In Colorado, marijuana doesn’t pay. Josh Barro has a piece in the Upshot on the low amount of revenue the state has gotten from pot taxes. At first the state predicted it would take in $118 million from pot taxes; now, it’s predicting only $69 million—in a state with a budget of $27 billion. Why was the number revised down?
But Mr. [state director of marijuana coordination Andrew] Freedman says the biggest drag on revenue is that so much of Colorado’s marijuana market remains unregulated. A 2014 report commissioned by the state’s Department of Revenue estimated 130 metric tons of marijuana was consumed in the state that year, while just 77 metric tons was sold through medical dispensaries and recreational marijuana retailers. The rest was untaxed: a combination of home growing, production by untaxed medical “caregivers” whose lightly regulated status is protected in the state constitution and plain old black-market production and trafficking.
In other words, legalization neither created a tax windfall nor ended the in-state black market. Both of those facts should give us pause. On the other hand, legalization not only in Colorado but also in Washington, Alaska, Oregon, and D.C. does appear to be cutting into the profits of Mexican drug cartels. Time Magazine reports that U.S. Border Patrol and the Mexican army have seen drops in the amount of weed they have confiscated since legalization started in those states. The story speculates that losses in pot profits could help reduce the money cartels have on hand to fund corruption and violence—but it also notes that they could get revenue from new crimes they’ve moved into,”from sex trafficking to stealing crude oil from Mexican pipelines.”Put all this together, and it seems like pot legalization is a pretty middling: some new revenue, but much to bank on; a persistent black market at home; and losses for cartels that will now branch out into other crimes. That’s not dispositive about whether legalization should have happened or not, but it does show that the effects may not be as radical as advocates supposed.