Legalizing Pot Would Lower Price, Double Consumption

Legalizing pot in California would cut the price by as much as 80 percent and may double consumption.

Those predictions come from a study by the Rand Corp. as California voters look forward to a November vote on legalizing marijuana.

State officials previously said taxing weed would haul in more than $1 billion a year in new revenue. But that figure may be much lower or higher depending on a number of variables, the Rand researchers say.

The cost of high-quality marijuana may drop to as low $38 an ounce from about $375 today, the researchers estimate after analyzing production costs and current pricing.

Lower cost, higher availability, and less stigma around the drug would increase consumption by 50 to 100 percent, which would increase usage to levels not seen since the late 1970s, the study finds.

A number of things can have an impact on the sales and taxes. It’s not clear how the federal government would respond to a state legalizing a drug that’s still unlawful at the national level (the Bush administration cracked down on California’s medical-marijuana dispensaries). Under the November ballot issue, cities would be authorized to legalize pot, but they don’t have to opt in. If they do opt in, they would set their own tax rates.

The issue of taxing is tricky, too, since the potency of pot can vary considerably. Sellers could get higher profit by selling high-potency weed if taxes are set at a fixed rate.

"A fixed excise tax per ounce may give producers and users an incentive to shift to smaller quantities of higher-potency forms of marijuana," says study co-author Jonathan P. Caulkins, a professor of operations research at Carnegie Mellon University's Heinz College and Qatar campus.