One of the advantages of legalizing mj is that it will suppress the black market. There’s been legalization in two states for a couple years now. Has anyone studied how much, if at all, the black market has been suppressed in those states?
It will probably depend on how much the government tries to skim off the top, in the form of taxes on legal marijuana. Make it too much, and the black market will continue.
Cigarettes are legal in all 50 states, but taxed at various rates. It’s common to have people addicted to cigarettes cross state lines to buy cartons in a lower-taxed state. Here in Minnesota, there are Indian reservations which sell cigarettes without any taxes. Addicts often go there to get their cigarette fix, and the state often sets up checkpoints on the roads outside them to catch non-Indians illegally bringing untaxed cigarettes off the reservation.
Same with liquor – it’s not uncommon to see news stories about a liquor store or bar busted for selling liquor with a counterfeit tax stamp on it.
And that’s also much of the reason for the success of online sellers like Amazon, Ebay, and other online retailers – they avoid paying the sales tax that brick-and-mortar stores pay to the state. So they are a black market. Or at least some shade of gray.
You just need to look at Washington state. Legalizing marijuana did not destroy the black market at all. The reason you ask??? It’s still CHEAPER to buy marijuana on the streets than the legal store all over the place. But Washington state did make over $70 Million in taxes from marijuana in 2014.
One problem is that legalization helps the black market folks as well. A black market marijuana dealer can just openly carry around up to the legal limit (I think it’s an ounce which is apparently quite a bit) and sell to whoever. Unless the cops actually catch him in the act of selling it, he isn’t subject to arrest.
Not even sure that’s illegal - if I buy some marijuana from a pot shop, then sell a bud to a friend for $20, the taxes on the drug were already paid. I think such a person to person resale is legal. The cops would probably have to catch the guy, with the drugs, and prove that they did not come from a legal marijuana shop. Find the drugs, the baggies, the scale, etc might not even be enough.
And, as a purchaser, you’re also safer buying from the black market if it’s legalized. Buy some weed from your weed dealer, walk around town with it in your pocket. Long as you don’t have too much on you, if the cops find it on you, it’s now as if they found a pack of cigarettes in your pocket. I assume that if you get arrested and brought to jail with some legal weed on you, the police will give it right back when they let you go.
That’s a funny mental image. “money clip with $20. Iphone 5. 1 wallet, with ID and 3 credit cards. 1 joint. 1 lighter. Sign here on the dotted that you got your stuff back. Have a nice day”.
Black market prices here have collapsed … what once cost $400 an oz can be had for $100 today. This is due to the medical marijuana laws crippling law enforcement’s activities, if you put a cancer patient in prison, the State has to pay for their treatment. Basically the local police just quit enforcing the laws concerning non-medical uses. 10 years later, legalizing recreational use is somewhat anti-climatic … that cat has already been let out the bag.
I’m not sure if this policy is national, but here in California we do pay sales tax on online purchases, at least from Amazon. I never use Etsy or Ebay.
I’m not sure the OP’s question is being answered yet though–i.e., is the volume and dollar amount of marijuana sold by large-scale criminal organizations notably decreased in states which have some level of legalization? I certainly don’t know who could tell you this except maybe the DEA, and they have an incentive not to say. Perhaps from the fact that they AREN’T trumpeting the fact that there is no decrease in organized drug selling we can infer that there IS such a decrease 
*if I buy some marijuana from a pot shop, then sell a bud to a friend for $20, the taxes on the drug were already paid. I think such a person to person resale is legal. *
Not in California - any sales outside of a dispensary are still illegal - however - this is the new “black market” - people with recommendation letters selling to those without - mostly what hear about is those over 18 selling to those under 18.
You’d have to talk to growers about sales to legal vs illegal outlets to get a picture of how big the illegal market still is.
OK, I was mostly wondering about any scholarly studies on the subject, but it looks like no one knows of any.
I knew that the nature of the black market changes because of legalization. But they’ve put some significant restrictions on legal sales, so there’s still lots of room for the black market to function in.
I just heard a radio interview with the director of a new Frontline documentary about El Chapo,the Mexican drug baron who just escaped from prison. The director remarked in passing that legalization had brought down profits on marijuana, so the cartel was moving more into poppies (for heroin).
The documentary is on tonight, though I’m sure it will touch only tangentially on your question.
The scholarly research process is so slow I would doubt there would be any studies yet.
I think a good analogy would be the existence of moonshine many years after the end of Prohibition. Anyone know of any studies on that?
