Can Colorado create a legal market for marijuana?

November 1, 2012

Back in 1932, Colorado voters took to the polls and approved Amendment 7, a bill that legalized alcohol consumption and ended prohibition. 

Now, 80 years later, the state is  weighing Amendment 64, a voter proposition that would similarly legalize marijuana.

Colorado voters aren't alone: Oregon and Washington will take up similar measures on Tuesday. If any of the three voter propositions succeed, they would put the an American state left of the Netherlands on marijuana policy - and upend the economics of a contraband market.

“It would be unprecedented,” said Jonathan Caulkins, a professor at Carnegie Mellon University whose research focuses on marijuana legalization. “If one of these things passed, the United States would be right out there in the front of the liberal reform movement for drugs.”

This isn't the first time that a marijuana legalization effort has landed on a state ballot. In 2010, a similar proposal landed on a California ballot. Proposition 19 would have legalized the purchase and consumption of marijuana in the state.

Proposition 19 failed by a seven-point margin. Legal marijuana advocates say they learned lessons from that first state ballot, lessons that helped them land three new ballot initiatives in 2012.

“Proposition 19 definitely pushed the issue into the mainstream, and got people thinking about it,” said Morgan Fox, communications manager for the Marijuana Policy Project. “It taught us that the most effective message is one that shows prohibition doesn’t work, that it comes at a cost to communities and taxpayers.”

Seventeen states had efforts to land a marijuana legalization proposition on the ballot in 2012. Three of those - in Oregon, Washington and Colorado - succeeded.

In those states, both sides are now pitching voters on what it would mean to go beyond decriminalization. Marijuana sales and production would become a legal, regulated commodity. 

"This is utterly unlike decriminalization," Caulkins said. "This is legalizing personal consumption, but also setting up a scheme for a private marijuana sector [in the Washington and Colorado initiatives]."

They look to have some shot at success on Tuesday. A poll out Thursday, commissioned by a Seattle television station, found Washington voters to support legalization by a 19-point margin. A late October poll in Colorado saw the effort there to have 53 percent support and 43 percent opposition. More generally, Gallup polls have found national support for marijuana legalization to have steadily increased in recent decades. It hit a record high of 50 percent last October.

Supporters of marijuana legalization in Colorado have done what nearly every other politician has done this cycle: Focus on the positive economic impact of their proposal. Talk about small businesses. And above all, emphasize job creation.

“There are hundreds of thousands of jobs on the table, and a great deal of tax revenue,” said Tvert, co-director of the Colorado Campaign to Regulate Marijuana Like Alcohol. “It would take profits away from drug cartels and direct them toward legitimate, Colorado businesses.”

In Colorado, Amendment 64 would put an excise tax on marijuana products. The Colorado Center on Law and Policy estimates the law would generate $46 million in new revenue while reducing law enforcement spending by $16 million. The law would direct the legislature to send the revenue generated by the excise tax to local school districts.

“When we saw alcohol prohibition fall, states began to repeal it first,” Tvert said. “They saw it was problematic and wasn’t working. The federal government followed a few years later.”

Opponents of the Colorado initiative worry about what it would mean for one state to legalize marijuana while its neighbors maintain much stricter regulation.

“Colorado is a place that promotes families coming here, and going skiing on the mountains,” said Laura Chapin, communications director for No on 64. “Now you’re going to be the state with the big marijuana industry.”

While the Colorado Democratic Party has endorsed the measure, Gov. John Hickenlooper (D) opposes it.  "Amendment 64 has the potential to increase the number of children using drugs and would detract from efforts to make Colorado the healthiest state in the nation,” he told the Denver Post in September. “It sends the wrong message to kids that drugs are okay."

Chapin also raised numerous logistical issues with the Colorado legalization effort. For one, it’s a constitutional amendment: If there’s any problem with it, it would have to go back to voters for a change. The legislature’s hands would be tied.

