Having established that cannabis legalization was not a disaster after all, and that the 21 drinking age has been the greatest alcohol policy failure since Prohibition, it may seem a bit odd that Twenty-One Debunked has grudgingly supported cannabis legalization with a 21 age limit thus far. The reason for this was, of course, pure pragmatism, as the odds of legalization actually passing with an age limit of 18 would have been almost nil in the critical early years of 2012-2016. It was, after all, the lesser evil compared with continued prohibition. But five years and eight states later after the first initiatives passed (albeit narrowly) in November 2012, we feel it is now time to really tackle the issue of cannabis age limits.
To put it bluntly, there is absolutely no legitimate scientific or public health reason why the age limit for cannabis should be any higher than 18. Zip, zilch, nada. And while cannabis (though safer than alcohol and tobacco) is not completely harmless, and there is of course some evidence that it can be more harmful before age 18 and especially before 15, there is still no hard scientific evidence that it is any more harmful at 18 than it is at 21, 25, or even 30 for that matter. Any claims of such are merely glib conjecture rather than real science. In fact, a recent study by the American Psychological Association on the long term physical and mental health effects of teen and young adult cannabis use should be seen as the final nail in the coffin in that regard. One possible reason for the null results (i.e. no significant differences between groups regardless of cannabis use trajectory) not always echoed by other studies may be the relative lack of participants who began before age 15 and the relative lack of ultra-heavy users at any age in this study, but overall it should greatly alleviate the worst fears about both legalization itself as well as late adolescent and young adult cannabis use in general.
And after reviewing the most major studies of drugs and drug policy (with cannabis being the most heavily studied of all) throughout history, the results of this recent study should really not come as much of a surprise. Unless, of course, you have a vested interest in maintaining prohibition and/or are simply a bigoted, intolerant, ageist jerk. But in that case, you probably wouldn't be caught dead reading this blog.
Additionally, the issue of the black market comes to mind as well. Given the fact that cannabis use tends to peak around age 18-20 or so, an age limit of 21 would be more likely to encourage at least some persistence of the black market compared with an age limit of 18, particularly if taxes are high. After all, dealers don't ask for ID, and such an issue for cannabis would be more likely than alcohol or tobacco since the former has had decades of black market history and is less bulky per dose than the other two. And such dealers would probably continue to sell to people under 18 as well, including in schools, as they currently do under prohibition. So any concerns about "trickle-down effects" of an age limit of 18 need to be put in such perspective. Besides, any such "trickle-down" can be greatly curbed by simply capping how much 18-20 year olds can buy in the stores (say, no more than an eighth of an ounce per transaction, and no more than one transaction per day). You know, kinda like Twenty-One Debunked has long advocated for alcohol sales.
And let's not forget the issue of social cohesion as well. Few things are more inherently communal than sharing a joint, blunt, bowl, bong, or whatever sort of cannabis smoking implement--in fact, that is literally the origin of the term "joint". And if the 21 age limit is to be taken seriously to its logical conclusion, it would mean that every time someone over 21 passes it around to someone under 21, a crime has technically been committed. At least during prohibition, everyone is in the same illegal boat in that regard, but a 21 age limit would divide the 18-24 year old demographic in that regard, potentially inhibiting social cohesion. Not to mention it gives people over 21 one more thing to "lord it over" people under 21. At a time in history where social cohesion appears to be at a record low overall, we need that kind of additional division like we need a hole in the head!
But truly the strongest argument of all for an age limit no higher than 18 is one of civil rights. The age of majority (i.e. legal adulthood) is 18 in nearly all states, and denying legal adults the right to decide what they put into their own bodies has no place in a free society. Old enough to fight and vote = old enough to drink and toke. 'Nuff said.
Sunday, December 10, 2017
Saturday, December 9, 2017
Who's Afraid of Cheap, Legal Weed?
Aside from the usual suspects (Big Alcohol, Big Pharma, and of course the illegal drug cartels), who stand to lose the most from cannabis legalization and/or falling cannabis prices, as well as those who simply oppose cannabis in general, there have also been some legitimate public health researchers such as Mark Kleiman who also seem to fear it--specifically the "cheap" part, not the "legal" part. The fear here is that, while legalization per se may be a non-problem, a large price drop may lead to a significant increase in heavy cannabis use and related problems, at least in theory. But we don't really see much reason to worry.
Of course, prior to Colorado and Washington's cannabis legalization, there had been a widespread belief that before-tax prices would plummet by at least half, and perhaps even 80% or more, upon legalization or very shortly after. And yet, that did not happen--yet. If anything, prices went up at first due to higher demand in the short term, and with or without taxes the prices three years later still have not dropped nearly as much as predicted compared with the status quo ante, at least not at the retail level.