One perhaps somewhat obvious answer is that obviously the black market got smaller because a certain portion of it moved into the legal market. It’s not like the people who got into MM or now recreational pot didn’t have previous experience in the field.
One other factor beyond simple economics is that the legal situation still isn’t 100% clear. The Feds are currently tolerating it, but who knows if that toleration will outlive the current administration. Until that gets settled more conclusively, you’re still going to have people who simply prefer to operate in the shadows.
That’s also a reason why the situation isn’t really comparable to the end of Prohibition. When that ended, everyone knew you could start safely pouring money into breweries and distilleries again. That is not at all the case here. Putting money into legal pot operations is extremely risky, both because of the financial obstacles that exist today and the risk of changing attitudes with federal law enforcement. Right now, legal pot operations can’t compete with the black market on price because they’re pretty similar in scale to the black market ones (i.e. small). Once the legal situation becomes clearer and it becomes safe to put big money into legal pot, you’ll likely see larger scale operations that can beat the black market on price even with paying taxes.
You don’t have to beat illegal pot on price: Most people will pay a higher price for quality for all types of products (and illegal pot is highly variable in quality).
I was in Seattle last April and there was a big drug bust in the downtown area where we were staying. A large number of people were arrested and most for selling mj.
So I suppose that answers the question somewhat.
There’s some bite to the restrictions on home production too. IIRC Washington only allow personal growing for medical marijuana users. Colorado limited number of plants and where. Depending on how home grow regulations are implemented if can have an effect on the supply side.
I think a big difference is it’s something of a pain in the ass to make moonshine, whereas marijuana is a troublesome weed in some parts of the country.
It is easy to grow marijuana. It is not quite so easy to grow and harvest the parts of the pot plant that are useful for getting high. I have made moonshine it is not that difficult. Farming is hard work.
I was in the Seattle area last week on vacation. Altho I had not used marijuana in about 40 years, I did buy and enjoy some while on vacation.
One real advantage (besides of course it being legal) to buying at a dispensary was that the amount of active compounds was clearly listed on the packaging. Also, you could choose between two different strains – important to me because one reason I gave up smoking pot was that it was making me depressed. Back in the day, we never knew if what we were buying was strong or weak or what actually it was. I guess that means you could count us as “new” users, ones that wouldn’t have bought on the black market.
(As a side note, altho they sold smoking weed at the dispensary, we bought only cookies and candy. Our hotel was 100% nonsmoking, as was our rental car, and it’s illegal to smoke pot in public.)
The State of Washington charged 37% in tax, which IIRC did not include the sales tax. I think Illinois should legalize recreational use as a way to get out of the serious financial bind we’re in. And sooner rather than later since I think there would be an advantage to being the first Midwestern state to legalize. However, given that the Land of Lincoln can’t seem to work out all the issues in selling medical marijuana, I’m not holding my breath.
IIRC, a cookie containing 10mg of the active compound (considered a single dose) cost, including taxes, about $10 – so it wasn’t cheap. And naturally it was cash only.
(Another side note – if you’re going to Seattle, be aware that there are no dispensaries in the CBD of the city. We spent the first part of our trip in Bremerton [family wedding] and bught there.)
Legal pot might be more expensive but:
- You don’t have to go to some shady apartment building.
- You don’t have to pretend to be friends with some douchbag.
- You don’t have to sit around for 20 minutes and smoke with the same douchbag.
It’s really great to just complete a simple transaction in a nice clean store.
I read in the local paper that Oregon is going to deliberately keep prices cheap to try to suppress the black market. That in turn will probably put downward pressure on prices in Washington and possibly elsewhere.
That could be. I haven’t heard what tax rate they’re planning on proposing, but it could be quite low. Right now, a number of Portland-area people are going to Vancouver (just across the state line) to buy. If the Oregon rate is substantially less, that traffic will be reversed. I doubt it’ll have much effect on cities further away, such as Seattle.
The Oregon law legalizing it prohibits local governments from imposing their own taxes. Some cities anticipated this and imposed taxes on mj before the law was approved, figuring these will be grandfathered in. Some just want additional revenue; others set their tax rate so high that no one will open a shop in their city. I’m sure there’ll be court cases about whether these local taxes are legal or not.
One unfortunate recent development is that the legislature will probably allow some counties to opt out of legal mj. All these counties are in eastern Oregon and in fact, pretty much cover the entire state east of the Cascades. Assuming they all do opt out, Idaho residents will be SOL.