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Running Head: Decriminalizing Marijuana and the Effects on the U.S.

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Decriminalizing Marijuana and the Effects on the United States Joseph L. Lawton IV MGT 8800, Integrative Independent Study Project B Wilmington University July, 2013

Thesis Submitted in Partial Fulfillment of the Requirements for the Degree of Master of Science Management in Public Administration

Running Head: Decriminalizing Marijuana and the Effects on the U.S. PROPOSED MGT 8800 PROJECT APPROVAL

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NAME:

Joseph L. Lawton IV

SSN:

xxx-xx-6875

DEGREE PROGRAM:

Master of Science Management of Public Administration

PROJECT TITLE:

Decriminalizing Marijuana and the Effects on the United States

MENTOR:

Dr. James K. McFadden

SITE:

Wilson Graduate Center

I have approved the above students MGT 8800 Project proposal.

MENTORS SIGNATURE: _______________________________________________

Running Head: Decriminalizing Marijuana and the Effects on the U.S. Acknowledgments I would like to thank the faculty at Wilmington University for the knowledge that I gained through my journey to complete a Master's Degree. I would also like to thank my family for being there for me in my educational pursuits.

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Running Head: Decriminalizing Marijuana and the Effects on the U.S. 5 Abstract The Effects of Decriminalizing Marijuana could have a major economic impact on the United States of America. The economic impact could see a positive gain since taxes collected as a result of legalization and to savings in expenditures for enforcement of the current laws. The savings will not only be on enforcement of the prohibition in the United States, secondly a savings on enforcement from the Mexican Drug Trafficking organizations as a vast amount of illicit Marijuana currently comes from Mexico.

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 6 Table of Contents Introduction ..........................................................................................................................8 Problem Statement ...............................................................................................................9 Research Questions ............................................................................................................10 Hypothesis..........................................................................................................................10 Rationale ............................................................................................................................10 History and Relevant Information to the Problem .............................................................11 Literature Review...............................................................................................................12 Gateway Hypothesis ....................................................................................................11 Addiction......................................................................................................................15 II. Economics .....................................................................................................................17 Criminal Justice System ...............................................................................................17 Tax Benefits .................................................................................................................20 Additional Sources of Revenue ...................................................................................25 Drug Trafficking Organizations in Mexico .................................................................25 Mexican Drug Trafficking Organizations- Illicit Drug Smuggling....................................27 Effect of Legalizing Marijuana on the Mexican Drug Trafficking Organizations..............28 Price: Will a Legal Marijuana Compete.............................................................................29 Methodology ......................................................................................................................30 Limitations of Research .....................................................................................................31 Conclusions ........................................................................................................................31 References ..........................................................................................................................33 Appendix A: Marijuana Tax Structure Possibilities .........................................................36 Appendix B: Estimated Tax Revenue by State ..................................................................38

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 7 Appendix C: Estimates of Export Revenues from other Drugs .........................................42 Appendix D: Estimates of Wholesale Marijuana Prices......................................................43

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 8 Introduction The drug Marijuana has been in the forefront of mainstream politics since late 2012, as two states, Colorado and Washington decriminalized the possession and use of the substance. However, what Colorado and Washington has done is tricky since federal law supersedes state law and federal law still considers the drug to be a class I controlled substance. This also applies to the other 16 states that decriminalized the drug for use in medicinal treatments. A "Gallup poll showed that 50 percent of the public now favors decriminalizing the use and possession of the drug. The Gallup poll found that most of the opposed to the decriminalization of the drug were 65 or older and this is to be expected as people of that era do not have much education on the drug (Newport, 2011)." Therefore, the idea of decriminalizing Marijuana for recreational use deserves another look under Federal Law. Secondly, the United States debt has risen to unprecedented levels never seen before to the sum of "16.7 trillion dollars (Bentley, 2013)." Given the high burden of debt, the United States Government has to figure out creative ways to lower the debt burden. Therefore, things such as taxation of recreational Marijuana could create tax revenues that could help ease some of the burden on the debt level. Thirdly, the criminal justice system in the United States spends "7.6 billion per year (Mirron, 2005)" on the arrest and prosecution of Marijuana, whether it be users or sellers. This also contributes to the national debt running at such high levels. By recreational Marijuana given a legal stature, this would also produce significant savings to the already overburdened criminal justice system. Also the criminal justice system could use these new savings to pursue other avenues of crime that couldn't previously have been pursued before.

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 9 Fourthly the drug trafficking organizations are the only people benefiting from the
current United States Marijuana policies are the by procuring 70 percent of their profits in

the United States from marijuana sales alone. (Reuteman, 2010)" Currently it is estimated the drug trafficking organizations annual marijuana profits is up to $1.37 billion. (Driscoll, 2012)" As of 2012, the drug trafficking organizations are responsible for the murders of 60,000 people (Grillo, 2012)." The United States Government is aware of the Mexican drug trafficking organizations presenting major criminal problem, but with their current levels of profits, cannot gain a foothold against them in order to thwart their activities in the United States. Problem Statement The current problem with the United States Marijuana policy is that the thinking behind it is outdated and there is no hard scientific data to back it up. This could also be argued that the policy is setup to keep people safe from becoming addicted to the currently illegal drug Marijuana. Unfortunately, this is not backed up by scientific evidence to prove that recreational Marijuana use is of any more danger to a person than for instance Alcohol use is. When evaluating the benefits of something such as Marijuana, every aspect of it should be evaluated such as current trends, addiction, benefit to society, and monetary revenues as a result of recreational legalization. If all of these factors outweigh the cons of recreational Marijuana use then policy should be changed in order for the American people and the United States Government to benefit with positive results.

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 10 Research Questions 1. If Marijuana is legalized under Federal Law, would the United States create a new drug problem or epidemic related to addiction. 2. If Marijuana is legalized under Federal Law, would the Criminal Justice system in the United States benefit from the legalization 3.If Marijuana is legalized in the United States, would the Federal Government increase revenues in the form of taxes to the newly legalized substance. 4. If Marijuana is legalized how would this play out with the Mexican drug trafficking organizations and would this policy reduce the current hold that the Mexican drug trafficking organizations have on the trade of black market Marijuana sales. Hypothesis By legalizing Marijuana use in the United States for recreational use, the Federal Government would be justified because the rate of addiction, the tax benefits and the benefits to the criminal justice system in the form of savings.

Rationale The findings of this study can be used to influence public policy and to show the effects of legalizing Marijuana for recreational use. Mirron (2005) suggests that by legalizing Marijuana for recreational use, the taxation of the drug would produce revenues from 2 billion to 6 billion dollars depending on the type of tax imposed on recreational Marijuana. Furthermore, Shepard and Blackley, (2007) show that a savings of 7.7 billion dollars to the United States criminal justice system could be expected if Marijuana laws did not have to be enforced.

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 11 History and Relevant Information to the Problem Since the early 1900's, Marijuana has been criminalized as a drug that was illegal to possess and to use. In "2005, the Supreme Court has ruled Marijuana a class one substance. Under this ruling, Marijuana has no benefit even as a therapeutic drug used in the medical field (Mears, 2005)." Even with this ruling handed down by the Supreme Court, it hasn't stopped 18 states from decriminalizing the drug for medical use. As of yet the Supreme Court has not yet chosen to hear a case based on the States decriminalizing the drug for medical use and this leaves open ended questions to whether the sale and possession of Marijuana is even legal under Federal Law for medical use. The only clarification from the Federal Government to States decriminalizing Marijuana came from the "Attorney General in 2009, in the form of a memorandum to Prosecutors. The memorandum basically states that prosecutors should use discretion when people are using marijuana under a recommended treatment guideline as prescribed by a doctor in a state where medical marijuana use is legal (N.A., 2009)." During the 1930's, Marijuana was associated with "black Jazz musicians and due to racism being a major factor in American culture, this would eventually lead to the criminalization of the drug. The following was written in 1934 in a prominent newspaper, Marijuana influences Negroes to look at white people in the eye, step on white mens shadows and look at a white woman twice (Guither, N.D.). Then came along Harry Anslinger, the head of a relatively new agency called the Bureau of Narcotics and he quickly realized the importance of "Marijuana as a platform to build his agency because there were more Marijuana user as opposed to Cocaine or Opiate users. Anslinger's next move was to push for federal legislation to make the possession or use illegal (Guither, N.D.)". He accomplished this by spreading false racist information such as There are

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 12 100,000 total marijuana smokers in the US, and most are Negroes, Hispanics, Filipinos, and entertainers. Or their Satanic music, jazz, and swing, were the result from marijuana use. Or this marijuana use causes white women to seek sexual relations with Negroes, entertainers, and any others (Guither, N.D.). Or "You smoke a joint your likely to kill your brother (Guither, N.D.)." Soon Mr. Anslinger had help from newspapers across the country including William Randolph Hearst. These papers would print things such as, Users of marijuana become stimulated as they inhale the drug and are likely to do anything. Most crimes of violence in the United States, especially in country districts are laid to users of that drug (Guither, N.D.). This led to the Marijuana Tax Act of 1937 and eventually the criminalization of the drug even though no scientific evidence had ever been introduced that this drug would lead a person down a degenerate road. Literature Review Gateway Hypothesis To fully understand the ramifications if any, should the Federal Government decriminalize the use of recreational Marijuana, several studies should be looked at in order to find guidance. The idea that Marijuana has been a stepping stone to other harder illicit drugs has been an issue that has been brought up time and time again. This idea originated as the Gateway Hypothesis and in order to better understand the theory, it is key to look at the original study done in 1975. The Gateway Hypothesis has been prevalent in deciding that Marijuana should be an illegal substance that has no medical benefit, nor should be used recreationally in current United States society.

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 13 This hypothesis that there are developmental stages and sequences involvement in drugs was first advanced a quarter century ago in 1975. According to this notion there is a progressive and hierarchical sequence of stages of drug use that begins with alcohol and tobacco. This then continues to Marijuana use and from Marijuana use to other illicit drug use such as Cocaine or Heroin (Kandel, 2002). The gateway hypothesis also believes in stages of drug use and that each drug equals a stage that the user will progress to the next stage. It does however, show that not everyone will fall into the gateway hypothesis and that some users will stop at a certain stage and never move beyond that stage into the further progression of harder illicit drug use. For instance, a user might only try alcohol and Marijuana, but not move into the use of Cocaine or Heroin. This can also be seen in a survey conducted in "1998 and the results were that 90 percent of young adults 20 to 30 years old in the United States had followed the assumed sequence. Of those that used Alcohol or Tobacco, 49 percent proceeded to use more illicit drugs (Kandel, 2002)." Unfortunately for the idea of legalizing recreational Marijuana use, the Gateway Hypothesis has some flaws as of those 49 percent of young adults, it is not clear if these individuals stopped their gateway progression with the use of Marijuana or did the participants delve further into illicit drug use. Yet another problem of the Gateway Hypothesis is that it is hard to predict who will end up using illicit drugs. "there has been much work to identify the stages, but not enough work to identify the risk factors associated with the Gateway Hypothesis (Kandel, 2002)." "To evaluate the Gateway Hypothesis thoroughly, several important issues have to be resolved. These include not only the conceptual issues, but also issues of substance, methods, underlying mechanisms, and policy (Kandel, 2002)."

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 14 Finally, "the notion of a gateway drug is vague, what makes a drug a gateway drug? Is it any lower ranked drug whose use precedes the rank of higher ranked substance? The most common hierarchy establishes Alcohol and Tobacco as the intitial stage followed by Marijuana and then into harder illicit drugs, but even this has been questioned (Kandel, 2002)." On the other hand, a study conducted by Tarter, Vanyukov, Kirisci, Reynolds, & Clark, (2006), investigated whether the transition from licit drug use to marijuana use is determined by particular risk factors, as specified by the gateway hypothesis. They also evaluated the accuracy of the gateway sequence. The methodology consisted of: 1. boys who consumed illicit drugs only 2. boys who consumed illicit drugs and then transitioned to Marijuana use 3. boys who used Marijuana before using illicit substances The boys were prospectively studied from ages 1012 and through 22 years of age to determine whether specific factors were associated with each drug use pattern. The groups were compared on 35 variables measuring psychological, family, peer, school, and neighborhood characteristics. In addition, the utility of the gateway and alternative sequences in predicting substance use disorder was compared to assess their clinical in-formativeness (Tarter, et al., 2006). "Twenty-eight (22.4%) of the participants who used marijuana did not exhibit the gateway sequence, thereby demonstrating that this pattern is not invariant in drug-using youths (Tarter, et al., 2006)." Among youths who did exhibit the gateway pattern, only delinquency was more strongly related to marijuana use than licit drug use. Specific risk factors associated with transition from licit to illicit drugs were not revealed. The alternative sequence

