Legalizing the production and distribution of marijuana in California could cut the price of the drug by as much as 80 percent and increase consumption, according to a new study by the nonprofit RAND Corporation that examines many issues raised by proposals to legalize marijuana in the state.
While the state Board of Equalization has estimated taxing legal marijuana could raise more than $1 billion in revenue, the RAND study cautions that any potential revenue could be dramatically higher or lower based on a number of factors, including the level of taxation, the amount of tax evasion and the response by the federal government.
Past research provides solid evidence that marijuana consumption goes up when prices go down, but the magnitude of the consumption increase cannot be predicted because prices will fall to levels below those ever studied, researchers say. Consumption also might rise because of non-price effects such as advertising or a reduction in stigma, researchers say.
In addition to uncertainty about the taxes levied and evaded, researchers do not know how users will respond to such a large drop in price. Even under a scenario with high taxes ($50 per ounce) and a moderate rate of tax evasion (25 percent), researchers cannot rule out consumption increases of 50 percent to 100 percent, and possibly even larger. If prevalence increased by 100 percent, marijuana use in California would be close to the prevalence levels recorded in the late 1970s.
The analysis, prepared by the RAND Drug Policy Research Center, was conducted in an effort to objectively outline the key issues that voters and legislators should consider as California weighs marijuana legalization.
"There is considerable uncertainty about the impact that legalizing marijuana in California will have on consumption and public budgets," said Beau Kilmer, the study's lead author and a policy researcher at RAND. "No government has legalized the produc
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