I recently noted that Colorado doesn’t seem to be collecting an excise on medical marijuana:
Pot sales so far are expected to generate about $2.7 million in license fees, in addition to the more than $681,000 in sales tax collected from July 2009 to February 2010.
Jacob Sullum doesn’t think legal marijuana would yield an excise tax bonanza:
Gieringer suggests a tax of 50 cents to $1 per joint, which is extremely heavy even compared to the cigarette taxes that prevail in New York City ($3 a pack, or 15 cents a cigarette, on top of the federal excise tax of 39 cents a pack). Even a levy as big as Gieringer proposes would bring in revenues that “might range from $2.2 to $6.4 billion per year,” according to his estimate.
Federal excise taxes have changed since I last looked, but they shed some light on what’s “reasonable”:
- Beer (12 oz.) – $0.05
- Wine (750 mL) – $0.21
- Liquor (750 mL, 80 proof) – $2.14
- Cigarettes (pack of 20) – $1.01 (up from $0.39)
State taxes can be much, much higher — but the pot-friendly states of California and Colorado don’t have high excise tax rates compared to other states:
- Beer (12 oz.) – $0.01875 [CA], $0.0075 [CO]
- Wine (750 mL) – $0.20 [CA], $0.25 [CO]
- Liquor (750 mL, 80 proof) – $3.30 [CA], $2.58 [CO]
- Cigarettes (pack of 20) – $0.87 [CA], $0.84 [CO]
California NORML argues that an excise of $1 per half-gram “joint” could yield $1 billion per year for the Golden State:
At current levels of consumption, an excise tax of $1 per gram of marijuana would yield $475–$550 million per year, while a tax of $ 2 per gram ($1 per half-gram joint) would yield around $ 1 billion, about the same as California’s current excise tax on cigarettes.
Other economic studies have attempted to evaluate the revenues from a marijuana excise tax. According to a study by Caputo and Ostrom [2], a nationwide excise tax would yield $3.44–$12.25 billion (inflation adjusted to current dollars). Adjusted for population, California’s share would come to $400 million–$1.5 billion. Similar results were obtained by Gieringer [3], who estimated $3.2–$6.4 billion based on a nationwide $1 per joint tax, or $400–$800 million for California. Doubling the tax to $2 per joint could bring the total up to $1.5 billion in California.
Sales taxes would generate another $240–$400 million, so the total tax revenue could grow quite large:
Another way to estimate the total tax revenues from marijuana is by drawing a parallel with California’s current tax on cigarettes. Fully one-half of the current price of cigarettes is accounted for by taxes and fees. On a $3.60 pack, consumers pay a $0.87 excise tax, $0.28 in sales tax, and another $0.74 for the tobacco settlement. A similar 50% level of taxation in a legal $3–$5 billion marijuana market would yield $1.5–$2.5 billion.