Will the Legalization of Recreational Pot Lead to Tourism and Tax Revenues or Federal Intervention?

As we looked at earlier, this year the general election ballots in six states contained initiatives dealing with medical or recreational use of marijuana. Let’s tally the results and consider the effects.   

In Colorado and Washington, in defiance of federal law, the recreational use of marijuana passed 55 to 45 percent, while in Oregon it failed by approximately the same margin. In Massachusetts, medical marijuana use passed 63 to 37 percent, but in Arkansas medical use narrowly failed 51 to 49 percent. Finally, in Montana, restrictions that the state legislature put on medical use in 2011 were ratified 57 to 43 percent.

A Boon to Tourism?

On November 9th, ABC News (Associated Press, Kristin Wyatt) speculated on the possibility of a “weed tourism” in Colorado and Washington because both state measures allow possession of small amounts of marijuana by residents and visitors (tourists) to the state, as long as they purchase and use the drug within the state. 

Interestingly, Wyatt writes that “The home county of Aspen approved the marijuana measure more than 3 to 1. More than two-thirds approved marijuana in the home county of Colorado’s largest ski resort, Vail. The home county of Telluride ski resort gave marijuana legalization its most lopsided victory, nearly 8 in 10 favoring the measure.”

In addition, Wyatt reminds us that Washington already has marijuana tourism. “Every summer on the shores of Puget Sound, Seattle is host to ‘Hempfest,’ which according to organizers attracted around 250,000 people over three days this year. For those three days, people are largely left alone to smoke publically at a local park, even as police stand by.”

The Triple Tax Effect on Budget Hawks

CNNMoney (Aaron Smith, November 8) reported on November 7 that analysts had predicted that the recreational use measure would pass in Washington due to the triple tax which would make the measure attractive to state “budget hawks.” In describing the triple tax, Smith wrote “The Washington initiative calls for a 25 percent tax rate imposed on the product three times: When the grower sells it to the processor, when the processor sells it to the retailer, and when the retailer sells it to the customer.”

Here Come the Feds?

Despite all the hoopla, let’s not get ahead of ourselves.  As reported by Smith in CNNMoney, the Drug Enforcement Administration (DEA) and the U.S. Attorney for Colorado both issued statements. The DEA stated: “The [DEA’s] enforcement of the Controlled Substances Act [CSA] remains unchanged.” “In enacting the [CSA], Congress determined that marijuana is a Schedule I controlled substance. The Department of Justice is reviewing the ballot initiatives and we have no additional comment at this time.”  Likewise, the Colorado U.S. attorney stated that it position on marijuana as an illegal drug is “unchanged.”

In Reuters (Alex Dobuzinskis, November 7), Kevin Sabat, former Obama drug czar, is quoted as saying “This is a symbolic victory for (legalization) advocates, but it will be short-lived.”  “They are facing an uphill battle with implementing this, in the face of…presidential opposition and in the face of federal enforcement opposition.” 

Dobuzinskis also reported that Robert DuPont, a former drug czar under Nixon and Ford, welcomes the confrontation, saying “I think it’s time to resolve it.”

Individual Possession vs. Retail Stores

In tacit recognition that there is nothing the federal goverment will attempt to do with regard to individual possession of small amount of marijuana for personal use, Dobuzinskis writes that Sabat “acknowledged that states were free to eliminate their own penalties for possession.” However, Sabat further suggests that “U.S. Attorneys could send letters to Colorado and Washington governors warning them not to implement provisions to regulate and tax marijuana at special stores.”

Political Courage of State and Federal Officials

If the proposed warning letters regarding specialty stores are ineffective, will the Justice Department file suit to block their creation?  Will state officials respect the voters mandate and implement the initiatives?  Will the Obama administration and federal law enforcement officials crack down and risk alienating younger voters?  Stay tuned.