Six Marijuana Legalization Lessons

What have policy makers learned since Colorado became the first state to allow recreational use in 2012?

Legislators in New Jersey, New York, New Mexico, and Virginia voted to legalize recreational marijuana this year, bringing the number of states that have approved legalization to 18. While New Jersey was implementing a 2020 ballot initiative (the typical route to legalization), legislators in the other three states acted on their own, although Virginia has not yet approved rules for commercial production and distribution. The four bills reflect six big lessons policy makers have learned—and in some cases ignored—since Colorado became the first state to allow recreational use in 2012.

1. Expungement: Unlike the first few states to legalize marijuana, New Jersey, New York, New Mexico, and Virginia are simultaneously trying to alleviate the damage done by prohibition. All four states are creating expungement programs to remove the taint of criminality from people who were convicted of marijuana-related conduct that is no longer illegal.

2. Stoned Driving: New Jersey, New York, New Mexico, and Virginia, unlike several other states with legal pot, wisely eschewed defining marijuana-impaired driving based on THC blood levels, which are not a reliable measure of intoxication. All four states will continue to require additional evidence of impairment, such as erratic driving and performance on sobriety tests.

3. Cannabis Cafés: After the first few states legalized marijuana, dispensary customers—especially tourists—frequently had trouble finding a place where they could legally consume the pot they could now legally buy. New Jersey, New York, and New Mexico address that problem by allowing marijuana use in specially licensed consumption areas.

4. Home Delivery: When states allow local governments to ban dispensaries, even buying marijuana can be difficult. Home delivery, which New Jersey, New York, and New Mexico all will allow, frees cannabis consumers from the dictates of weed-unfriendly jurisdictions.

5. Home Cultivation: Most states where marijuana is legal let recreational consumers grow cannabis at home to use and share with friends, which is analogous to allowing home brewing by beer drinkers. New Mexico began allowing home cultivation this summer, so consumers won't have to continue relying on the black market until state-licensed pot shops are up and running, which is supposed to happen by April 1, 2022.

Virginia legislators plan to approve rules for licensing and regulating commercial suppliers by the end of 2023. But in the meantime, they have legalized home cultivation as well as possession, effective July 1.

New York, by contrast, is delaying permission for home cultivation until up to 18 months after the first recreational dispensary opens, which could mean consumers won't be allowed to grow marijuana until late 2023 or early 2024. New Jersey, meanwhile, is prohibiting homegrown marijuana altogether.

6. Taxes: New York's long delay in allowing home cultivation presumably is aimed at helping newly licensed suppliers establish themselves and displace the black market. But when it comes to taxes, New York legislators do not seem very keen on helping the industry—or consumers.

New York plans to tax marijuana based on THC content, but with different rates for different products: higher for concentrates than for flower, and higher still for edibles. A consumer who buys a chocolate bar containing 100 milligrams of THC will be taxed six times as heavily as a consumer who buys a gram of flower with the same amount of THC.

The THC levy may amount to a tax as high as 30 percent, depending on costs, THC content, and product type. That's on top of a 13 percent marijuana sales tax, which is in addition to general state and local sales taxes that can run as high as 8.9 percent.*

New Jersey plans to impose an excise tax ranging from less than 3 percent to more than 30 percent, depending on the average retail price per ounce (lower prices trigger higher rates). The state also will allow local governments to collect multiple taxes from growers, manufacturers, wholesalers, and retailers, with the rate capped at 2 percent for each transaction.

New Mexico's marijuana sales tax is simple and modest by comparison: 12 percent initially, rising gradually to 18 percent by July 2030.

States such as Alaska, Illinois, Maine, Massachusetts, and Michigan tax marijuana even more lightly. These states seem to recognize that heavy taxes make it harder for licensed retailers to compete with black-market dealers. It's a lesson that some politicians will have to learn all over again.

*CORRECTION: New York's legalization bill exempts recreational marijuana from general sales taxes.