Marijuana

Yes, Rhode Island Should Legalize Marijuana. No, the State Shouldn't Run the Shops.

Gov. Gina Raimondo wants to sell weed to balance the state's budget.

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Rhode Island Gov. Gina Raimondo released her proposed budget for 2021 yesterday. Apparently, she's counting on the state to legalize recreational marijuana—and run all the pot shops—to make the numbers work.

Rhode Island has legalized medical marijuana use but not recreational sales or consumption. The Democratic governor is pushing for full legalization, with an eye on the sweet, sweet cash she thinks it'll bring. To that end, Raimondo wants the state to run all the stores and get most of the revenue.

Here's what's in the summary of her budget plan:

The FY 2021 budget includes the legalization of adult use marijuana. This legalization takes the form of a state-control model, similar to how liquor sales are regulated in New Hampshire and over a dozen states. The state would hire a contractor to acquire adult use marijuana and operate retail stores on the state's behalf. This regulatory approach will allow the state to control distribution, prevent youth consumption, and protect public health. Similar to the state lottery and gaming, the state will receive a share of retail sales revenue net of the wholesale cost of marijuana products. The state share is 61 percent, while the contractor would receive 29 percent, and municipalities would receive 10 percent. Regulatory and public health expenditures would be appropriated out of the state share of revenue. Net of those expenditures, the general revenue transfer from adult use marijuana is expected to be $21.8 million in FY 2020.

Fully ending Rhode Island's war on weed would be good news, but Raimondo needs to pay attention to the problems that will arise when you depend on marijuana revenue to balance your budget—and the bad consequences that have come from state-run shops.

Seven states directly own all the liquor shops within their boundaries: Utah, Virginia, New Hampshire, Pennsylvania, North Carolina, Idaho, and Alabama. This monopoly arrangement leads to higher prices and poorer choices, not to mention no small amount of consumer hassle. And with marijuana, the problems will be worse.

Giving the state a monopoly is a way to make sure it gets a share of the revenue. But marijuana is not like hard liquor: It's much easier to manufacture and to sell on the black market in large quantities. Rather than looking at New Hampshire, Raimondo really needs to be looking to places like Canada and California.

In Canada, the government doesn't run all the shops, but it does serve as the monopoly wholesale vendor to retailers and the sole online vendor. The rollout of this system was a mess, causing the province of Ontario to actually lose $42 million last year. The government was not prepared to meet the demand for marijuana; there were shortages and any number of bureaucratic problems. And after I wrote about Canada's problems last year, a few marijuana smokers contacted me to tell me that the quality of pot the state-run wholesalers were distributing was not terribly good.

California should serve as a warning for any governor who casually assumed she can balance a budget with new revenue from marijuana sales. The government there burdened the fledgling pot industry with taxes and regulations, in part to get the money flowing to city and state coffers. The state expected it would get $1 billion in revenue from legal sales from fiscal year 2018–19. Instead it brought in just $288 million. Because of the high taxes and the oppressive bureaucratic environment, three-quarters of all California marijuana sales still take place in the black market or from retailers who aren't properly licensed.

Marijuana Moment notes that Raimondo's plan would permit adults to purchase only one ounce of marijuana per visit and would forbid home cultivation. This is not a recipe for ending the drug war. This is a recipe to profit from regulating purchases of a drug that will otherwise still be forbidden.

Rhode Island should legalize marijuana sales, but it shouldn't attempt to run its own stores. That's not a path for eliminating the black market for weed or for reducing the bad effects of the drug war. And it's most certainly not going to fix a state's revenue or debt problems.

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  1. The black market happens in other states, not Rhode Island.

  2. Why not do what Congress members do – smoke weed until they no longer care about balancing the budget?

  3. While I disapprove of the NH liquor monopoly on principle, I will point out that NH liquor stores have good prices and selection and are generally pretty nice. There is no state tax on alcohol (unless you count the markup at the stores.

    1. The markup is the tax.

      Now do PA.

      1. Yeah, that’s what I said. Still costs less than other places that do have alcohol taxes. There is also no tax on beer and wine sold at private stores.

        I don’t have direct experience of PA liquor stores, but by all accounts they have terrible prices and selection and aren’t pleasant places to visit.

        1. I thought NH had a 30% per gallon tax on alcohol and additional 5% on wine.

          1. Nope. There is a 30 cent per gallon excise tax on beer, not none on either liquor or wine.

            https://www.salestaxhandbook.com/new-hampshire/alcohol

            1. Should have read “none on”…not “not none”.
              It would be nice if you could edit your posts…

  4. OR, you could stop spending more money than you are bringing in. That’s another way to balance your budget. Are you too stupid or too crooked to realize that?

