Taxes On Marijuana Keep The Black Market Going Strong

Taxes On Marijuana Keep The Black Market Going Strong

Twenty-one states have legalized some amount of marijuana for recreational use, and sixteen more states allow marijuana for medical use.

Critics say that black markets still exist even though they are now legal. This is true because legalization has been followed by a lot of taxes and rules.

For example, it’s hard for the legal marijuana business in California to compete with the black market. Illegal sales in the state are close to $8 billion per year, which is twice as much as legal sales.

It’s easy to understand why. Retailers have to pay an application fee of $1,000 and a licensing fee of at least $2,500 per year. Sales are taxed at 15%. This makes the price of legal marijuana products two to three times higher than the price of illegal marijuana products.

Also, California and other states let local governments ban marijuana shops, which keeps the black market going.

Taxes on Marijuana Keep The Black Market Going Strong

ALSO READ: Mississippi Lawmakers Send A Bill To The Governor That Changes The State’s Medical Marijuana Law

The same thing is happening in New York. Taxes on sales are 13% plus a tax on distribution per milligram of THC. Even though recreational marijuana use was legalized two years ago, most sales are still done illegally. A lawmaker who worked to make marijuana legal in New York said she “didn’t think this was going to happen.”

It should have been obvious. There are black markets wherever taxes are high.

This doesn’t just happen with marijuana. New York’s $4.35 per pack cigarette tax is one of the highest in the country. So, more than 53% of cigarettes sold in New York are brought in illegally. The governor wants to put a $1 tax increase on each pack of cigarettes and ban flavored cigarettes. Researchers think this will increase the rate of smuggling to 66 percent and cause $167 million less to be collected in taxes.

Not only do black markets hurt tax revenues, but they also hurt people. When high-potency drugs are sold on the black market, they cause violence and overdoses. Decriminalizing drug use in Oregon without also legalizing the sale of drugs hasn’t helped reduce the harms of the black market.

Even if marijuana is legal, black markets will still exist even if it is heavily taxed and regulated. By legalizing marijuana without putting too many taxes on it, lawmakers can raise money and avoid spending money on enforcement.


Mohit Sharma

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