The Premium On Legal Weed

Sullum fears that high taxes in Washington state will limit the market for legal marijuana and keep the state’s illicit market in business:

According to calculations by BOTEC, [Mark] Kleiman’s consulting firm, these taxes will make the retail cost of cannabis 58 percent higher than it would otherwise be, accounting for 37 percent of the price paid by consumers. One BOTEC projection, based on a production cost of $2 per gram, indicates the after-tax retail price will be $17 per gram, or $482 per ounce. Another projection, based on a production cost of $3 per gram, puts the retail price at $25.50 per gram, or $723 per ounce.

That’s a lot more than pot smokers in Washington currently pay. According to the website Price of Weed, which collects reports from marijuana consumers across the country, the average price for high-quality cannabis in Washington is $239 per ounce.

In another post, Sullum considers the fate of Washington’s medical marijuana dispensaries, which are untaxed:

The state-licensed outlets will face competition not only from ordinary pot dealers but from medical marijuana dispensaries, which are not explicitly authorized by state law but are run as cooperatives by patients and their designated providers. There are something like 200 dispensaries in Seattle, where the liquor control board plans to allow just 21 state-licensed pot shops. A.P. notes that “the City Council has passed zoning regulations for pot businesses that would require medical marijuana dispensaries to obtain a state license [which is not currently available for dispensaries] or stop doing business by 2015.” Despite assurances by supporters of I-502, Washington’s legalization initiative, that it would not affect dispensaries, it looks like the writing is on the wall. How long will state and local governments eager for marijuana tax revenue allow these untaxed, unregulated outlets to compete with government-licensed stores selling cannabis of similar quality at higher prices?