California Might Legalize Marijuana

How can the government raise funds in a recession? One way is to turn an illegitimate business into a legitimate one, and then tax it. Our largest state in the nation is considering doing just that, Time reports:

Ammiano introduced legislation last month that would legalize pot and allow the state to regulate and tax its sale — a move that could mean billions of dollars for the cash-strapped state. Pot is, after all, California's biggest cash crop, responsible for $14 billion a year in sales, dwarfing the state's second largest agricultural commodity — milk and cream — which brings in $7.3 billion a year, according to the most recent USDA statistics. The state's tax collectors estimate the bill would bring in about $1.3 billion a year in much needed revenue, offsetting some of the billions of dollars in service cuts and spending reductions outlined in the recently approved state budget.

The proposed legislation might generate more tax revenue in other ways, too.

There is economic evidence that drug prohibition shifts people who would otherwise be legitimate businesspeople into the lucrative black market (see my previous post explaining this in more detail here.)

So California would not only be able to tax the sale of marijuana.  There would also be many other new entrepreneurial endeavors to tax, as would-be drug dealers start legitimate businesses.

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