Then there’s also the idea of the excise tax: The proposition would require the state legislature to pass a new fine on marijuana. Separate Colorado law, however, prohibits raising additional taxes without putting the issue to a statewide vote. “You cannot constitutionally require members of the legislature to vote for a tax in Colorado,” Chapin said.

The biggest logistical issue, however, is most likely how the federal government reacts. A state law legalizing marijuana would be preempted by federal laws that regulate the drug as an illegal substance.

The federal government would have to decide how aggressively, if at all, it would want to interfere with a state-level law.

“The next administration could essentially say, we’re not going to let this happen,” said Carnegie Mellon’s Caulkins. “Or they could take a position where they respect the voters. They could also just try to stop exports to other states, since you would have one place that becomes a lot more appealing place to do production.

While some have pushed Attorney General Eric Holder to take a solid position against the voter initiatives - a stance he took two years ago when the California amendment was on the ballot - he has not commented on the issue.

Tvert, in Colorado, is optimistic that they could have a positive working relationship with the federal government. The state recently established a regulatory system for medical marijuana, another law that conflicts with federal regulation. There, the Drug Enforcement Agency has essentially allowed medical sales to continue, albeit with some interference.

“The federal government has largely respected our state’s right to regulate and control the production and sale of medical marijuana,” he said. “They once did send letters to about 60 medical marijuana businesses, informing them that must relocate since they were within 1,000 feet of a school zone."

Caulkins predicted that even one state legalizing marijuana would have dramatic effects on the drug’s national market, near certainly driving down prices as the intoxicant became more widely available.

“One of the things people don’t realize is that, in all likelihood, this will effect markets across the country,” he said. “Over five or so years, you’d expect this to start pushing prices down.”

States like Colorado and Washington would have the power to revoke licenses of those who transport marijuana across state lines. But as Caulkins pointed out, it's a big challenge as there “aren’t walls between one state and another.”

Lower prices could stand to dramatically alter the marijuana market. If everyone can sell a cheap intoxicant, there’s a new premium on finding a niche market.

“If you end up in the situation where adding marijuana to a brownie is really cheap, like a penny or two, you could see someone capitalizing on that,” Caulkins said. “Maybe we’re not talking about Godiva Chocolates, but some enterprising business saying, ‘I can make more money getting people to spend $1 on a brownie than I can just selling marijuana.’”

SECTION: {section=business, subsection=null}!!!
INITIAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=m6yzjj840m, display_more=true, moderationrequired=false, includefeaturenotification=true, defaultsort=reverseChronological, canvas_allcomments_id=washpost.com/km4ey0dajm, comments_period=14, includevoteofftopic=false, allow_videos=false, includesorts=true, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, childrenitemsperpage=3, includeheader=true, includeverifiedcommenters=true, defaulttab=all, includerecommend=true, includereport=true, maxitemstop=2, source=washpost.com, allow_photos=false, maxitems=7, display_ugc_photos=false, includepause=true, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!!

UGC FROM ARTICLE: !!!

FINAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=m6yzjj840m, display_more=true, moderationrequired=false, includefeaturenotification=true, defaultsort=reverseChronological, canvas_allcomments_id=washpost.com/km4ey0dajm, comments_period=14, includevoteofftopic=false, allow_videos=false, includesorts=true, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, childrenitemsperpage=3, includeheader=true, includeverifiedcommenters=true, defaulttab=all, includerecommend=true, includereport=true, maxitemstop=2, source=washpost.com, allow_photos=false, maxitems=7, display_ugc_photos=false, includepause=true, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!
Comments
SECTION: {section=business, subsection=null}!!!
INITIAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=m6yzjj840m, display_more=true, moderationrequired=false, includefeaturenotification=true, defaultsort=reverseChronological, canvas_allcomments_id=washpost.com/km4ey0dajm, comments_period=14, includevoteofftopic=false, allow_videos=false, includesorts=true, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, childrenitemsperpage=3, includeheader=true, includeverifiedcommenters=true, defaulttab=all, includerecommend=true, includereport=true, maxitemstop=2, source=washpost.com, allow_photos=false, maxitems=7, display_ugc_photos=false, includepause=true, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!!

