Could legalizing recreational marijuana help Nevada's economy?

Allen St. Pierre has advocated for years to legalize marijuana.

The National Organization for the Reform of Marijuana Laws’s executive director said that back in the ’90s, people’s eyes would glaze over if you brought up the economic benefits.

Instead, the angle that attracted media, political and public attention was “compassionate use” — if someone needs to use it for their glaucoma, then they were willing to listen.

But after five years in an economic rut, the narrative has changed.

St. Pierre was just on a radio show in the South debating a politician he’d faced many times. The politician had always opposed legalization.

But this time he said there were tough choices between funding hospice care, schools and hurricane dike repair, and that “marijuana prohibition is no longer a luxury we can afford.”

St. Pierre said, “I never thought prohibition was a luxury. But if this guy now wants to use this narrative that this was a luxury we could afford in the past but no longer can, then I say ‘Hallelujah.’”

Voters in Colorado, Washington and Oregon will decide soon whether recreational cannabis use should be legalized, and claims of big financial benefits are being used to persuade a yes vote.

Given that Nevada was hardest hit by the recession, should we also consider legalizing it?

Bummer for Nevada

Mark A.R. Kleiman, a professor of public policy at UCLA and co-author of the new book “Marijuana Legalization: What Everyone Needs to Know,” doesn’t think there’s much reason for Nevada to legalize now.

“If Colorado or Washington wants to be pioneers, let them — pioneers got arrows in their backs,” he said.

The problem with legalizing it before it happens everywhere is that no one knows the full consequences, he said. And there are many pieces to deal with once you decide to legalize, starting with: what’s the price, what regulations should you have, how do you limit people from exporting it out of state (possibly drawing federal wrath) and how do you keep kids from getting it?

But Nevada might have an advantage.

“If Nevada were the first state with substantial casinos where you can take a joint to your table, that might attract business,” he said.

That said, he’s not big on the idea. For one, he thinks casinos probably prefer gamblers to be drunk than stoned.

And “I think the question of whether to legalize should be judged on drug policy rather than on whether you can have services with no taxes (because the services are paid for with revenues from marijuana),” Kleiman said.

He thinks taxes could be raised only so far before people were driven to get marijuana on the black market (as has happened in places with high cigarette taxes), and that marijuana prices would be driven so low that not much tax revenue could be generated.

In Kleiman’s book, it’s estimated marijuana taxes after federal legalization could generate a few billion dollars a year nationally, compared with revenues from tobacco, alcohol and lotteries at $10 billion a year each.

Then there’s the problem that even if Nevada were an early adopter, marijuana still wouldn’t really be legal.

“It’s a felony under federal law and there’s nothing Nevada can do about that,” Kleiman said.

“Does Nevada want to be a place where a lot of people want to commit a federal felony? If you managed to restrict it to Nevada then the feds would probably leave you alone but it would require a lot of effort and would probably cost too much to make it a benefit.

“Look, I don’t have a dog in this fight. I can make arguments for or against legalizing. But the economic benefits at the state level aren’t high on the list of reasons for legalizing — you may think you’re going to create jobs or solve the state’s fiscal problems but you’re not and you’re not.”

Not so fast

NORML’s St. Pierre thinks there are economic advantages for states to legalize recreational use of marijuana depending on how it’s regulated.

(Kleiman would agree and says it’s silly to talk for or against legalization without knowing the myriad details of how it would be enacted.)

For one, St. Pierre thinks if marijuana cultivation is restricted to indoor operations, there would be substantial tax benefits.

His outfit estimated the cost of producing high quality, consumer-ready marijuana in a 50,000-square-foot indoor facility at $1 per gram.

“Ninety percent of the cost is not lights, equipment, water and nutrition like many think,” St. Pierre noted. “Ninety percent is the human interaction: cutting, drying, maintaining and packaging.”

The grower would sell to a wholesaler who would sell it to a retailer who would mark it up 10 percent for a final cost to the consumer of an estimated $4.40 per gram before the government steps in.

