Marijuana's $42 Billion Question

 

source: Forbes
Quentin Hardy


The U.S. marijuana is a $113 billion annual business that costs taxpayers $41.8 billion in enforcement costs and lost tax revenues, according to a study to be published later Monday.

The study, "Lost Taxes and Other Costs of Marijuana Laws," by Jon Gettman, contends that marijuana sales are mostly the province of teenagers and young adults. His numbers also imply that the industry is supported, in both demand prices, by a relatively few extremely heavy users.

The study used diverse sources including government studies, private research and even High Times magazine to determine that about 25 million Americans consume an estimated total of 31 million pounds of pot annually. The number of users, and the price paid for pot, have changed little over recent years, despite continual government interdiction and incarceration efforts, the study says.

Based on government assumption that some 28.7% of U.S. gross domestic product ends up as tax revenue on a federal, state or local basis, the $113 billion could yield $31 billion in taxes. Assuming that marijuana offenses, which are 5.54% of all arrests, take an equal share of the country's $193 billion in annual criminal justice expenditures, Gettman finds another $10.7 billion in annual savings.

Gettman, who has a Ph.D. in public policy from George Mason University and publishes extensively on the pot business, admits that his numbers are at best rough, but contends they represent an accurate study of what keeping pot illegal costs. "The real answers are somewhere inside the bands" of all the published studies, he says. "It would be interesting to see what the government did with another $42 billion."

The report is available at www.drugscience.org, the Web site of The Bulletin of Cannabis Reform, Gettman's organization.

Away from the headline numbers, a closer examination of Gettman's work carries a couple of interesting surprises. The annual 31 million pounds of pot consumed works out to a daily consumption equivalent by American pot smokers of 1.5 to 1.75 of the 85-by-25-millimeter (length and circumference, respectively) standard joint that the U.S. government rolls for in its studies. Most users don't fire up that much, however.

Of the 25 million annual users, some 12.8 million people over the age of 18 use pot monthly, and about 23% of these smoke three or more joints a day. In this, marijuana seems much like the alcohol business, which relies on 20% of its consumers for more than half of its consumption.

In addition, Gettman's work says that 54.8% of children aged 12-17 and 52.8% of adults over the age of 35 say marijuana would be easy for them to get. The number spikes by as much as 20 percentage points for people between those ages.

In terms of drug selling, however, the numbers skew lower: According to a government study quoted in the report, 3.2% of kids 12-17 have sold drugs, while for those 18 to 24 the number is 6%. It falls to 2.3% for people 25 to 34, and to a mere 0.7% for the 35-and-over set. While this number applies to all drug sales, and not just pot, Gettman maintains that licit marijuana would drive many young dealers out of business.

"Right now, kids buy from other kids," he says. "The fixed costs of entry are quite affordable for a 16-year-old. We don't have that structure in the liquor business. There is an economic incentive for a child to do this, and no control under the current regimen."