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 15 had the same accuracy for predicting substance use disorder as the gateway sequence. The conclusions were that proneness to deviancy and drug availability in the neighborhood promote marijuana use. These findings support the common liability model of substance use behavior and substance use disorder (Clark, et al.,2006) Another study done in 2003, by the RAND Drug Policy Research center also attempted to test the validity of the Gateway Hypothesis and "the study demonstrates that associations between marijuana and hard drug use could be expected even if marijuana use has no gateway effect (Morral, McCaffrey & Paddock, 2003)." The methodology consisted of researchers testing the marijuana gateway Hypothesis by creating a mathematical model simulating adolescent drug use. Rates of marijuana and hard drug use in the model matched those observed in survey data collected from representative samples of youths from across the United States. Without assuming any gateway effect, the model produced patterns of drug use and abuse remarkably similar to what is experienced across the nation, showing that a marijuana gateway effect is not needed to explain the observed behavior. (Morral, McCaffrey & Paddock, 2003) Furthermore, "The people who are predisposed to use drugs and have the opportunity to use drugs are more likely than others to use both marijuana and harder drugs (Morral, McCaffrey & Paddock, 2003)." " "Marijuana typically comes first because it is more available. Once we incorporated these facts into our mathematical model of adoles-cent drug use, we could explain all of the drug use associations that have

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 16 been cited as evidence of marijuana's gateway effect Morral, McCaffrey & Paddock, 2003)." The Gateway Hypothesis is currently what the United States Government uses in order to keep Marijuana prohibition in place as the United States Government doesn't want young adults to be subdued by drug use. Hence the Federal Government doesn't want young adults using Marijuana and becoming addicted to hard illicit drugs. To make more sense of this it is important to evaluate the United States drug policies with those of the Netherlands. "Netherlands Soft drugs, such as cannabis (hash and weed) and sedatives are less harmful to health and to society than hard drugs (MacCoun, 2011)." "Marijuana and Hash (a derivative of Marijuana) can be sold in coffee shops (MacCoun, 2011)." According to Dana Graham (2001), in the Netherlands, marijuana is legal and minimal experimentation by teenagers illustrates that legalization does not necessarily cause increased use. Also "when the Dutch government legalized marijuana for personal consumption while maintaining laws against possession and sale of large quantities, the level of marijuana use declined (Graham, 2001)." The Netherlands system believes that separating the markets would weaken the statistical gateway association between cannabis and hard drug use (MacCoun, 2011)." Furthermore, "European national surveys over the decade 19982008. All suggest that cocaine and amphetamine use are below what one would predict for the Netherlands. Although hardly conclusive, this data is consistent with the notion that the Netherlands system might weaken the gateway (MacCoun, 2011)." Addiction The addictiveness factor has to be looked at thoroughly as the idea of decriminalization will result with putting a financial burden on the taxpayer for

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 17 rehabilitation treatment due to addiction. Studies have shown that Marijuana does have addictive qualities putting those who become addicted at 9 percent, but "compared to other substances, marijuana is not very addicting. It is estimated that 32 percent of tobacco users will become addicted, 23 percent of heroin users, 17 percent of cocaine users, and 15 percent of alcohol users (Gumbiner, 2010)." Therefore, addictiveness should not be an issue as Marijuana is less addictive than alcohol. II. Economics Criminal Justice System A study done by Shepherd and Blackley (2007) took an extensive look into the costs of enforcing Marijuana prohibition in the United States and found that "U.S. law enforcement against the sale and possession of marijuana has been estimated to cost close to $8 billion a year in criminal justice resources (Shepard & Blackley, 2007)." Secondly, " the study estimates the size of the marijuana market to exceed $10 billion a year and estimates the annual cost of marijuana law enforcement to be about $7.7 billion (Shepard & Blackley, 2007). " "At the federal level, spending for drug enforcement, including interdiction and intelligence, rose from about $1.5 billion in 1981 to over $12 billion by 2002 (Shepard & Blackley, 2007). " In 2003, there were over 750,000 arrests for marijuana, 88 percent of which were for possession only (Shepard & Blackley, 2007)." In 2011, the numbers seem to stay around 750,000 for Marijuana enforcement, According to the FBI's Uniform Crime Reporting Data (Ferner, 2012)." To put this into further perspective, there were a total of 1.5 million arrests total made for drug enforcement, but Marijuana arrests accounted for 49.5 percent or a little under half of all drug arrests (Ferner, 2012)." Shepard & Blackley, (2007) explain that

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 18 microeconomic theory holds that resources should be allocated to law enforcement up to the level where their marginal benefit is equal to their marginal cost, and when enforcement is cost effective compared with alternative approaches. It is therefore efficient for society to tolerate some positive level of crime, including some illicit drug use if the additional cost of achieving a drug free society exceeds the benefit (Shepard & Blackley, 2007). The current objective of drug control policies in the United States is to reduce both supply and demand by achieving a higher risk of arrest and incarceration for buyers and sellers as well as disruptions in supply. Benefits commonly cited for current policies are improvements in health, safety and the quality of life, higher productivity in the workplace, and reductions in drug-related crime. In the case of marijuana, special priority is often placed on adolescents and young adults, since it is viewed as a gateway to further drug use that may initiate long-term problems with dependence and addiction, including joblessness and involvement in crime (Shepard & Blackley, 2007) a report by the Drug Enforcement Agency states that most violent crime are committed not because people want to buy drugs, but because people are on drugs. Past research has documented positive correlations between illicit drugs and other crimes (Shepard & Blackley, 2007) Next Shepard and Blackley (2007), " use an analysis whether marijuana arrests are significantly related to rates of property crime involving burglary, larceny, and motor vehicle theft. The analysis then provides estimates of the impact of arrests for the sale of marijuana on a violent crime, murder, and the incidence of arrests for hard drug possession. (Shepard & Blackley, 2007)."