And while the price elasticity of demand for cannabis remains controversial to this day, it is generally thought to be relatively inelastic overall, though estimates vary dramatically. Note that all estimates were calculated during the time of prohibition and do not always adjust for potency. There may very well be a relatively "elastic zone" above a certain price point, such as the average price during the 1980s and early 1990s when usage rates dropped, but any further decreases from current levels are squarely in the "inelastic zone". In fact, even before legalization, the typical cost per buzz-hour was already cheaper than beer.
Of course, prior to Colorado and Washington's cannabis legalization, there had been a widespread belief that before-tax prices would plummet by at least half, and perhaps even 80% or more, upon legalization or very shortly after. And yet, that did not happen--yet. If anything, prices went up at first due to higher demand in the short term, and with or without taxes the prices three years later still have not dropped nearly as much as predicted compared with the status quo ante, at least not at the retail level.
And while the price elasticity of demand for cannabis remains controversial to this day, it is generally thought to be relatively inelastic overall, though estimates vary dramatically. Note that all estimates were calculated during the time of prohibition and do not always adjust for potency. There may very well be a relatively "elastic zone" above a certain price point, such as the average price during the 1980s and early 1990s when usage rates dropped, but any further decreases from current levels are squarely in the "inelastic zone". In fact, even before legalization, the typical cost per buzz-hour was already cheaper than beer.
Still, the long-term trend in cannabis prices does seem to be downward, both in legalization states and nationwide. And contrary to what the fearmongers like to claim, that is not necessarily a bad thing, given how cannabis is overall safer than alcohol, and generally tends to substitute for it. Many studies strongly suggest that when one advances, the other retreats, albeit with some nuance. Cannabis may even take a major bite out our nation's deadly and devastating opioid epidemic as well, according to some studies. Thus, cheaper weed, especially if it is legal, may very well be a net public health and safety benefit on balance. And there is also no hard evidence that teen cannabis use has increased as a result of legalization--on the contrary, the latest NSDUH data find that cannabis use among 12-17 year olds nationally has dropped to a 22-year low, even as it has risen significantly among both 18-25 year olds and those 26 and over since 2008.
As for heavy use, the definition of that term varies, but for argument's sake let's use Mark Kleiman's "daily or near-daily" (DND) use definition of 20+ times per month. He notes how the rate of past-month use among adults is roughly the same as it was in the early 1990s, but within that group the proportion of DND users has apparently increased fourfold by 2014. And yes, heavy users would be the most sensitive to price as a rule, since they spend a more significant chunk of their incomes on weed than non-heavy users. But this increase occured almost entirely during prohibition, and now it seems like the market for heavy use is quite saturated even with legalization and falling prices. So heavy use is unlikely to increase much more (if at all) going forward, regardless of price or legal status.
As for heavy use, the definition of that term varies, but for argument's sake let's use Mark Kleiman's "daily or near-daily" (DND) use definition of 20+ times per month. He notes how the rate of past-month use among adults is roughly the same as it was in the early 1990s, but within that group the proportion of DND users has apparently increased fourfold by 2014. And yes, heavy users would be the most sensitive to price as a rule, since they spend a more significant chunk of their incomes on weed than non-heavy users. But this increase occured almost entirely during prohibition, and now it seems like the market for heavy use is quite saturated even with legalization and falling prices. So heavy use is unlikely to increase much more (if at all) going forward, regardless of price or legal status.
So how far will the price ultimately fall? Well, consider this. Take a look at the price by weight of various products in your local grocery store. For example, think "parsley, sage, rosemary, and thyme" (like the song), and of course oregano and tea bags--all of which are typically just a few dollars per ounce (which works out to mere pennies per gram), compared to cannabis at $100/oz. for low-grade and $300+/oz. for high-grade (i.e. $1600-5000/lb.) despite it being roughly as easy to grow as basil. That's a roughly 100-fold difference! The notable exception to this rule is saffron, which is about $1000-5000/lb. but that is because it is made from just the pistils of the crocus flower and thus requires a LOT of flowers, and a little bit goes a very long way. But for cannabis, once the industry becomes fully developed, the current artificial scarcity caused by tight regulation and licensing will dissipate, and the inevitable (albeit delayed) drop in price will happen, sooner or later. Exactly how much is anyone's guess, and depends on supply and demand as well as taxation, but down it will go, most likely by a lot. Perhaps even so low that a "dime bag" would literally cost a dime (before taxes), though demand would most likely buoy the price at least somewhat higher than that.
