Marijuana Taxes Keep Black Markets Thriving

Jeffrey Miron and Jacob WinterTwenty ‐​one states havelegalized some amount of marijuana for recreational use, and sixteen more allow marijuana for medical use.Critics claim black markets remain despite legalization. This is true — because legalization has been accompanied by excessive taxation and regulation.California ’s legal marijuana industry, for example, has a tough time competing with the black market. The state ’s illegal sales approach $8 billion annually, twice legal sales.It ’s not difficult to see why. Retailers must pay a $1,000 applicationfee and a minimum $2,500 licensing fee annually, and sales aretaxed at 15 percent. This causes the price of legal marijuana products to exceed that of illegal products by two to three times.Moreover, California and other states allow municipalities to ban marijuana retail shops, further perpetuating black markets.New York has a similar problem. Sales aretaxed at 13 percent plus a distribution tax per milligram of THC. Illegal sales are still the norm despite legalizing recreational marijuana two years ago. A legislator who sponsored NY ’s legalization bill said she “didn’t think this was going to happen.”This should have been clear. Wherever there are high taxes, there are black markets.This phenomenon is not limited to marijuana. New York imposes one of the highest taxes on cigarettes in the nation — $4.35 per pack. Consequently, over 53 percent of cigarettes sold in NY are smugg...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs