Raising taxes on state-legal cannabis products drives a significant percentage of consumers to the unregulated marketplace, according to data published in the journal Health Economics.
Investigators affiliated with the Ohio State University evaluated purchasing behaviors among a cohort 1,525 adult cannabis consumers. They reported that tax increases discourage many consumers from patronizing legal cannabis markets.
“While increases in the prices of legal products significantly reduce their consumption [of state-legal products], 89 percent of this reduction may be offset by [consumers] switching to illegal products,” the study’s authors concluded. “Increasing prices through taxes on legal products will drive consumption to illegal products.”
NORML has long argued against imposing high tax rates upon state-regulated cannabis products. Writing in an op-ed earlier this year, NORML’s Deputy Director Paul Armentano warned: “Many states are sacrificing the long-term health and sustainability of the legal cannabis market for theoretical short-term gains reaped by sky-high taxes. … Imposing excessive taxes on legal cannabis strengthens illicit markets while weakening legal ones. It encourages consumers to seek out unlicensed sellers who don’t check IDs, who lack the means or the desire to test their products for quality or purity, who operate without any regulatory oversight, and who don’t redistribute their revenues back into their local communities.”
Last year, lawmakers in several states – including Maine, Maryland, Michigan, and Minnesota – passed legislation imposing significant cannabis-related tax hikes. By contrast, a legislative effort led by California NORML successfully rolled back marijuana-related taxes in that state.
Earlier this year, members of the DC City Council also rejected a budget proposal that sought to significantly raise sales taxes on retail cannabis purchases.
The full text of the study, “The impact of various tax bases and rates on cannabis consumption among US adults who use recreational cannabis,” appears in Health Economics.
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