Getting hooked on the budget's miracle drug

I’ve always been pretty agnostic about marijuana legalization. I’ve never cared to try the stuff personally – it smells like roadkill skunk to me, and I’m perfectly content to kill my brain cells with alcohol, just as God intended. I don’t care if other people use it recreationally, but I come across a great many regular marijuana users in my day job, and generally find them a pathetic lot. Pot obviously isn’t meth or heroin – but then again, it ain’t Oreo cookies.

But of all the arguments in favor of marijuana legalization, I’ve always found, “Tax it and the government will be rolling (heh heh) in extra dough!” to be the least persuasive. I worry that Nevada is about to learn – again – that free money never is, in the end.

Governments love to spend money, and politicians love to talk about spending other people’s money. It’s even better if Other People are being taxed for doing something not particularly respectable. Knowing this simple truth, I always thought that when and if the industry became legal, politicians would assume every dime in projected marijuana tax would be collected (it won’t), would add about 10% to the projected revenues for good measure (they will), and then spend it all in future budget allocations before the first dispensary ever opened up.  

Then, a few years later, the whole thing would fail to meet expectations – and we’d be dealing with “unexpected” budget shortfalls and “emergency” tax increases on less black-marketable industries or individuals.

Those revenue projections and associated budgeting, I’ve always feared, would inevitably ignore or downplay marijuana’s social costs, further reducing any net gain we might see economically. Like I said – it isn’t meth, but it’s still a psychoactive drug that damages brain development, correlates strongly with increased risk of mental health problems, and makes it dangerous to drive a car.

Edibles, especially in candy form, create increased risk to children. Black markets haven’t gone away in states where cannabis is legal, and they won’t here. And in our rush to start getting more tax dollars out of a still-developing regulatory environment, will our government be able to keep marijuana customer or entrepreneur data secure?

We’re about to find out.

Gov. Sandoval proposed a 10% tax on recreational marijuana sales, in addition to other taxes and fees.  His budget assumes – and is dependent upon – $99.2 million raised by taxing pot.

In both Washington and Colorado, tax revenues from marijuana trickled in at less than expected levels at first, but now exceed originally budgeted predictions by substantial amounts and continue to grow every year. Does this mean my fears are baseless, and that I should embrace all this free weed money for schools?  Maybe, but I’m still skeptical.

The numbers we have from those two states must reflect their early adoption status, with big boosts from pot-headed tourists from neighboring states. The more places pot’s legal, the more places it will be manufactured, and the cheaper it will be to get. The cheaper it is, the less tax revenue it will generate.  

Washington’s marijuana revenue will no doubt take a hit now that Oregon and California have followed suit. Colorado has double our population, and raised less than $170 million in the first two years of legalization. And they didn’t have neighboring states with their own pot industries to compete with them.

All that aside, has taxing vice been of long-term cultural profit to Nevada? We rely on gaming, obviously, and tobacco money has been a critical component of our education budget since 1999. But neither of these sources of Other People’s Money, even where it has been unique to our state and a major tourist draw, has been enough to lift our schools out of their statistical doldrums. What about marijuana money do we think will be any different?

Marijuana isn’t going to be un-legalized any time soon, and I hope the federal government decriminalizes it on their level so individual states can continue their experiments with marijuana revenue freely. Since it’s legal now, we might as well get some financial benefit from it.

But Gov. Sandoval would do well to maintain a healthy skepticism about the drug’s ability to fill budget holes in the long term. Moreover, in the final budget, our legislature must account for the fact that social costs, regulatory burdens, and individuals illegally growing their own will seriously limit the net gain to our state’s coffers.

We’ll be wise not to get too addicted to the budget’s new miracle drug.

Orrin was a political columnist for the Reno Gazette-Journal in 2015 and 2016. He has appeared as a guest commentator on Nevada radio and television programs including Nevada Newsmakers and The Travis Christiansen Show. He began blogging in 2005 for his law school’s Federalist Society chapter and in 2007 started his own blog, First Principles.