Blowing smoke into the budget gap

brownie on plate

A new source of revenue for the state?

With New York State scraping to cover a seemingly ever-widening budget gap, state leaders have been exploring all sorts of options for new revenue. But here's one that, as far as we know, hasn't come up, yet: taxing marijuana.

Ha! That's a joke, right? Well, in California -- which is facing a $42 billion budget gap -- a state assemblyman has proposed doing just that. And by some estimates, the Golden State could bring in more than a billion dollars that way.

OK. If New York started taxing pot, how much could it bring in?

Let's start with the size of the overall pie (or, uh, brownie).

From a 2006 analysis by a marijuana reform advocate, the annual US marijuana crop is worth $35.8 billion. (If that's accurate, pot is the #1 cash crop in the US.)

So now we have to figure out size of New York's slice. Let's just go the quick and easy way by dividing the value of the crop by the number of people in the US for a per capita figure.

$35.8 billion of marijuana / 298 million people in 2006 = $120.13 per capita

Let's assume that New York consumes marijuana at that average. New York has roughly 19.5 million people. At $120.13/person, that's $2.34 billion a year in annual pot sales in the Empire State.

Here's where things get really tricky (sticky?) -- how do we figure the state's take of those sales? There's sales tax to consider, of course, but also excise taxes and income taxes from the all new businesses that will now be above board. Hmm. Let's punt. In that Time article first referenced above, there's an estimate that California could get $1.3 billion on $14 billion in marijuana sales. So let's just go with a rate of 10 percent.

$2.34 billion x .1 = $234 million in state revenue

The total state budget is somewhere around $122 billion, so that $234 million isn't going cover that much. But it's something. For example, the recent state worker layoffs were projected to save the state almost $500 million over two years. Yep, you could cover the cost of those state jobs by taxing marijuana.


Caveats and all that

This is some seriously fuzzy (hazy?) math. It's estimates based on estimates based on assumptions about an underground market. You gotta figure that the price of marijuana will go down a bit if it's legalized. And we haven't figured in any of the potential societal cost that could come with legalization. That said, the state could probably save some money by no longer having to prosecute these transactions, either.

By the way: Barack Obama doesn't think this is the sort of economic stimulus we need right now.

photo: Flickr user chatirygirl

The Bottom Line

According to a bunch of fuzzy math, New York State could bring in roughly $230 million by taxing marijuana.

Comments

Not to mention better and safer pot.

Proposal: Combine decriminalization with the, "fat," tax. New York could be rolling in munchies money.

I'd be all for it, except I'm deathly allergic to the stuff. Found out from 2nd hand. Never even had the chance to smoke it. So, legalizing it would be a real bummer for me. Kinda like passing the cheap can of tuna in the supermarket and remembering that you love tuna, but are allergic to it so can't partake in it's cheap yumminess. Oh, and I'm allergic to tuna too. *shrug*


I'm suddenly hungry and I'm not sure why...

woah mannnnn those maths are bugging me outtttttttttttttttttttttt

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