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 19 Firstly, Increases in current period arrests for marijuana possession are associated with increases in reported rates of larceny and motor vehicle theft. These results support the view that arrests for possession may significantly harm the employment or educational status of those involved, leading to a greater likelihood of stealing to get by. Because of the illegality of participating in marijuana transactions, prices may be higher when sellers perceive a greater risk of being caught due to the information provided by detained buyers. This implies that users may also turn to stealing in order to finance their purchases of marijuana at higher prices. In addition, increases in these types of crimes may result from an emphasis by police on marijuana arrests, since the likelihood of arrests for other crimes may be lower when resources are applied to enforcing marijuana laws (Shepard & Blackley, 2007). Secondly property crimes were affected with only the rate of burglaries adversely affected by an increase in marijuana sales arrests. Several effects may be at work. First, arrests for sales can be expected to disrupt supply and lead to price increases. Other sellers, or perhaps even users, may resort to burglary to cope with these increases. Second, if the risks of selling become too great for some, they may switch to burglary as an alternative criminal activity that has the potential to be more economically rewarding and to have less risk than is typical of larceny and motor vehicle theft. this outcome may result from the shift in use of scarce police resources from enforcement of laws related to nondrug crimes to enforcement of drug laws, drug investigations and drug arrests (Shepard & Blackley, 2007). Thirdly, the "impact of arrests for marijuana sales on reported rates of homicide and arrests for the possession of hard drugs are analyzed (Shepard & Blackley, 2007)."

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 20 when counties increase their arrests for selling marijuana, they experience a significant increase in homicides during that time period. There is an insignificant decrease in the following period. For the county of 100,000 persons, a one-standard deviation increase in arrests for marijuana sales would be associated with 0.35 additional homicides.19 While this incremental impact is small in absolute terms; it represents a 9 percent increase over the mean homicide rate of four per 100,000 persons (Shepard & Blackley, 2007). These increases can be also be attributed with a supply chain interruption by law enforcement in "which the arrest of sellers may disrupt established supply channels and lead to violent confrontations between rival groups seeking to replace those recently arrested. While this process is underway, homicides may increase, and not decline to previous levels until stable geographical supply relationships are reestablished (Shepard & Blackley, 2007)." Finally, Shepard and Blackley's findings suggest that the recent focus on marijuana law enforcement has been counterproductive for addressing non-drug crime. If it is the illegality and arrests for these drug market activities, rather than the usage of marijuana per se, that is the root cause of other crimes, then our results provide evidence that crime will not be adversely affected by a relaxation of laws against marijuana (Shepard & Blackley, 2007)." A report by the National Research Council in 2001, indicated that because of a lack of investment in data and research, the nation is in no better position to perform a comprehensive assessment than it was 20 years ago, on the enforcement of drug related crimes (Shepard & Blackley, 2007)." Currently " the objective of current drug control policies is to reduce both supply and demand by achieving a higher risk of arrest and

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 21 incarceration for buyers and sellers as well as disruptions in supply (Shepard & Blackley, 2007). " In the case of marijuana, special priority is often placed on adolescents and young adults, since it is viewed as a gateway to further drug use that may initiate long-term problems with dependence and addiction, including joblessness and involvement in crime (Shepard & Blackley, 2007)." "A series of recent studies has found that drug prohibitions and drug arrests are associated with increases, not decreases, in non-drug crime (Shepard & Blackley, 2007)." Another study "showed that enforcement of drug prohibitions has led to increased violence in the United States and the degree of enforcement of drug prohibitions across counties has positively been associated with increased violence (Shepard & Blackley, 2007)." A partial reasoning for this is that reported that increases in drug prisoners have led to reductions in expected time served for other offenses, increasing other crimes as a result (Shepard & Blackley, 2007)." " In addition, increases in drug enforcement in Florida were associated with increases in property crime (Shepard & Blackley, 2007)." Currently, "under prohibition some marijuana offenders pay fines, which partially offsets the expenditure required to arrest, convict and incarcerate these offenders. however, offsetting revenue has been at most $100 million per year in recent years at the state and local level (Mirron, 2005)." "Even with 100 million taken into account, the Federal and local governments pay 7.6 billion dollars for prohibition (Mirron, 2005)." Tax Benefits To first look at taxation of Marijuana, the question of what is the optimal excise tax. Caulkins, Hawken, Kilmer, Kleiman, Pfrommer, Pruess & Shaw (2013), proposes the following:

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 22 "Any tax structure will have to balance the various sometimes conflicting goals of legalization, including: 1. Maximizing tax revenues. 2. Battling the black market and violence by those involved in the drug trade. 3. Limiting the increase in marijuana abuse and dependency, 4. Minimizing the use of particularly risky and unhealthy forms of marijuana. 5. Limiting gray-market tax evasion. 6. Minimizing the cost and complication of enforcing the marijuana tax structure. (Caulkins et al., 2013), " In order to achieve this optimization of the excise tax Caulkins et al., (2013) has set up some hypothesized analysis tables in order to find the best strategy for taxation. See Appendix A. Caulkins et al., (2013) This is done by comparing taxing methods into three different categories; by weight, taxing by ad-valorem and lastly by THC content. To tax THC content would mean taxing higher rates to product that has higher THC contents than other product. Each of these categories have their pro's and con's. For instance, by taxing by weight, higher THC content product has an incentive and edible's such as brownies mixed with Marijuana are going to be a higher weight which makes this tax structure even trickier. The clear advantage of taxing by weight is that it is the simple way to structure a tax around. Even simpler is Ad-Valorem as the government is now taxing on a percentage, but this too has its drawbacks. Caulkins et al., (2013) hypothesizes that this will favor low cost production methods and Creates incentives focusing marijuana's a loss-leader if imposed at the retail level. Again this is a simple method for imposing tax and that is why Caulkins et

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 23 al., (2013) used it in his hypothesis. On the other hand, Caulkins et al., (2013) proposes taxing the THC content of the product and its hypothesized that this method will Requires quality control and labeling, but can incentivize less potent and potentially less risky forms of marijuana. This is also Complex, particularly if distinguish by type of cannabinoid; testing may not be accurate enough. Also it should be noted that all of these proposed tax strategies were introduced as bills in the State level for Colorado, Massachusetts, Hawaii and Washington. According to Earlywine (2006), it is estimated that if Marijuana were legalized, a tax by the Federal government would yield 2 billion annually if Marijuana were taxed as general merchandise. On the other hand, the government could make 6 billion annually if Marijuana were taxed similar to Alcohol and Tobacco (Earleywine, 2006)." To estimate the tax revenue, "first the current expenditures are estimated on the national level. Secondly, it estimates expenditures likely to occur under legalization. Thirdly, it estimates the tax revenue that would result from this expenditure based on assumptions about the kinds of taxes that would apply to legalized Marijuana. Fourth, it provides calculations of the portion of revenue that would accrue in each state (Earleywine, 2006)." To estimate the tax revenue upon ending prohibition, Egan suggests using data from the Office of National Drug Control Policy and in 2000, United States residents spent 10.5 billion on the purchase of illegal Marijuana. Secondly, Egan and Mirron assume that the demand for Marijuana will be unchanged and therefore use the illegal purchase number of 10.5 billion as a baseline for their calculations. Thirdly Egan and Mirron believe that costs for the purchase of Marijuana would drop as their would now be no legal ramifications that are currently in place due to the prohibition. "This can be assumed since the penalties for possession potentially deter some persons from consuming. But any increase in demand