UGC FROM ARTICLE: !!!

FINAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=m6yzjj840m, display_more=true, moderationrequired=false, includefeaturenotification=true, defaultsort=reverseChronological, canvas_allcomments_id=washpost.com/km4ey0dajm, comments_period=14, includevoteofftopic=false, allow_videos=false, includesorts=true, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, childrenitemsperpage=3, includeheader=true, includeverifiedcommenters=true, defaulttab=all, includerecommend=true, includereport=true, maxitemstop=2, source=washpost.com, allow_photos=false, maxitems=7, display_ugc_photos=false, includepause=true, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!
Show Comments
November 1, 2012

Back in 1932, Colorado voters took to the polls and approved Amendment 7, a bill that legalized alcohol consumption and ended prohibition. 

Now, 80 years later, the state is  weighing Amendment 64, a voter proposition that would similarly legalize marijuana.

Colorado voters aren't alone: Oregon and Washington will take up similar measures on Tuesday. If any of the three voter propositions succeed, they would put the an American state left of the Netherlands on marijuana policy - and upend the economics of a contraband market.

“It would be unprecedented,” said Jonathan Caulkins, a professor at Carnegie Mellon University whose research focuses on marijuana legalization. “If one of these things passed, the United States would be right out there in the front of the liberal reform movement for drugs.”

This isn't the first time that a marijuana legalization effort has landed on a state ballot. In 2010, a similar proposal landed on a California ballot. Proposition 19 would have legalized the purchase and consumption of marijuana in the state.

Proposition 19 failed by a seven-point margin. Legal marijuana advocates say they learned lessons from that first state ballot, lessons that helped them land three new ballot initiatives in 2012.

“Proposition 19 definitely pushed the issue into the mainstream, and got people thinking about it,” said Morgan Fox, communications manager for the Marijuana Policy Project. “It taught us that the most effective message is one that shows prohibition doesn’t work, that it comes at a cost to communities and taxpayers.”

Seventeen states had efforts to land a marijuana legalization proposition on the ballot in 2012. Three of those - in Oregon, Washington and Colorado - succeeded.

In those states, both sides are now pitching voters on what it would mean to go beyond decriminalization. Marijuana sales and production would become a legal, regulated commodity. 

"This is utterly unlike decriminalization," Caulkins said. "This is legalizing personal consumption, but also setting up a scheme for a private marijuana sector [in the Washington and Colorado initiatives]."

They look to have some shot at success on Tuesday. A poll out Thursday, commissioned by a Seattle television station, found Washington voters to support legalization by a 19-point margin. A late October poll in Colorado saw the effort there to have 53 percent support and 43 percent opposition. More generally, Gallup polls have found national support for marijuana legalization to have steadily increased in recent decades. It hit a record high of 50 percent last October.

Supporters of marijuana legalization in Colorado have done what nearly every other politician has done this cycle: Focus on the positive economic impact of their proposal. Talk about small businesses. And above all, emphasize job creation.

“There are hundreds of thousands of jobs on the table, and a great deal of tax revenue,” said Tvert, co-director of the Colorado Campaign to Regulate Marijuana Like Alcohol. “It would take profits away from drug cartels and direct them toward legitimate, Colorado businesses.”

In Colorado, Amendment 64 would put an excise tax on marijuana products. The Colorado Center on Law and Policy estimates the law would generate $46 million in new revenue while reducing law enforcement spending by $16 million. The law would direct the legislature to send the revenue generated by the excise tax to local school districts.

“When we saw alcohol prohibition fall, states began to repeal it first,” Tvert said. “They saw it was problematic and wasn’t working. The federal government followed a few years later.”

