Legalizing Marijuana In California: Pros And Cons

Impact on California’s economy

Discuss about the Legalizing Marijuana in California.

Legalization of marijuana remains a good move for social justices as asserted by proponents. The pot prices are headed for a rise once the legalization is finalized and implemented. For a long time, laws on drugs have been utilized when arresting as well as incarcerating minorities at extremely exorbitant and upper rates than the whites. Additionally, validation of pot has occurred to be less dangerous than alcohol, as President himself put it categorically (Choo et al., 2014). Thus rather than establishing a black-market for these offenders, it is rational to impose tax on it besides subsequently regulated it to help individuals of California. In lieu of this, it is true that the main purpose for legalizing marijuana is to increase the revenues derived from taxation. These are sound as well as noble arguments. There is hence a need for people to vote Yes on Proposition 64, which is a measure that will legalize recreational marijuana for people above 21 years.

The 15% taxation on the marijuana for recreational purposes under these measures shall enhance weed’s price contrasted with that person who undertake to sell marijuana out of her apartment. The sales tax in certain portion of the law of LA County is already ten cents on the dollar. Therefore, if one is looking at a sheer price rise for one’s organic harvest if one were to purchase it lawfully for frivolous use. Studies have shown that even the wholesale price base will probably upsurge, at least on interim magnitudes, in case voters legalize marijuana (Gieringer, Rosenthal & Carter, 2008). As predicted by the released white paper, there will be an inevitable surge in the pot prices once the rules of Proposition 64 opens the door to the recreational retailers commencing in 2018. Following the Gold Rush: California, Cannabis and Election” by data on marijuana price firm Cannabis Benchmarks examined at what occurred following the recreational ratification in Oregon, Washing  and Colorado to make a deduction. 

In Oregon, the legalization was followed by an increasing weed prices in reaction to its ratification, plus a 200.0 dollar a pound point, to a price of 1,941.0 dollars, late previous year, as well as a 12% spike further in the current year, based on the said white paper. The 1^st rise was due to dispensaries that were stocking up to allow them meet the surged demand; 2^nd rise was a reaction to a “supply tailback”  as rules and regulations compelled retailing group to purchase produce which had been established by the corresponding ascribed labs. The CEO of Cannabis Benchmarks, Jonathan Rubin explicated the various factors possible of increasing post-legalization prices in California.

Price surge and tax revenues

Compliance: Proposition 64 shall decree licences for the cultivators as well as venders, along with regulating packaging as well as labelling which all cost money and hence shifted to the prices. Stocking up: The dispensaries will have to engage in “advance purchasing to ensure their respective shelves are adequately stocked” on January 1, 2018, when, as the Proposition 64 has gone through, anybody with a heartbeat as well as an Identification Document validating they are twenty-one years or older can then move into these dispensaries and purchase pot. Demand: Since virtually everyone will be capable of buying the weed, demand is anticipated to surge. Advanced demand will denoted advanced prices of the legalized marijuana. Testing: Compulsory merchandise testing not solely decelerates the supply line thereby adding costs for the producers, yet it further implies that non-compliant product will be held and further destroyed. Fewer supply will denote higher or surged prices of the legalized marijuana (Knopf, 2017).

The above variables have accounted for price surges as witnessed in states which have already legalized the recreational marijuana. Nevertheless, the CEO further recognized that California is a distinct beast. Experts have also agreed that around one-eighty percent of the America’s weed emerges from the Golden State. Outdoor growers in this state have enormous capacity, and this could assist to alleviate certain price fluctuation. However, it is believed that consumers will still view higher-priced pot. In every commodity market, the final user is the person costs get passed on to.

The surge might be interim, portion of a “boom-bust cycle” whereby entrepreneurs haste into an emerging market and subsequently create huge amounts of products and hence, much competition which makes the prices to level of sooner than anticipated. Where prices remain extremely high, more players are attracted, and the stiffness of competition rises, more supply, and in turn prices decline (McGinty et al., 2017).

Longer-run prices will stabilize as the economic forces of demand and supply hit equilibrium. This scenario will afford the prevailing cultivators as well as early entrants the chance for optimizing their corresponding operations as well guarantee security of their competitive stances.