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 24 from legalization would plausibly come from casual users, whose marijuana use would likely be modest (Earleywine, 2006)." Next it can be assumed that under the assumption that demand does not shift due to legalization, any change in the quantity and price would result from changes in supply conditions (Earleywine, 2006)." On one hand, marijuana suppliers in a legal market would not incur the costs imposed by prohibition, such as the threat of arrest, incarceration, fines, asset seizure, and the like. This means, other things equal, that costs and therefore prices would be lower under legalization. On the other hand, marijuana suppliers in a legal market would bear the costs of tax and regulatory policies that apply to legal goods but that black market suppliers normally avoid. This implies an offset to the cost reductions resulting from legalization. Further, changes in competition and advertising under legalization can potentially yield higher prices than under prohibition. (Earleywine, 2006) With this in mind, the best way to understand the Marijuana price structure is to look compare the United States with the Netherlands price structure. In the Netherlands, Although marijuana is still technically illegal in the Netherlands, the degree of enforcement is substantially below that in the U.S., and the sale of marijuana in coffee shops is officially tolerated. The regime thus approximates de facto legalization. Existing data suggest that retail prices in the Netherlands are roughly 50-100 percent of U.S. prices (Earleywine, 2006)." Therefore, any price elasticity can be attributed to the demand in the Marijuana market. "Since the decline in price is unlikely to exceed 50% and the demand elasticity is likely at least -0.5, the plausible decline in expenditure is approximately 25%. Given the estimate of $10.5 billion in expenditure on marijuana under current prohibition, this implies expenditure under legalization of about $7.9 billion (Earleywine, 2006)."

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 25 "The first assumption is that tax policy treats legalized marijuana identically to other goods. In that case tax revenue as a fraction of expenditure would be approximately 30 percent, implying tax revenue from legalized marijuana of $2.4 billion (Earleywine, 2006)." "The second assumption is that tax policy treats legalized marijuana similarly to alcohol or tobacco, imposing a sin tax in excess of any tax applicable to other goods (Earleywine, 2006)." With a sin tax in place, Marijuana could attain revenue as high as 9.5 billion dollars, but would be taxed at 80 percent (Earleywine, 2006)." Although Earleywine, (2006) does agree that 9.5 billion is on the upper limits of attainment and therefore proposes a "more modest tax of 50 percent, which would generate 6.2 billion dollars a year (Earleywine, 2006)." The next piece is to realize that 9.5 billion dollars would be accrued by all forms of government and that In practice this total would be divided between state and federal governments. "It is therefore useful to estimate how much revenue would accrue to each state, and to state governments versus the federal government, under plausible assumptions (Earleywine, 2006)." Appendix B indicates the tax revenue that would accrue to each state and to the federal government under the assumption that each state collected revenue equal to 10 percent of the income generated by legalized marijuana and the federal government collected income equal to 20 percent (Earleywine, 2006)." Something not to be overlooked is the creation of new jobs that will lead to the Federal Government collecting taxes on the employees. "Since the FICA rate is 15.3%, counting the employers half, it would produce essentially the same revenue as a fifteen percent excise tax on the wholesale value (Caulkins et al., 2013)." "States could also collect income taxes on marijuana-industry wages; for example, 4.63% in Colorado (Caulkins et

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 26 al., 2013)." Unfortunately to the amount of jobs created in the Marijuana industry, there is not enough data to support any assumptions on how many jobs could possibly be created. Therefore it is safe to assume that taking the safe 6.2 billion dollar figure with the taxation of Marijuana and the reduced expenditures in the criminal justice system of 12 billion dollars a year, that a new figure can be established for legalizing the substance for recreational use. The new figure would therefore be representative of 16.2 billion dollars that the Federal Government is now saving and earning as a result of legalizing the use of Marijuana for recreational use. On the other hand, if the high end of the taxation figure is taken into account and by other studies is attainable, the Federal Government would now have 21.5 billion dollars as a result of revenue and savings. Additional Sources of Revenue Caulkins et al., (2013) shows that most proposals to regulate the marijuana industry include some form of licensing of producers, manufacturers, and stores, with associated licensing fees. This could also be another potential way of revenue for the State and Federal Government. Caulkins et al., (2013) also shows that if the licenses were limited, it would drive up the demand and a New York cab type scenario would take effect. In New York a bidding effect takes place when a cab license becomes available and recently one sold for 700,000 dollars. Drug Trafficking Organizations in Mexico According to Kilmer, Caulkins, Bond and Reuter, (2010), believe that it is noncontroversial to claim that at least 50 percent of the commercial-grade marijuana consumed in the United States comes from Mexico, especially because a number of law enforcement officials claim that the majority of marijuana consumed in their jurisdictions is from Mexico or is supplied by the Mexican drug trafficking organizations. Next to calculate

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 27 how much money the Mexican drug trafficking organizations or cartels were making, "gross revenue from exporting marijuana to the border wholesale markets is simply total U.S. consumption multiplied by Mexican marijuanas market share multiplied by the wholesale price in border states (Kilmer, et al., 2010)." Furthermore, "This yields an 80percent confidence interval of $1.1 billion to $2 billion, with a best estimate close to $1.5 billion (Kilmer, et al., 2010)." Secondly, The United States Government estimates that Mexican traffickers receive more than $13.8 billion in revenue from illicit-drug sales to the United States; 61 percent of that revenue, or $8.5 billion, is directly tied to marijuana export sales. Marijuana has become the primary revenue source for Mexican drug trafficking organizations, eclipsing the potential revenue from cocaine, heroin, and methamphetamine combined (Kilmer, et al., 2010)." This claim can be dissolved as un-credible by using calculations; $8.57 billion figure indirectly implies that the United States consumed at least 14,500 Metric tons. Allowing for 20-percent underreporting in the household survey and recognizing that past-month users account for 88 percent of reported past-year days of marijuana use, that combination suggests that, on average, those 14.6 million past-month users in the United States were each consuming about 700 grams of marijuana per year: That is almost 4.5 joints per day for every past-month user for every day of the year. Since some of this marijuana is seized after it gets past the southwestern U.S. border, the actual figure would be lower than 4.5 joints per day every day; however, the seizure rate would have to be unrealistically high to make these numbers credible. (Kilmer, et al., 2010)