Thus, an 80-90% price crash at some point in the not-too-distant future is really not too farfetched. If that happens, then the average potency would also likely drop from its currently high levels. What would be the point of using energy-intensive indoor growing methods to force the THC percentage levels well into the double-digits and even into the twenties, when decent bud can be produced much more cheaply and efficently via outdoor growing or in literal greenhouses? After all, the whole point of high-potency weed is more "bang for the buck", as well as making it easier to conceal. At the same time, bunk weed would be, well, weeded out. And specialty products such as edibles and vape products will likely increase in production, as the cost of producing them will go down due to cheaper crude cannabis prices.
Thus, an 80-90% price crash at some point in the not-too-distant future is really not too farfetched. If that happens, then the average potency would also likely drop from its currently high levels. What would be the point of using energy-intensive indoor growing methods to force the THC percentage levels well into the double-digits and even into the twenties, when decent bud can be produced much more cheaply and efficently via outdoor growing or in literal greenhouses? After all, the whole point of high-potency weed is more "bang for the buck", as well as making it easier to conceal. At the same time, bunk weed would be, well, weeded out. And specialty products such as edibles and vape products will likely increase in production, as the cost of producing them will go down due to cheaper crude cannabis prices.
And for those who are concerned about a hypothetical Big Tobacco-style supervillain cannabis industry somehow endangering public health? Well, if the price really does plummet as much as researchers predict, it would really take the profit out of it at the same time, so this hypothetical "Big Pot" would not get very far. Thus, Twenty-One Debunked believes "don't fear the reefer", no matter how cheap and readily avaliable it may eventually become.
Sunday, December 3, 2017
Cannabis Taxes: Start Low, Go Slow
With several states having legalized cannabis now, and taxing it, what lessons have we learned thus far? It would seem that the biggest one of all is, "start low, go slow" when it comes to taxes.
As Rear Admiral Luther E. Gregory found out after the repeal of alcohol Prohibition, the black market does not vanish right away, and setting the tax rate too high at first will keep the black market in place, while setting it low to start with will undercut it. And once the black market is gone, it will not return easily, so then one can raise the tax rate quite high without worrying about the black market making a comeback. Of course, there is still such a thing as "too high" in that regard, but the threshold for significant black market formation and persistence is much higher afterwards than it is in the very first year or two post-prohibition.
Fast-forward to cannabis legalization in 2014, Colorado and Washington found out the hard way what happens when cannabis excise taxes are too high. Though otherwise successful, their legalization success was hampered by a fairly persistent black market, albeit smaller than the pre-legalization one. So they both ended up having to cut their tax rates as a result.
So why did they start out with such high taxes? Well, the promise of much-needed revenue certainly helped sweeten the deal for the fence-sitters. But also, there was a widespread belief that before-tax prices would plummet by at least half, and perhaps even 80% or more, upon legalization or very shortly after. And yet, that did not happen. If anything, prices went up at first due to higher demand in the short term, and with or without the taxes the prices three years later still have not dropped very much compared with the status quo ante. And while the price elasticity of demand for cannabis remains controversial to this day, it is generally thought to be relatively inelastic overall, though estimates vary dramatically.
Still, the long-term trend in cannabis prices does seem to be downward, both in legalization states and nationwide. And contrary to what the fearmongers claim, that is not necessarily a bad thing, given how cannabis is overall safer than alcohol and generally tends to substitute for it. Many studies strongly suggest that when one advances, the other retreats, albeit with some nuance. Cannabis may even take a bite out our nation's deadly and devastating opioid epidemic as well, according to some studies. Thus, cheaper weed, especially if it is legal, may very well be a net public health and safety benefit on balance. And there is also no hard evidence that teen cannabis use has increased as a result of legalization--on the contrary, the latest NSDUH data find that cannabis use among 12-17 year olds nationally has dropped to a 22-year low, even as it has risen among both 18-25 year olds and those 26 and over since 2008.
As for specifics as to what the the tax on cannabis should be, it seems that an initial rate of 30% or more on final retail sales like Colorado and Washington originally had is too high to eliminate the black/gray market, and 10-25% is now what most legalization states are aiming for. Alaska chose a flat $50/oz., which based on the average price of $250/oz. would be about 20%. There are pros and cons to either method, ad valorem or by weight, and California is apparently combining both types of taxes. And once the black market is gone after a year or two, then jack the rate up to a level just shy of what would cause a significant black market to return. But to start with, Twenty-One Debunked recommends a rate of 10% and/or $10-20/oz. for the first year or two before raising it any higher, and perhaps even a "tax holiday" for the first three months of legalization like Oregon did.
Also, once the kinks are worked out, we think it would be a good idea to have the tax rate be at least somewhat proportional to THC levels and perhaps even inversely proportional to CBD levels as well. For now, though, a simple single rate (whether ad valorem or by weight) will likely be the most workable starting point for any states that are new to legalization. And if they wish to incentivize THC not being too high or CBD too low, the regulators are free to cap THC levels and/or set a floor for CBD levels.
