Legal Pot Means More Money for States, Less for Gangs

The good things that should happen after marijuana is legalized are happening in Colorado. In November, voters in Colorado -- and Washington state -- legalized pot for recreational use. (Many states allow medical use of marijuana.)

What are the good things?

For starters, money, money, money for the state coffers. As of last week, lawmakers in Denver were still tussling over how heavily to tax marijuana sales. A leading plan centers on excise and sales taxes totaling 30 percent. The tax can't go so high that it encourages a black market.

The first $40 million collected from the excise tax would go to schools. And revenues from a 15 percent sales tax on pot plus the 2.9 percent ordinary state sales tax would be sent to local governments and cover the cost of enforcing the new marijuana regulations.

Meanwhile, the state would save money it now spends on arresting, prosecuting and jailing citizens caught smoking the stuff. As one small example, Washington state no longer trains new police dogs to sniff out marijuana.

Some lawmakers say they want "safeguards" in place to ensure that marijuana doesn't end up in the hands of kids, criminals and cartels -- like it's not happening already.

Speaking of which, turning pot producers and vendors into legitimate businesses is perhaps the most welcome outcome of marijuana legalization.

As Elliott Klug, head of Pink House Blooms, a $3-million-a-year marijuana business in Denver, told The Wall Street Journal: "We were the bad guys. Now we are still the bad guys, but we pay taxes."

What he means is that while the new marijuana operations can operate in the open, they are not being treated as leniently as other farming ventures. The state is regulating them with a heavy hand, to the point of doing background checks on the growers' tattoos.

As more people pile into marijuana merchandizing, prices fall. (Pot prices in Denver are already down a third from their levels in 2011.)

Taking the big money out of a formerly illegal but popular product dismantles the criminal cartels' business model. That means less violence on the streets, less smuggling at the Mexican border. It means ordinary citizens can hike in national forests without fear of tripping upon some gang-run marijuana operation.

Unfortunately, while Colorado and Washington state are doing their bit to end the insanity, the federal government has not. Under federal law, marijuana remains an illegal substance.

This means that legitimate pot growers can't borrow money. (Banks will not lend to businesses the feds do not consider legal.) If a grower develops an especially high-quality plant, the U.S. Patent and Trademark Office will not register it.

Marijuana has been a $1.3 billion-a-year business in this country, a business largely closed to the law-abiding. And there's a collateral lost opportunity caused by our crazy prohibition on hemp farming.

Hemp is an industrial product with many uses. Though it lacks the psychoactive properties of marijuana, hemp is a cousin of marijuana bearing some family resemblance. That's the only reason American farmers are banned from growing it. Across the northern border in Canada, hemp waves on thousands of acres.

Sadly, the Obama administration has lacked the courage to boldly move forward on changing the national marijuana laws. Last winter, President Obama took the baby step of saying the administration wouldn't spend much time on recreational users.

The U.S. Department of Justice is currently scratching its head over what to do about Colorado and Washington state. Eventually, the feds will come around, but how much money must be wasted on prosecution and how much tax revenues lost before that happens?

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