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 28 According to Shirk (2011), since 2008, the United States has been releasing 400 million dollars in aid to the Mexican Government to combat the Mexican drug trafficking organizations. Shirk (2011) suggests that by legalizing Marijuana in the United States that the 1 billion to 2 billion in losses would drive them out of business requiring the drug trafficking organizations to move into trafficking harder illicit drugs which in turn could let law enforcement focus on these movements of harder illicit drugs coming over the border. What Shirk fails to imply is that the demand for the harder illicit drugs will increase and therefore the need for enforcement will rise. On the other hand, Shirk (2011) does acknowledge that criminal activity such as extortion, kidnapping, robbery and other forms of organized crime will rise as a result of the loss of revenue from drug trafficking Marijuana. Mexican Drug Trafficking Organizations- Illicit Drug Smuggling Again According to Kilmer, Caulkins, Bond and Reuter, (2010), the Mexican Drug trafficking organizations play a key role in drug trafficking illicit drugs over the United States border and they estimate that these organizations hold 30 percent of the market share for Cocaine, 20 percent for heroine, and 5 percent for methamphetamines.(see Appendix C) "There is also evidence to suggest that the Drug Trafficking Organizations from Mexico are setup domestically to produce methamphetamines in the United States, but the data is limited to see how much of the market the Drug Trafficking Organizations control (Bond, et al., 2010)." Effect of Legalizing Marijuana on the Mexican Drug Trafficking Organizations Kilmer, Caulkins, Bond and Reuter, (2010), look at several events in United States history to show what would happen if Marijuana was decriminalized in the United States. Firstly, they use the Mafia and Prohibition. During Prohibition, the Mafia made a vast amount of

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 29 wealth similarly to what is going on with the Drug Trafficking Organizations in Mexico. After Prohibition was repealed, the Mafia did lose strength, but since the organization had branched out into other illegal activity such as Racketeering, Gambling and Prostitution they were able to stay in business. Then gambling became their largest share of revenue, but due to gambling becoming decriminalized in more states across the country, the organization has fallen to its lowest point of decline and no other organization has stepped up to take its place. Using the Mafia as a model for the Drug Trafficking Organizations in Mexico, shows that a likely decline of the organizations power will occur due to the decreased revenues from the sale of trafficking Marijuana over the United States border. Furthermore, the Mexican Drug Trafficking Organizations will have to rely on their other illegal activities in Mexico and the trafficking of illicit drugs. With the decriminalization of Marijuana, the Federal and local enforcement agencies in the United States have a chance to strengthen enforcement on these harder illicit drugs coming over the border as smaller amounts will be flowing due to a lower market share. Price: Will a Legal Marijuana Compete Kilmer, Caulkins, Bond and Reuter, (2010), assess "California produced Marijuana at the wholesale level, after a $25-per-ounce excise and a 9-percent sales tax had been collected, raising the price from $400 to $836 per pound (Bond, et al., 2010)." The Drug Trafficking Organizations due come in "1.5 times lower per pound, but the trade off is that the California produced product would be 23.6 times more potent (Bond, et al., 2010)." (See Appendix D for wholesale prices) Therefore it is hard to compare on an Apple to Apple type scale, but by assuming that legal Marijuana will be easier to attain and potency matters more than anything else, the legal Marijuana will carry a higher demand over illegal trafficked Marijuana from Mexico.

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 30 Methodology The first method of methodology is to review current data on the use of Marijuana in a recreational format in order to see if there is a need to lift the current prohibition. The review of this data is in the form of surveys done by the United States Government and by the organization known as Gallup. Secondly, reviewing studies that others have done in the subject of Marijuana as gateway drug. These studies use methods such as surveys, interviews, and statistical research in the field to come up with their conclusions in to whether or not the use of Marijuana is a gateway drug. Thirdly, in order to find the addictiveness of Marijuana, reviewing studies done in the field of Marijuana addictiveness were reviewed. These studies were conducted in clinical fashion and the results are in the form of statistical data. Fourthly, in order to find the effects on the criminal justice system, studies were reviewed in order to find the impact that Marijuana enforcement has had on the United States. Also in these studies contained the financial impact that Marijuana enforcement has had on the United States. These studies contained data from the United States Government and were statistical. Fifthly, to find the potential tax revenue associated with decriminalizing the drug Marijuana for recreational use, studies were looked at and the data was in the form of mathematical equations done by using current government statistics in order to hypothesize several scenarios for tax revenue Lastly, drug trafficking studies were looked at for their impact on the United States concerning the hypothesis that Marijuana be legalized for recreational use. The data comes from the United States Government and also mathematical equations were formulated in

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 31 order to see how much of an impact the drug trafficking organizations have on the United States. Limitations of Research There is a significant amount of United States citizens that are producing Marijuana in the United States and how many is unknown, but if these numbers were accurate it could give a better picture of how many jobs could possibly be created as these producers could then be licensed to produce Marijuana legally. Also there is not enough accurate knowledge on the drug trafficking organizations to produce significant numbers to how much product that these organizations are producing inside the United States.

Conclusions After reviewing the data, the United States would benefit from the recreational legalization of Marijuana. Firstly, the gateway Hypothesis from 1975 doesn't hold water to current research such as Kandel (2001) or (Tarter, et al., 2006), who proved that the Gateway Hypothesis isn't likely to occur when someone uses Marijuana recreationally. Therefore, Americans are not going to be using Marijuana and then evolving to harder drugs which in turn could result in crime, violence, and other deviant behavior. Also the addictiveness rate of Marijuana is less than Alcohol or Tobacco and therefore by legalizing the drug Marijuana for recreational use, the United States would not be in a position of creating an epidemic of addicts or addicts that will eventually need treatment for their addiction that would substantially cost the American taxpayer. Secondly, the United States criminal justice system would benefit from the initial savings of 7.7 billion dollars a year. These savings can be used to do a lot of things with

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 32 and one could speculate even being used to enforce more serious laws such as illicit drug trafficking. Thirdly, the tax benefits to the United States outweigh the current prohibition of the recreational use of Marijuana and at the proposed taxation revenue of 50 percent, would net 6.2 billion dollars a year for the United States. Given the current level of debt, just legalizing recreational Marijuana isn't the complete answer, but can play a role in the current level of debt. Lastly, the drug trafficking organizations from Mexico are not making what the United States Government stated at 13.8 billion dollars and really making 1.1 billion dollars to 2 billion dollars a year from the drug trafficking in Mexico to the United States. Even with a much lower market share than was previously thought, the legalization of recreational Marijuana "would drive the drug trafficking organizations out of business (Shirk, 2011)." Therefore, with the results being that the drug trafficking organizations relying on other illegal ways of making profits. These other ways of making profits are not centered on bringing illegal drugs into the United States and more centered on illegal behavior in Mexico. As can be seen, by legalizing the recreational use of the drug Marijuana would have a positive impact on the United States as now billions from tax revenues will flow from the sale of the product, the criminal justice system will save billions, the United States is in no fear of creating Gateway addicts and the drug trafficking organizations will not have a strong foothold in the United States.