It is expected that the demand for marijuana will increase with the legalization. As has been witnessed in other states including Washington, Colorado and Oregon whereby marijuana use, sales and production are presently legalized, the demand have always gone up unlike place where use of pot is restrained and prohibited (New York State Medical Marijuana Program 2015). Over 70% of the demand for marijuana emerge from approximately thirty percent of its users in states where it is already legalized (Gourdet et al., 2017). For example, the demand for Marijuana from the users of 21 and older can be illustrated below: 

Influence on demand and supply

The price is down in Colarado. A single ounce sale in June 2014 averaged between $300 to $400 and in June 2015, it averaged between $250 and $300 and presently, the price ranges between $241.91 (high-quality) and $196.26 (medium quality) (Pacula, 2010). In Washington, the price plunged as can be seen by the diagram below indicating ratio of sales value to weight in dollars a gram:  

Given the above information, the bottom line for demand and supply can be illustrated. As has been witnessed in other states, it was a classic supply as well as demand and hence, California will never be an exemption. Since the number of retailers as well as cultivators will multiply, the supply and demand curves will shift rightwards as illustrated below:

The 15% sales tax imposed by this measure on retail sales of marijuana alongside the cultivation tax of $9.25% per ounce of marijuana flowers as well as $2.75% per ounce of marijuana leaves substantially  enable state government  of California to collect a huge amount of tax revenue. This is so due to price elasticity of demand. The PED of marijuana is inelastic and, hence even with the interim anticipated rise in prices, many people will still buy (Cerdá et al., 2017).

This is coupled by the as at November 9, 2016, residents of California of 21 and older were permitted to own as much as an ounce of marijuana or eight grams of concentrated cannabis based on the California chapter of National Organization for the Reform of Marijuana Laws (NORML). Further, the residents are permitted to grow as many as 6 plants a residence as well as owns the marijuana produced by such plants. These will ensure that by January 1, 2018, when the sales will be opened, the government will draw as much tax revenue as possible before the prices finally stabilize in the long run. 

The ushering of Marijuana will be seen as substitute to Tobacco products and hence it may reduce the consumption of Tobacco and hence lower tax revenue from Tobacco products. However, the government will still benefits as the tax revenue lost from Tobacco will be offset but increased consumption of recreational marijuana which will still get into the government coffers (Carnevale et al., (2017).  Accordingly, the Proposition 64’s envisioned fiscal influence is realistic. This is as mentioned above, the fiscal influence is to get more tax revenue from recreational Marijuana. This is exactly what will happen since besides people shifting from Tobacco to Marijuana, the uses of Marijuana in the black market will now cease to hide and consume it which will not be accounted for as tax revenue (Pacula, 2017)).

References

Carnevale, J. T., Kagan, R., Murphy, P. J., & Esrick, J. (2017). A practical framework for regulating for-profit recreational marijuana in US States: Lessons from Colorado and Washington. International Journal of Drug Policy.

Cerdá, M., Wall, M., Feng, T., Keyes, K. M., Sarvet, A., Schulenberg, J., … & Hasin, D. S. (2017). Association of state recreational marijuana laws with adolescent marijuana use. JAMA pediatrics, 171(2), 142-149.

Choo, E. K., Benz, M., Zaller, N., Warren, O., Rising, K. L., & McConnell, K. J. (2014). The impact of state medical marijuana legislation on adolescent marijuana use. Journal of Adolescent Health, 55(2), 160-166.

Gieringer, D. H., Rosenthal, E., & Carter, G. T. (2008). Marijuana medical handbook: Practical guide to the therapeutic uses of marijuana. Oakland, Calif: Quick American.

Knopf, A. (2017). Marijuana legalization: What effect does it have on teens?. The Brown University Child and Adolescent Behavior Letter, 33(2), 1-7.

McGinty, E. E., Niederdeppe, J., Heley, K., & Barry, C. L. (2017). Public perceptions of arguments supporting and opposing recreational marijuana legalization. Preventive Medicine, 99, 80-86.

New York State Medical Marijuana Program. (May 2015). Retrieved from: https://www.health.ny.gov/regulations/medical_marijuana/

Pacula, R. L. (2010). Examining the Impact of Marijuana Legalization on Marijuana Consumption.

Pacula, R. L. (2017). Regulating Medical Marijuana Markets.

Gourdet, C., Giombi, K. C., Kosa, K., Wiley, J., & Cates, S. (2017). How four US states are regulating recreational marijuana edibles. International Journal of Drug Policy, 43, 83-90.