Study Finds Legalizing Marijuana In California Would Lower The Price Of The Drug And Increase Use

Article Date: 09 Jul 2010 – 0:00 PDT

Legalizing the production and distribution of marijuana in California could cut the price of the drug by as much as 80 percent and increase consumption, according to a new study by the nonprofit RAND Corporation that examines many issues raised by proposals to legalize marijuana in the state.

While the state Board of Equalization has estimated taxing legal marijuana could raise more than $1 billion in revenue, the RAND study cautions that any potential revenue could be dramatically higher or lower based on a number of factors, including the level of taxation, the amount of tax evasion and the response by the federal government.

Past research provides solid evidence that marijuana consumption goes up when prices go down, but the magnitude of the consumption increase cannot be predicted because prices will fall to levels below those ever studied, researchers say. Consumption also might rise because of non-price effects such as advertising or a reduction in stigma, researchers say.

In addition to uncertainty about the taxes levied and evaded, researchers do not know how users will respond to such a large drop in price. Even under a scenario with high taxes ($50 per ounce) and a moderate rate of tax evasion (25 percent), researchers cannot rule out consumption increases of 50 percent to 100 percent, and possibly even larger. If prevalence increased by 100 percent, marijuana use in California would be close to the prevalence levels recorded in the late 1970s.

The analysis, prepared by the RAND Drug Policy Research Center, was conducted in an effort to objectively outline the key issues that voters and legislators should consider as California weighs marijuana legalization.

“There is considerable uncertainty about the impact that legalizing marijuana in California will have on consumption and public budgets,” said Beau Kilmer, the study’s lead author and a policy researcher at RAND. “No government has legalized the production and distribution of marijuana for general use, so there is little evidence on which to base any predictions about how this might work in California,”

The analysis also suggests that the annual cost of enforcing current marijuana laws is smaller than suggested by others. The RAND study estimates that the cost of enforcing the current laws probably totals less than $300 million.

“It is critical that legislators and the public understand what is known and unknown as the state weighs this unprecedented step,” said Rosalie Liccardo Pacula, a study co-author and co-director with Kilmer of the RAND Drug Policy Research Center.

Two proposals are pending that would legalize the production and sale of marijuana in California. Assembly Bill 2254 authored by Assemblyman Tom Ammiano (D-San Francisco) would legalize marijuana for those aged 21 and older and task the state Department of Alcoholic Beverage Control with regulating its possession, sale and cultivation. The bill would create a $50 per ounce excise tax and these funds would be used to fund drug education, awareness, and rehabilitation programs under the jurisdiction of the State Department of Alcohol and Drug Programs.