Getting Into the Weeds Part IV: Pot Legalization Could Create a Banana Republic

Diane Harkey Board of Equalization Member Diane Harkey 4 Comments


This op-ed originally appeared in The Press Enterprise and can be viewed here.

As we enter 2016, our new industry and cash crop, marijuana, is the buzz in Sacramento. Over 30 new pieces of pro-marijuana legislation will be introduced this year, with little outside-the-beltway scrutiny. Big players are waiting in the wings to seize the marketplace with recreational use ballot initiatives. Medical marijuana businesses are leery of how wholesale legalization will affect their market, and cities are passing zoning ordinances to keep the “industry” out of their neighborhoods.

One consistent adage in politics is if you want to understand the why, follow the money. To be sure, there are billions of dollars at stake. Promoters tout that the state could eventually collect several million to billions in presently forgone taxes. But the structure legislated in 2015 ensures any taxes collected, with the exception of sales tax, will not add more to our state coffers but will fund a new state bureaucracy led by a yet-to-be hired Pot Czar.

The new bureaucracy’s mission will be to further industry participants’ regulatory needs, address negative impacts of cultivation, manufacturing and transportation of the products and generally to expand the market for marijuana. Commercializing marijuana similar to tobacco is anticipated to draw major corporate interests and increase usage under the guise of a regulated, safer and higher quality-controlled product. Gov. Jerry Brown’s 2016-17 budget calls for 126 new hires, 61 allocated to control environmental impacts.

With only 5 million people to our 38 million, Colorado is a petri dish for research on the effects of legalization with regard to increasing drugged driving, youth use, cartel activity and disappointing state revenue. Amazingly, our Legislature seems unwilling to address criminal resistance to and public safety impacts of increasing use, as California attempts to legitimize a multi-billion dollar underground and illegal industry.

More amazing yet, the retention of financial records that all other businesses keep still poses a major hurdle to legitimacy. Much like the marijuana industry itself, banks are fearful of money laundering charges and asset seizures by the federal government for what is still an illegal drug at the federal level. It seems irresponsible to underestimate local law enforcement funding needs to fend off criminal activity in our communities as the state attempts to collect taxes from permitted as well as black-market operators. These black-market individuals may not wish to pay their fair share of taxes or co-exist with the state’s legitimized operators.

Public safety concerns must be front and center since last year’s medical marijuana legislation was crafted to create a framework for the November 2016 recreational marijuana ballot initiatives. One well-funded initiative establishes the California Marijuana Tax Fund, which consists of all taxes, interest and penalties collected and paid to the state by the industry. It will not contribute to the state’s general fund, and can only be used to further the initiative. The proposed taxes are: (a) an excise tax of 15 percent of gross receipts collected by the dispensary/retailer; (b) a sales and use tax (in addition to excise tax) for recreational cannabis only (medical marijuana is exempt); (c) a cultivation tax of $9.25/ounce for flowers and $2.75/ounce for leaves.

Public universities are on board to score $10 million annually to study the public safety and criminal justice impacts of marijuana. The Highway Patrol gets $3 million to figure out how to detect drugged drivers. Grants to local governments could be approved for law enforcement, fire protection or other public health programs, providing the locals have not banned the cultivation or retail sale of marijuana.

It’s a pay-to-play system that punishes communities that obey federal law or simply do not want marijuana trade in their neighborhoods. The impacts of areas that embrace the trade could spill over into those communities that do not wish to participate, without recompense or recourse.

So, follow the money. The cannabis initiative pads the pockets of the industry participants, funds a growing bureaucracy, promotes the products and, when considering the potential cost or unintended consequences, has very little direct benefit to our existing state budget. If all goes according to plan and marijuana becomes our new “cash” crop replacing existing agriculture, California could be on its way to establishing the next big tobacco industry and the first banana republic in the nation.

Diane Harkey is a member of the Board of Equalization.


Comments 4

  1. It appears to me that Ms Harkey is brought to you by the Big Pharm industry. What say the free market Rostrafarians? This is the biggest load of crap I’ve read in a long time.

  2. This could work to the CAGOP favor. Since pot diminishes memory. Stoners would forget to vote. Who knows, voter turn out could be so low that San Francisco would elect a Republican mayor.

  3. Can we take a moment and remind ourselves of our values, the ideals that once guided us towards prosperity – limited government, free markets and individual freedom?

    These ideas are the foundation of our republic and our party platform. The profits of any business endeavor should only “pad the pockets” of the entrepreneur risking capital. Do I misunderstand capitalism? It should not fund a growing bureaucracy or increase a state budget or general fund.

    The federal government lacks constitutional standing to address drug use. If I am incorrect please show me the law. If we aren’t willing to submit to higher law how can we point at Democrats?

    This unjust authority only empowers cartels, increases prices, weakens our already overwhelmed law enforcement and deprives San Diegans of more of their property (taxes).

    Of course if “conservatism” means to ‘conserve the status quo and big government’ by all means regulate it to death allowing the pharmaceutical, alcohol and tobacco industries to deploy our legislators to protect their markets from competition.

    Government has a role and that is to protect our freedoms until that point where we begin encroaching on our neighbor. It follows that if “A” doesn’t have the right to interfere in a free transaction between “B” and “C” that “A” also doesn’t have such a right/power to transfer to his legislator “D” who is representing at his consent. If a legislator disagrees please explain where this authority to interfere arises.

    The decades long decline in character is not coming from dope in Colorado it is coming from, excuse me, “dopes” in Sacramento and Washington D.C. who have allowed the government to operate beyond its lawful jurisdiction at the expense of the institution that creates character and the ability to self-govern – the American family.

  4. This piece demonstrates the hypocrisy of the so-called small government GOP. Colorado is tiny piece of the larger body of evidence about the negative impacts of prohibition.The only valuable analysis that can be gained from Harkey’s insights are for the electorate to be wary of the initiatives that expand California’s invasive and stagnating regulatory environment. Legalization as an economic public good should not be the factor that drives support for ending prohibition. It should be primarily decades of a failed drug war, an overburdened prison system, unfounded negative health claims, and a thriving violent black market that bring California voters to support legalization. For California GOP voters to support legalization, the primary factors should be an ideological commitment to liberty and states rights; end consideration.

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