  5. If the government takes all the profits, they might avoid the problem encountered in some states of taxing it at too high a rate. They might even do it like nearby New Hampshire, which has traditionally kept prices low and attracted business from surrounding states.

    There is an impulse about to bribe the state to allow pot business, else they won’t allow it at all. High taxes or state monopoly may be a necessary temporary price to get this legal in many states. Once it’s legal in most of the country, then competition will tend to drive down the taxes and drive out the monopolies, so we should pay any price to get this legal ASAP.

  6. Any argument is purely academic because section 280 (e) of the Federal tax code makes cannabis vendors unable to take any standard business deductions except for the cost of goods sold. This renders this plan DOA. It isn’t acurate to say that RI is going to run the stores directly. The proposed scheme has RI owning the stores and hiring private firms to run them. RI keeps 61% of the gross revenue. Dead on arrival…that 61% isn’t deductible and the only jobbers they’ll find will be trying to get rid of their money because there’s no way to break even much less make a profit.

    Either Gov Raimondo is trying to get credit for getting cannabis re-legalized without actually doing so or she’s a poster child for incompetence. Dishonest or stupid…those are the choices. No wait, on second thought I suppose it could be a combination of both.

    1. “…she’s a poster child for incompetence.”

      Bingo! Look no further than the “Cooler & Warmer” fiasco or the UHIP disaster.

  7. Most states are short of money so it might be a good idea if the state took over the selling of all the sin industry such as tobacco, marijuana, alcohol etc. The profits from these sales would go a long ways to correct the budget imbalance that they have. At the same time the income taxes that these employees would be just as great or even greater then the employees of the independent businesses. This procedure could be carried over into other areas of the sin industry such as gambling and prostitution if these are allowed in the state. It would be easier to implement any new rules or regulations passed by the state legislators because there would be no challenge to the regulations.

    1. Hey, maybe they could get some advice from the Venezuelan government. They’ve nationalized a lot of industry using the same lame claptrap.

  8. There is already a recreational pot shop in Uxbridge, Massachusetts, not far from the RI border.

  9. That’s why you decriminalize instead of legalize. You get about the same result for citizens, but it keeps the state from taxing and regulating it.

    1. Same results? Not if you get caught with it. It’s a $150 fine, plus loss of your weed. Not to mention what happens to the person you buy your weed from if they get bagged.

  10. NH is a low tax state with low unemployment and low poverty. It is a state of producers that is an example of how the rest of the USA could be. They have very low diversity which may explain their success.

    1. In 2018 15 States had a higher per capita contribution to our nation’s GDP than New Hampshire. Among them were California, Massachusetts, Alaska, Washington and Colorado.
      https://en.wikipedia.org/wiki/List_of_U.S._states_by_GDP_per_capita

      I didn’t list DC because people here can choose to live in Maryland and Virginia and pay their income tax to their choice. Since only someone not in his right mind would want to live in DC and after considering the city’s substantially higher tax rates the middle class packed up and moved. The vast majority of those still work in DC and use city services for free. In most other places a significant percentage of those people don’t have the luxury of being able to move to a State with lower taxes. With a contribution to GDP more than twice that of #2 Massachusetts it’s a laughable statistic. The only thing produced in DC is hot air.

  11. Using NH is not a good example. I live in RI, and whenever we go to NH, we hit the state liquor stores to stock up on what we drink, because it’s far cheaper there than prices are down here.

  12. While I suppose it’s possible that a State could run Marijuana stores without losing money, I don’t think it’s the way to bet. Furthermore, if the State has a monopoly on legal Marijuana , the State is going to be zealous in enforcing that monopoly. which is a situation rife with possibilities, most of them bad.

  13. no to both questions

  14. Using NH is not a good example. I live in RI, and whenever we go to NH, we hit the state liquor stores to stock up on what we drink, because it’s far cheaper there than prices are down here…… Read more  

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  16. This will be a cluster fuck. The legal system is a cluster fuck I know work in it! They think they can make bank on taxes because illegal weed has been so expensive in the past. They fail to realize it was only that expensive because it was ILLEGAL! They go from jailing us using our tax dollars one day to the next signing paper and getting into the money of the drug game themselves on the tax level. Nothing beats taking 50K to the tax man each month in cash and it somehow becomes clean drug money when passing the doorway of the tax office. Then they put the money I can’t put into a bank into a FUCKING BANK!

  17. They are making some most of medical cannabis are too expensive but the truth is it’s easy to plant and harvest it, and they are putting so much tax that’s why they don’t approve it to be legal. this is a medical cannabis check it and it’s very cheap
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