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 33 References: Caulkins, J., Hawken, A., Kilmer, B., Kleiman, M., Pfrommer, K., Pruess, J., & Shaw, T. (2013). High tax states: Options for gleaning revenue from legal cannabis. Oregon Law Review, 91(1041), 1041-1067. Retrieved from http://law.uoregon.edu/org/olr/volumes/91/2/documents/Caulkins.pdf Clark, B., Kirisci, L., Tarter, R., Reynolds, M., & Vanyukov, M. (2006). Predictors of marijuana use in adolescents before and after licit drug use: Examination of the gateway hypothesis. American Journal of Psychiatry, 163(12), Retrieved from http://ajp.psychiatryonline.org/article.aspx?articleID=97496 Earleywine, M. (2006). Pot politics : Marijuana and the costs of prohibition:. New York, NY: Oxford University Press. Retrieved from http://books.google.com/books?id=nB8LTwhVSpwC&printsec=frontcover&source =gbs_ge_summary_r&cad=0

Ferner, M. (2012, August 28). Why marijuana should be legalized: 'regulate marijuana like alcohol' campaign discusses why pot prohibition has been a failure. Retrieved from http://www.huffingtonpost.com/2012/08/28/why-marijuana-should-belegalized_n_1833751.html

Graham, D. (2001). Decriminalization or marijuana: An analysis of the laws in the united states and the netherlands and suggested for reform. Loyola of Los Angeles International Comparitive Law Review, 23(297), 297-328. Retrieved from http://digitalcommons.lmu.edu/cgi/viewcontent.cgi?article=1524&context=ilr Gumbiner, J. (2010, December 5). Is marijuana addictive?. Retrieved from http://www.psychologytoday.com/blog/the-teenage-mind/201012/is-marijuanaaddictive

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 34 Guither, P. (N.D.). Why is marijuana illegal?. Retrieved from http://www.drugwarrant.com/articles/why-is-marijuana-illegal/

Kandel, D. (2002). Stages and pathways of drug involvement. Cambridge: The Press Syndicate of the University of Cambridge. Kilmer, B., Caulkins, J., Bond, B., & Reuter, P. (2010). Reducing drug trafficking revenues and violence in mexico. Retrieved from http://www.rand.org/content/dam/rand/pubs/occasional_papers/2010/RAND_OP32 5.pdf MacCoun. (2011). What can we learn from the dutch cannabis coffeeshop system?add_3572 1.12. Society for the Study of Addiction, doi: 10.1111/j.13600443.2011.03572.x Mears, B. (2005, June 7). Supreme court allows prosecution of medical marijuana. Retrieved from http://www.cnn.com/2005/LAW/06/06/scotus.medical.marijuana/

Mirron, J. (2005, June). The budgetary implications of marijuana prohibition. Retrieved from http://www.cannabis-commerce.com/library/Miron_Report_2005.pdf Morral, A., McCaffrey, D., & Paddock, S. (2003). Reassessing the marijuana gateway effect. Graduate Faculty , Psychology Society Bulletin, 1(1), 61-65. Retrieved from http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0C D4QFjAB&url=http://www.nspb.net/index.php/nspb/article/download/83/75&ei=9q TcUdSCGoHq8gS7ooCoDA&usg=AFQjCNHU25xmLJWkmZGcAZDKxwekxY7uw&sig2=sW7CwciPwGfASfpZktZMpg&bvm=bv.487056 08,d.eWU N.A. (2009, October 19). Memorandum from the united states department of justice. dea has the right to shut down dispensaries.. Retrieved from http://thehive.modbee.com/node/16333

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 35

Ralph Tarter, Ph.D., Michael Vanyukov, Ph.D., Levent Kirisci, Ph.D., Maureen Reynolds, Ph.D., Duncan Clark, M.D., Ph.D.; Predictors of Marijuana Use in Adolescents Before and After Licit Drug Use: Examination of the Gateway Hypothesis. American Journal of Psychiatry. 2006 Dec;163(12):2134-2140. Shepard, E., & Blackley, P. (2007). The impact of marijuana law enforcement in an economic model of crime. Journal of Drug Issues, 37(403), 403-425. doi: 10.1177/002204260703700209 Shirk, D. (2011). Drug violence and state responses in mexico. Retrieved from http://iisdb.stanford.edu/evnts/6716/ShirkDrug_Violence_and_State_Responses_in_Mexico.pdf

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 36 Appendix A: Proposed Tax Revenue Structures
By Amount of Intoxicant (e.g., THC, or THC to CBD ratio)

By Total Weight

Ad Valorem

Production Effects

Favors high value-to-weight production methods (e.g., organic, handcrafted) Incentivizes highpotency marijuana

Favors low-cost production methods

Requires quality control and labeling

Marijuana Type Effects

Creates incentives for using marijuana as a loss-leader if imposed at the retail level Simple

Can incentivize less potent and potentially less risky forms of marijuana

Tax Structure Complexity

Simple except for edibles and need to index for inflation

Complex, particularly if distinguish by type of cannabinoid; testing may not be accurate enough

Examples

CA Ammiano 87 Bill (2009) Proposed Rhode Island Bill 88 (2013)

Colorado Amendment 64 Washington I-502 Hawaiis Bill 89 (2013)

Massachusetts House Bill 1371

Taken from Caulkins et al., (2013)

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 37 Appendix A (Cont.) HYPOTHESIZED CONSEQUENCES OF VARIOUS MARIJUANA TAX STRATEGIES BY TAX TARGET

Growers/Producers Revenue Effects Relatively less revenue since marijuana is taxed early in the production chain and does not tax added value of marijuanainfused products Fewer taxpayers to monitor Generally hidden from consumer May be harder to tax based on potency Can be simple