“Then there will be a huge sin tax waiting on this purchase similar to alcohol, tobacco and increasingly on what society calls junk food,” St. Pierre said.

He discussed how different locales impose different taxes depending upon their own moral views. For instance, the tobacco tax in Kentucky is less than $2 a pack but in New York, it’s between $7 and $9 a pack.

“The Beer Institute has a good ad that says in America, for every can of beer we consume, we pay 45 percent of the cost in local, state and federal taxes. It generates an awesome amount of revenue,” St. Pierre said.

“And I have a Wall Street Journal article about the taxation rate per gallon of distilled spirits. It ranges from $2.50 in the Dakotas up to $27 a gallon in Washington state.”

What about Kleiman’s view of much lower tax revenues for marijuana?

St. Pierre said, “This entire scenario is different if you grow cannabis outdoors as a standard row crop. Then it’s pennies on the pound for production. I think you can get a metric ton of wheat for something like $30. So if we could grow marijuana outdoors and it costs so little to produce, the tax base would be much smaller and he’d be correct.”

But, St. Pierre said, there are already places taking this into account.

“In California, there are municipalities north of San Francisco where the local mores and values say, ‘We’re OK with marijuana and dispensaries but we’re not OK with people growing it outdoors because it stinks and we think it attracts people violently to places they shouldn’t be.’”

If the government attaches costs that make it prohibitive to grow it outdoors, then tax revenues could be substantial.

Let’s suppose the pot-using public has established that it’s willing to pay $200 an ounce (St. Pierre said he’s paid up to $600 an ounce for “vegetable matter”).

If it costs $75 an ounce to get it to the consumer — after giving a reasonable profit to those along the production and supply chain — that gives the government the option to impose taxes and fees that make up the difference: $125 for every ounce of marijuana sold.

“There will be billions and billions in revenue from taxes that come in,” he said.

Nevada voices

Chris Giunchigliani, who was behind Nevada’s legalization of marijuana for medical purposes and is now a Clark County commissioner, said she thinks recreational legalization could help the state’s economy.

“If regulated correctly, yes it could help,” she said. “We do it for cigarettes.”

She also said that legalizing industrial hemp — which can’t get you high but is basically the same plant — could boost Nevada’s manufacturing sector.

But she said she didn’t think Nevada voters — who overwhelmingly supported medical marijuana but just as strongly voted down two recreational marijuana ballot measures — would go for legalization until they see it can be used without problems.

Toward that end, she said the medical marijuana law needs to be amended to “allow distribution so you can get your medicine in a safe, responsible manner and don’t have to get illegal seeds and grow your own.”

Ted Choley — manager of Art Dogs & Grace, a shop that supports marijuana legalization but as a business focuses on tobacco — said he also thinks the state needs to make the medical-use law reasonable before it worries about recreational use.

He said it takes so long to go through the bureaucracy and then to grow and dry the marijuana yourself, that many terminal patients will die before they can get their first dose.

“I see people (who qualified for medical marijuana) on a pretty regular basis who are hard up, older people who don’t know what to do and they’re going through a rough time,” Choley said. “They have to grow their own medicine but the state won’t tell them how.”

Agreement

Both Kleiman and St. Pierre support legalization in Nevada but for different reasons.

“I’ve been to Nevada many times,” St. Pierre said. “I like to gamble, ski and fly fish. I can guarantee if tomorrow the Nevada Legislature legalizes marijuana and the governor signs it, I would call my brother to say ‘I have the best fly fishing trip planned’ and I would spend money there hand over fist.”

For his part, Kleiman said, “The biggest benefit for Nevada to legalize is if you like to smoke pot, you could do it in peace with better quality and known quality and no jail — that’s a benefit where I grew up. Not everything is money.”

Caption: A caregiver picks out a marijuana bud for a patient last month at a marijuana dispensary in Denver. Colorado, Oregon and Washington could become the first to legalize marijuana this fall. All three state are asking voters to decide whether residents can smoke pot. AP photo