Pubdate: Sun, 11 Dec 2005
Source: San Francisco Chronicle (CA)
Copyright: 2005 Hearst Communications Inc.
Author: Hal Glatzer


Editor -- David Lazarus makes the case for legalizing and taxing pot
very well ("The case for legal pot use," Lazarus at Large, Nov. 20).
But while I advocate the same position, for the same
law-enforcement-related reasons, I question the projections he cites
for revenue from taxation. If pot were truly legal, the cost of
production would not merely go lower, it would fall to insignificance.
The retail price would shrink by 80 to 90 percent, and would, at that
point, be nearly all tax.

Pot, today, sells for $100 to $300 per ounce in legal pot clubs -
about the same price range as for (illegal) street pot, because so
many suppliers serve both markets. For them, the big-ticket item is
protection - not only from the law but from thieves.

Indoor growers have to rent houses or warehouses, and their
high-wattage lamps run up big utility bills. Many outdoor growers,
particularly the cartels who cultivate pot on remote public lands,
have to pay for guns and armed guards and long supply lines. And the
illegal market is crammed with middlemen. No wonder each plant grown
in a national forest was reported by The Chronicle to be worth $4,000.

In fact, the true cost of growing pot is trivial. At most, it's a
couple of dollars per ounce. Even top-quality seeds are a one-time
investment, because some or all of the plants can be allowed to
produce fresh seeds. Indoors under lights, or outdoors in the sunnier
climes, this botanically annual plant can be pruned and kept in
production for an extra year. That, along with sequential germination,
obviates the need for, and the cost of, all-at-once harvesting and
replanting. In a legal market, too, good farmland (or indoor spaces)
would become available closer to consumers, shrinking even
transportation as a serious cost item.

And demand may not grow too much larger, overall, after legalization.
Just as people can make their own wine and beer today, consumers could
grow their own pot and supply friends and family for little or no
remuneration. While most people won't do that (most people don't grow
their own vegetables), those who do will to some extent offset the
increase in retail demand from first-time or returning consumers.

Today's retail prices -- the prices upon which most projections for
tax revenues are based -- can not be maintained in a truly legal
marketplace. I expect that the actual cost of legal production,
packaging and distribution -- the base price for pot -- will be about
$5 per ounce. And as with tobacco, consumers will then pay more for
the tax than for the weed itself: I expect the legal retail price will
settle in the range of $20 to $50 per ounce. And that's a fair price,
I think, as it's comparable to the price of (and offers more or less
the same intoxicating potential as) a bottle of distilled spirits.

So, while it would be wise for California to legalize pot because
law-enforcement efforts would be better deployed elsewhere, I expect
the state will earn only millions, not billions, from taxing it.

Hal Glatzer

San Francisco
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