Retailers Potentially get to tax value of other products sold in a bundle with the marijuana (e.g., marijuana-infused edibles) Incentivizes tax evasion between grower/producer and retailer (leakage) Tax is transparent to consumer Allows for cannabinoidbased taxation Can be complex, particularly if distinguish by type of cannabinoid Washington I-502

Black Market Effects Transparency Marijuana Type Effects Tax Structure Complexity Examples

Colorado Amendment 64 Washington I-502

Taken from Caulkins et al., (2013)

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 38 Appendix B: Estimated State Tax Revenue

Table 4a: State Marijuana Tax Revenue Population Method Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Dist. Columbia Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Population 4,447,100 626,932 5,130,632 2,673,400 33,871,648 4,301,261 3,405,565 783,600 572,059 15,982,378 8,186,453 1,211,537 1,293,953 12,419,293 6,080,485 2,926,324 2,688,418 4,041,769 4,468,976 1,274,923 5,296,486 6,349,097 9,938,444 4,919,479 2,844,658 5,595,211 902,195 1,711,263 1,998,257 1,235,786 8,414,350 1,819,046 18,976,457 8,049,313 642,200 11,353,140 3,450,654 3,421,399 12,281,054 1,048,319 4,012,012 754,844 5,689,283 Proportion 0.016 0.002 0.018 0.009 0.120 0.015 0.012 0.003 0.002 0.057 0.029 0.004 0.005 0.044 0.022 0.010 0.010 0.014 0.016 0.005 0.019 0.023 0.035 0.017 0.010 0.020 0.003 0.006 0.007 0.004 0.030 0.006 0.067 0.029 0.002 0.040 0.012 0.012 0.044 0.004 0.014 0.003 0.020 Tax Revenue 12.6 1.8 14.6 7.6 96.3 12.2 9.7 2.2 1.6 45.4 23.3 3.4 3.7 35.3 17.3 8.3 7.6 11.5 12.7 3.6 15.1 18.0 28.3 14.0 8.1 15.9 2.6 4.9 5.7 3.5 23.9 5.2 53.9 22.9 1.8 32.3 9.8 9.7 34.9 3.0 11.4 2.1 16.2

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 39


Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming 20,851,820 2,233,169 608,827 7,078,515 5,894,121 1,808,344 5,363,675 493,782 0.074 0.008 0.002 0.025 0.021 0.006 0.019 0.002 59.3 6.3 1.7 20.1 16.8 5.1 15.2

Taken From Mirron, (2005)

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 40


Table 4b: State Marijuana Tax Revenue Consumption Method Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Dist. Columbia Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Use Rate 0.044 0.098 0.055 0.054 0.068 0.089 0.063 0.068 0.108 0.066 0.051 0.072 0.056 0.056 0.064 0.046 0.053 0.055 0.064 0.069 0.057 0.063 0.071 0.063 0.050 0.061 0.087 0.064 0.086 0.099 0.050 0.059 0.075 0.056 0.056 0.067 0.052 0.090 0.054 0.095 0.050 0.057 0.047 0.049 0.046 0.100 User Population 193,449 61,251 284,237 145,166 2,296,498 383,672 213,529 53,206 61,897 1,051,640 420,784 87,110 72,461 689,271 388,543 135,489 143,024 221,489 284,227 88,352 302,959 401,263 705,630 311,403 142,802 339,070 78,581 109,179 172,450 121,725 420,718 106,596 1,427,030 448,347 35,771 759,525 180,469 306,557 664,405 99,485 198,996 42,875 266,827 1,015,484 102,502 61,126 Use Proportion 0.011 0.004 0.016 0.008 0.132 0.022 0.012 0.003 0.004 0.060 0.024 0.005 0.004 0.040 0.022 0.008 0.008 0.013 0.016 0.005 0.017 0.023 0.040 0.018 0.008 0.019 0.005 0.006 0.010 0.007 0.024 0.006 0.082 0.026 0.002 0.044 0.010 0.018 0.038 0.006 0.011 0.002 0.015 0.058 0.006 0.004 Tax Revenue 8.9 2.8 13.0 6.7 105.4 17.6 9.8 2.4 2.8 48.2 19.3 4.0 3.3 31.6 17.8 6.2 6.6 10.2 13.0 4.1 13.9 18.4 32.4 14.3 6.6 15.6 3.6 5.0 7.9 5.6 19.3 4.9 65.5 20.6 1.6 34.8 8.3 14.1 30.5 4.6 9.1 2.0 12.2 46.6 4.7 2.8

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 41


Virginia Washington West Virginia Wisconsin Wyoming 0.064 0.081 0.050 0.054 0.052 455,149 479,192 90,056 291,784 25,578 0.026 0.027 0.005 0.017 0.001 20.9 22.0 4.1 13.4 1.2

Taken from Mirron (2005)

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 42 Appendix C: Estimates of Mexican Drug-Trafficking Organizations' Export Revenues from other Drugs
Estimate Point Value of U.S. market at retail ($ billions) Retail price per pure kilogram (1,000 price per pure gram) Implied consumption in pure metric tons purity at wholesale/import level (%) Implied consumption at wholesale purity (MT) Import price per kilogram (not adjusted for purity) ($) Total export revenues of all traffickers ($ billions) U.S. market share exported from Mexico (%) export revenues of Mexican DTOs ($ billions) Cocaine 30 145,000 207 82 252 17,000 4.3 80 3.4 Mexican Heroin 10 450,000 22 35 64 22,500 1.4 30a 0.4 Colombian Heroin 10 450,000 22 60 37 60,000 2.2 30 b 0.7 Meth 5 260,000 19 75 26 30,865 0.8 77.5 0.6

Taken from Kilmer, Caulkins, Bond and Reuter, (2010)

Running Head: Decriminalizing Marijuana and the Effects on the U.S. 43 Appendix D: Estimates of Wholesale Marijuana Prices

Estimates of Wholesale Marijuana Prices Along the Southwestern U.S. Border, from Four Sources
Source nDICa Narcotic News b STRIDec aDaMd Year Mostly 20012002 2010 20052008 20002003 Grade Mexican Commercial grade not specified not specified Point Estimate ($/lb) 400 397 323 430 Range ($/lb) 300500 250500 234334 100600

nDIC (2001a, 2001b, 2002a, 2002b, 2007a, 2008a, 2008b, 2008c, 2008e). wholesale Marijuana prices, undated. arrestee Drug abuse Monitoring program (2000, 2001, 2002, 2003).

c STRIDe = Drug enforcement administration, System to Retrieve Evidence from Drug Evidence, annual. d

Taken from Kilmer, Caulkins, Bond and Reuter, (2010)