Tax Rascal

Proposition 19: Does Legal Marijuana Make For Tax Windfalls?

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Proposition 19: Does Legal Marijuana Make For Tax Windfalls?

California’s Proposition 19, known ever so formally as the Regulate, Control and Tax Cannabis Act of 2010 is being championed by a lot of people because it would have massive tax benefits. And it will–just not the ones you expect.

The biggest tax benefit of Proposition 19 would be the cut in law enforcement, not the revenue from those who like to pass to the left. In fact, that revenue is projected to be pretty small, since it’s all sales tax based. Even at a higher “sin tax” rate, it’s only projected to bring in $500 million annually. Nothing to sneeze at for a state as in debt as California, but nothing that will save them either.

Instead it’ll be the cut in law enforcement that will create the biggest windfall for the state. A projected $960 million will be saved, though that revenue likely comes attached to law enforcement job cuts, which have their own tax downsides (like pensions).

Proposition 19 and other decriminalization laws do inject some cash into the system, but it’ll hardly save California’s sinking debt ship. That said, there are plenty of reasons to vote for a legalization bill beyond the tax issues and, frankly, I’m all for it. Smoke up California, just don’t expect it to save you.

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