Michigan's Pot Tax Is Too Low, Mitch Albom Says, Because It Could Be Higher

The Detroit Free Press columnist seems oblivious to black-market competition.



Under Proposal 1, the marijuana legalization initiative that Michigan voters approved last week, cannabis products will be subject to a 10 percent special sales tax. Detroit Free Press columnist Mitch Albom thinks that rate is way too low:

The goal [of legalization], at least partly, was to redirect the money going to (then) illegal drug dealers and put it to better public use through the government.

And how did we do this? By passing amongst the lowest tax rates on pot in the country. Dealers in Michigan will only have to shoulder a 10 percent excise tax—plus collect our normal 6 percent sales tax, which is what you pay if you buy a toaster at Best Buy.

By comparison, the state of Washington charges 37 percent sales tax on pot. Colorado takes a 15 percent sales tax and a 15 percent excise tax. Oregon, which doesn't have a sales tax on anything else, slaps 17 percent on marijuana. California levies a 15 percent excise tax plus a product-tax rate on every flower and leaf.

And Michigan? We just voted in about the cheapest deal in America. Which means private marijuana enterprises can make more profit here than almost anywhere else.

As Cheech might say to Chong. "Whoa, dude. We did that?"

We did.

No doubt Albom thought he was being clever by deploying a Cheech & Chong reference to portray supporters of legalization as idiots, a rhetorical technique that was already hackneyed when the drug czar used it two decades ago. But if anyone is hazy on the subject of marijuana taxes, it is Albom, who seems to assume that higher rates inevitably mean more money for "public use." If that were true, why stop at 37 percent? Why not 50 or 100 percent?

The problem is that cannabis consumers can continue buying pot the way they always have and are apt to do so if the prices in state-licensed stores are substantially higher than they are on the black market. Politicians who want to displace the black market, or even just maximize tax revenue, ignore that tendency at their peril. Canadian legislators, noting that heavy marijuana taxes in places like California and Washington had made it hard for licensed merchants to compete with old-fashioned pot dealers, settled on a rate similar to Michigan's. So did Massachusetts. Those decisions were based not on ideological opposition to high taxes but on a practical understanding of what happens when legal businesses are undersold by unlicensed competitors: Much, maybe most, of the market is not taxed at all.

Albom, by contrast, seems genuinely oblivious to the effects of competition. "Collecting the lowest taxes doesn't mean you'll get the lowest prices," he says. "Economics might suggest that, but greed is not subject to rules. After all, the state won't be selling you your marijuana, private businesses will. They can charge what they want."

Yes, they can charge whatever they want, as long as they don't mind losing business to competitors who charge less. According to Albom, some people are so greedy that they don't care about making money.

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  1. Greed is not subject to rules?

    Then Proggies will repeal all anti-capitalist rules, right?

  2. >>>Albom, by contrast, seems genuinely oblivious to the effects of competition.

    doubly stupid from a sportswriter

  3. You don’t expect a sportswriter to cognizant of market economics, do you?

  4. Which means private marijuana enterprises can make more profit here than almost anywhere else.

    The horror.

    And the revenue stream being siphoned from the “criminals” isn’t the one going to the other band of criminals. It’s the profits going to the private enterprises. He’s got his incentive structure backward.

  5. Mitch Albom is some low hanging fruit.

    1. It’s like picking on a retard.

      (can’t say retard)

      It’s like picking on a mentally challenged person.

      (can’t say mentally challenged)

      It’s like picking on a sportswriter.

  6. Is this not just emblematic of how the journalism profession views the world? To them life is simply a unchanging pile of rocks, where the only question is how to divide those rocks, who should posses the rocks, and what the rules should be to move the rocks from on person to another.

    It’s what we never see articles in the media about the cost of regulations, the effects of taxation, or the side effects of prohibiting/mandating products or services.

  7. FWIW, even with the taxes, legal weed in CO is cheaper than black market weed in NM, though the black market price of weed in NM has dropped in response to the low prices of legal weed in CO.

    But the black market weed in NM is cheaper than the licensed medical weed in NM.

  8. “Collecting the lowest taxes doesn’t mean you’ll get the lowest prices,” he says. “Economics might suggest that, but greed is not subject to rules. After all, the state won’t be selling you your marijuana, private businesses will. They can charge what they want.”

    Seems to me that he’s suggesting that prices would be lower if it were the benevolent, non-greedy, non-profit state selling the weed instead of those greedy capitalists. The state isn’t greedy by raking its profits right off the top when it’s done absolutely none of the work, no siree. By the way there, Mitch, how’s the bread market up there in Detroit? Greedy capitalist selling bread at a thousand bucks a loaf are they? They can charge what they want, right? I guess it’s a good thing those greedy bastards are dumb as a bag of hammers too and stupidly selling bread at the lowest price possible instead of the highest price possible. Oh, wait, they are selling it at the highest price possible – it’s just that with competition and a free market it turns out that the highest price possible and the lowest price possible are the same price.

    1. On the contrary to Albom, economics very much says greed os subject to rules. Perhaps not rules anyone writes purposely, but you cannot just set whatever price you want and make scads of money. You would think being in the newspaper business in the 21st Century would give some passing familiarity with that truth.

  9. In Oregon anyway, there isn’t a black market left. Between the low taxes, and over growing you can get it for as low as $50 an ounce at a dispensary.

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