As for California's idea of having a combination of different taxes (a $9.25/oz. cultivation for flowers, $2.75/oz. for leaves, and a 15% ad valorem tax on retail sales, plus any additional taxes levied by municipalities if they so choose), that's fine. But both the state and municipalities really might want to consider reducing their rates for the time being, as the combined rates may be as high as 45% in some parts of California by the time it reaches the consumer. Ouch. And unlike in Colorado and Washington, medical cannabis will soon be taxable in California as well, so that's a double ouch. Best advice? Municipal taxes shouldn't be too much of an issue, since one can just go to the next town. But the state should aim for a retail excise tax of 10% and $10/oz. for flowers at the cultivation level. Ten and ten. The lower rate for leaves makes sense too, given their generally far lower THC content. "Start low, go slow."
As Rear Admiral Luther E. Gregory found out after the repeal of alcohol Prohibition, the black market does not vanish right away, and setting the tax rate too high at first will keep the black market in place, while setting it low to start with will undercut it. And once the black market is gone, it will not return easily, so then one can raise the tax rate quite high without worrying about the black market making a comeback. Of course, there is still such a thing as "too high" in that regard, but the threshold for significant black market formation and persistence is much higher afterwards than it is in the very first year or two post-prohibition.
Fast-forward to cannabis legalization in 2014, Colorado and Washington found out the hard way what happens when cannabis excise taxes are too high. Though otherwise successful, their legalization success was hampered by a fairly persistent black market, albeit smaller than the pre-legalization one. So they both ended up having to cut their tax rates as a result.
So why did they start out with such high taxes? Well, the promise of much-needed revenue certainly helped sweeten the deal for the fence-sitters. But also, there was a widespread belief that before-tax prices would plummet by at least half, and perhaps even 80% or more, upon legalization or very shortly after. And yet, that did not happen. If anything, prices went up at first due to higher demand in the short term, and with or without the taxes the prices three years later still have not dropped very much compared with the status quo ante. And while the price elasticity of demand for cannabis remains controversial to this day, it is generally thought to be relatively inelastic overall, though estimates vary dramatically.
Still, the long-term trend in cannabis prices does seem to be downward, both in legalization states and nationwide. And contrary to what the fearmongers claim, that is not necessarily a bad thing, given how cannabis is overall safer than alcohol and generally tends to substitute for it. Many studies strongly suggest that when one advances, the other retreats, albeit with some nuance. Cannabis may even take a bite out our nation's deadly and devastating opioid epidemic as well, according to some studies. Thus, cheaper weed, especially if it is legal, may very well be a net public health and safety benefit on balance. And there is also no hard evidence that teen cannabis use has increased as a result of legalization--on the contrary, the latest NSDUH data find that cannabis use among 12-17 year olds nationally has dropped to a 22-year low, even as it has risen among both 18-25 year olds and those 26 and over since 2008.
As for specifics as to what the the tax on cannabis should be, it seems that an initial rate of 30% or more on final retail sales like Colorado and Washington originally had is too high to eliminate the black/gray market, and 10-25% is now what most legalization states are aiming for. Alaska chose a flat $50/oz., which based on the average price of $250/oz. would be about 20%. There are pros and cons to either method, ad valorem or by weight, and California is apparently combining both types of taxes. And once the black market is gone after a year or two, then jack the rate up to a level just shy of what would cause a significant black market to return. But to start with, Twenty-One Debunked recommends a rate of 10% and/or $10-20/oz. for the first year or two before raising it any higher, and perhaps even a "tax holiday" for the first three months of legalization like Oregon did.
Also, once the kinks are worked out, we think it would be a good idea to have the tax rate be at least somewhat proportional to THC levels and perhaps even inversely proportional to CBD levels as well. For now, though, a simple single rate (whether ad valorem or by weight) will likely be the most workable starting point for any states that are new to legalization. And if they wish to incentivize THC not being too high or CBD too low, the regulators are free to cap THC levels and/or set a floor for CBD levels.
As for California's idea of having a combination of different taxes (a $9.25/oz. cultivation for flowers, $2.75/oz. for leaves, and a 15% ad valorem tax on retail sales, plus any additional taxes levied by municipalities if they so choose), that's fine. But both the state and municipalities really might want to consider reducing their rates for the time being, as the combined rates may be as high as 45% in some parts of California by the time it reaches the consumer. Ouch. And unlike in Colorado and Washington, medical cannabis will soon be taxable in California as well, so that's a double ouch. Best advice? Municipal taxes shouldn't be too much of an issue, since one can just go to the next town. But the state should aim for a retail excise tax of 10% and $10/oz. for flowers at the cultivation level. Ten and ten. The lower rate for leaves makes sense too, given their generally far lower THC content. "Start low, go slow."
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