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Economists: Regulating cannabis could save US $14 billion;

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Economists: Regulating cannabis could save US $14 billion;

Written by Autumn Bernstein

Over $1 billion in benefits for California taxpayers alone
Friedman and 500 economists call for new approach to cannabis control

A report released June 2 by Harvard economist Dr. Jeffrey Miron points to the economic advantages of treating cannabis like alcohol rather than prohibiting it as an illegal drug.
In “The Budgetary Implications of Marijuana Prohibition,” Miron estimates that replacing the prison model of drug enforcement with a fair system of taxation and regulation similar to that used for alcoholic beverages would produce combined savings and tax revenues of between $10 billion and $14 billion per year nationally and $1.1 billion in California.
A 2004 study by California NORML has estimated even higher savings for the state.

Noted economist Dr. Milton Friedman

Also on June 2, a group of more than 500 distinguished economists led by Nobel Prize winner Dr. Milton Friedman released an open letter to President Bush and other public officials calling for “an open and honest debate about marijuana prohibition.”
    “We believe such a debate will favor a regimen in which marijuana is legal but taxed and regulated like other goods,” the letter said.
    “Regulating cannabis would raise revenue for vital services, like schools and health care,” said Dale Gieringer, Executive Director of CA NORML, an organization dedicated to cannabis reform. “For example, California’s schools are facing a major budget shortfall this year, and a tax on cannabis could go a long way toward addressing that. In this budget climate, what other industry is stepping up to the plate to be taxed?”
Advocates also point to strong public support for taking cannabis out of the criminal justice system. The nation spends billions on arresting, prosecuting, and incarcerating people on pot charges.
    “Voters just don’t think we should be wasting money on cannabis enforcement. Just last November, Oakland voters overwhelmingly passed a measure calling for the legal taxation and regulation of cannabis for private adult use,” said Gieringer. Voters there passed Measure Z by 65.2% to tolerate and, when possible, legalize, tax and regulate adult sales, cultivation and use.
    “The plain fact is that marijuana prohibition is a failure,” said Bruce Mirken of the Washington DC-based Marijuana Policy Project. “Year after year, 85% of high school seniors tell government survey-takers that marijuana is ‘easy to get.’ Conservatives like Milton Friedman are part of the growing number of Californians saying it’s time we considered a new approach and stopped throwing billions of dollars at a failed policy.”
    Mendocino County recently heard a proposal to tax medical marijuana growers as a way to fill a looming $3 million budget deficit. The proposal’s author, Supervisor Jim Wattenburger, called the medical marijuana industry a driving force of the local economy that could help solve the county’s budgetary woes.
    The Miron report, using data from a variety of federal and state government sources, concludes:
• Replacing cannabis prohibition with a system of legal regulation would save California approximately $981 million in government expenditures on prohibition enforcement.
• Taxed, regulated cannabis sales would raise at least $96.3 million annually in new revenue for California, assuming it was taxed at a rate comparable to ordinary goods.
• Nationally, cannabis regulation would save approximately $7.7 billion in enforcement — $2.4 billion at the federal level and $5.3 billion at the state and local level.

In Oakland, 65.2% of voters passed an initiative last year to tolerate and, as soon as possible, tax & regulate adult sales, cultivation and use.

• National revenue from taxation of cannabis sales would range from $2.4 billion per year if cannabis were taxed like ordinary consumer goods to $6.2 billion if it were taxed like alcohol or tobacco.
    The Miron report examined two possible scenarios for national revenue from taxation of cannabis sales: a lower tax rate like those applied to ordinary consumer goods, and a higher “sin tax” like those applied to cigarettes or alcohol.
    On a state level, the report only looked at the more conservative scenario, where cannabis is taxed at a rate similar to ordinary goods, generating $96.3 million annually in California. In contrast, a 2004 report by CA NORML envisions cannabis being taxed at a steep “sin tax” rate, which would generate even more new revenue — up to $1 billion annually.
    Dr. Miron noted that many factors beyond costs and tax revenues would need to be considered in evaluating possible changes in cannabis laws, saying, “These budgetary impacts should be included in any rational debate about marijuana policy.”
    The full report, the open letter to public officials signed by over 500 economists, and the full list of its endorsers are all available at http://www.prohibition costs.org/.

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