess pot would complete the process of “decriminalization” of use. “Decrim” replaces criminal with civil penalties; Colorado and Washington have gone further by making the activity flat-out legal (for adults). I’m all for it.

But standing alone, legalizing possession wouldn’t do anything to “cartel” revenues. (“Cartel” is a hideous misnomer, but let it pass for the moment.) The drug traffickers don’t make money possessing pot: they produce and sell it. And those are the activities that Washington and Colorado have legalized.

Nor is there any question whether the federal government will “tolerate the repeal.” States make their own laws, and unmake them. The federal government has no authority to require a state to have a specific criminal law, and cannot force a state to help it enforce federal law. The feds could send DEA agents to arrest individual pot-smokers in Colorado, but the ratio of agents to pot-smokers makes that an exercise in shoveling sand against the tide. So Washington and Colorado cannabis users are now safe from arrest, unless they light up in a national park or a federal courthouse.

What remains in question is whether the feds will tolerate the aboveground taxed and regulated market proposed in the Colorado and Washington laws. The joker in the deck is that Colorado went beyond legalizing possession for personal use and legalized production for (nominally) personal use: up to six plants at a time per household. Again, the federal government could try to bust some individual home-growers, but it couldn’t possibly shut down homegrowing overall, or prevent some of the homegrown material from leaking into commercial channels unless Colorado authorities became enthusiastic partners in that enforcement effort.

The other howler in the Atlantic essay is the claim that “The duty [i.e., cannabis taxes] adds an estimated $500 million to Washington state coffers every year.” That reflects an official estimate of the potential revenues if the feds allow the regulated market to operate and if that legal market displaces the entire illegal market. Not a nickel of that is coming in today. And even on the most generous assumptions, it’s hard to see how the number could go that high: a horseback guess at the total current illegal market in Washington would be on the order of $300 million a year.

Anyway, the whole thing is worth reading. And then, if you’re suffering from an excessively cheerful mood, go ahead and read the comments. The combination of ignorant certainty and vitriol is really quite astounding.

Comments

  1. Igloo says

    If the Wash pot market is 300 million a year, probably 200 million of that is the illegal product premium. If that goes away, but sales stay the same, the tax certainly capture this 200 million premium. I doubt the tax is so well designed however. On top of that, however, is the potential to tax locally produced pot for export to other states, essentially taking over the market current server by BC bud that has to be dangerously and expensively be smuggled across the Canadian border.

    This is a real and substantial blow to organized crime, so really all we are arguing about is how big the blow is.

  2. Freeman says

    I saw similar numbers reported in the Seattle Times.

    Based on a state fiscal analysis, it will be a big market: 363,000 users consuming 187,000 pounds of marijuana each year, with steep sin taxes generating more than $560 million a year.

    The math on those steep sin tax numbers comes to a whopping $187/ounce. It sure leaves a lot of breathing room for the well-established black market. It will be interesting to see who will be willing to risk the uncertainty of federal prosecution in order to compete in an established market with a $187/ounce handicap to overcome.

    Washington officials would do well to research New York’s cigarette regulations to observe the dynamics of the market and tax revenues when a ubiquitous easily-smuggled commodity is taxed at rates on the downward slope of the Laffer curve.

    • Mark Kleiman says

      The studies I’ve seen suggest that NYC is actually still on the upslope: even with evasion, more taxes lead to more revenues, with the public-health benefits thrown in as a bonus.

      • Keith Humphreys says

        Bit of a snag though: The smuggling of cigarettes from places like Virginia (30 cents a pack, IIRC) to places like NYC is largely done by organized crime groups who establish themselves in both places and engage in other types of crime, which is a cost financially and in public safety.

      • Freeman says

        Perhaps I’ve not been privy to the studies you’ve seen. The reporting I’ve seen suggests the opposite. One example.

        I’m with Keith on the organized crime issue. A thriving black market serviced by organized crime is a negative in the public-health benefits calculation.

  3. merl says

    We don’t smoke crappy Mexican weed in Washington so I don’t see how that could impact their drug trade.

    • Mark Kleiman says

      Maybe “we” (upscale blog readers) don’t. But I’d be surprised if poorer Washingtonians didn’t smoke a fair amount of “crappy Mexican weed.”

  4. Tim Morgan says

    I completely support the legalization of marijuana. And all factors to consider i.e., – taxation issues, personal plant growth amounts, adults only (is this even a consideration?), cost of purchase for ounces, pounds, etc., potency per THC – has increased 20 fold since the 70′s, education about the danger to lungs/some advocate the idea that pot is worse than cigarettes and others vice/ versa.
    My personal thoughts (although I have many I’m only bringing one to the table). As follows:
    The use of cannabis among those afflicted with schizoaffective disorder, schizophrenia, Bipolar disorder, and several other pyschiatric conditions and diagnosis results show (with effective data supply and analysis)that the use of high potency reefer (high THC content),can cause psychosis,extreme paranoia, memory loss, reduction of ability to learn simple skills,to interfere with education/learning and (so very important) – the problems associated with smoking and driving. How accidents rise among users (based on data analysis),how individuals safe driving skills are impaired which has caused crashes with death tolls and overall driving skills diminished, sometimes leading to dangerous driving. So – in essence – lets look at these factors (and others) before deciding who can legally smoke,(age wise)- and who can’t.

  5. says

    Today I went to work at King County Metro Transit in Seattle, to find a new edict issued by the head of Human Resources. After reading it, I cannot help but wonder if they feel they are starting to believe that King County is vulnerable to legal action for their safety sensitive drug testing policy. After reading that:

    “The federal government has no authority to require a state to have a specific criminal law, and cannot force a state to help it enforce federal law.”

    I wonder if it is legal for King County to have testing. I wonder if this is something the Feds should be doing if they believe it is necessary. How can King County have the power to test someone for something that is perfectly legal to do if the test does not show whether a person is under the influence at the time of the test, but test for the breakdown chemicals that appear several hours after the person is under the influence. Does King County still have the power to test for a drug that is legal if that test could be one that comes up positive for a drug that it is perfectly legal to ingest in ones free time? Wouldn’t the test have to test for whether a person is high at the time, or has ingested the drug on that day or within a reasonable period of time?

    Before anyone gets all worried about stoned Bus Drivers, I wonder this because I feel I should be compensated for losing a right others have, and I wonder if government has the right to do this, where does it end for government workers? What other rights can they summarily decide to strip from me? I know I am not Thomas Jefferson, but I believe this opens a legal can of worms where at the end of a good fight, maybe all our rights as citizens are broadened.

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