Opponents of the Colorado initiative worry about what it would mean for one state to legalize marijuana while its neighbors maintain much stricter regulation.

“Colorado is a place that promotes families coming here, and going skiing on the mountains,” said Laura Chapin, communications director for No on 64. “Now you’re going to be the state with the big marijuana industry.”

While the Colorado Democratic Party has endorsed the measure, Gov. John Hickenlooper (D) opposes it.  "Amendment 64 has the potential to increase the number of children using drugs and would detract from efforts to make Colorado the healthiest state in the nation,” he told the Denver Post in September. “It sends the wrong message to kids that drugs are okay."

Chapin also raised numerous logistical issues with the Colorado legalization effort. For one, it’s a constitutional amendment: If there’s any problem with it, it would have to go back to voters for a change. The legislature’s hands would be tied.

Then there’s also the idea of the excise tax: The proposition would require the state legislature to pass a new fine on marijuana. Separate Colorado law, however, prohibits raising additional taxes without putting the issue to a statewide vote. “You cannot constitutionally require members of the legislature to vote for a tax in Colorado,” Chapin said.

The biggest logistical issue, however, is most likely how the federal government reacts. A state law legalizing marijuana would be preempted by federal laws that regulate the drug as an illegal substance.

The federal government would have to decide how aggressively, if at all, it would want to interfere with a state-level law.

“The next administration could essentially say, we’re not going to let this happen,” said Carnegie Mellon’s Caulkins. “Or they could take a position where they respect the voters. They could also just try to stop exports to other states, since you would have one place that becomes a lot more appealing place to do production.

While some have pushed Attorney General Eric Holder to take a solid position against the voter initiatives - a stance he took two years ago when the California amendment was on the ballot - he has not commented on the issue.

Tvert, in Colorado, is optimistic that they could have a positive working relationship with the federal government. The state recently established a regulatory system for medical marijuana, another law that conflicts with federal regulation. There, the Drug Enforcement Agency has essentially allowed medical sales to continue, albeit with some interference.

“The federal government has largely respected our state’s right to regulate and control the production and sale of medical marijuana,” he said. “They once did send letters to about 60 medical marijuana businesses, informing them that must relocate since they were within 1,000 feet of a school zone."

Caulkins predicted that even one state legalizing marijuana would have dramatic effects on the drug’s national market, near certainly driving down prices as the intoxicant became more widely available.

“One of the things people don’t realize is that, in all likelihood, this will effect markets across the country,” he said. “Over five or so years, you’d expect this to start pushing prices down.”

States like Colorado and Washington would have the power to revoke licenses of those who transport marijuana across state lines. But as Caulkins pointed out, it's a big challenge as there “aren’t walls between one state and another.”

Lower prices could stand to dramatically alter the marijuana market. If everyone can sell a cheap intoxicant, there’s a new premium on finding a niche market.

“If you end up in the situation where adding marijuana to a brownie is really cheap, like a penny or two, you could see someone capitalizing on that,” Caulkins said. “Maybe we’re not talking about Godiva Chocolates, but some enterprising business saying, ‘I can make more money getting people to spend $1 on a brownie than I can just selling marijuana.’”

SECTION: {section=business, subsection=null}!!!
INITIAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=m6yzjj840m, display_more=true, moderationrequired=false, includefeaturenotification=true, defaultsort=reverseChronological, canvas_allcomments_id=washpost.com/km4ey0dajm, comments_period=14, includevoteofftopic=false, allow_videos=false, includesorts=true, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, childrenitemsperpage=3, includeheader=true, includeverifiedcommenters=true, defaulttab=all, includerecommend=true, includereport=true, maxitemstop=2, source=washpost.com, allow_photos=false, maxitems=7, display_ugc_photos=false, includepause=true, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!!

UGC FROM ARTICLE: !!!

FINAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=m6yzjj840m, display_more=true, moderationrequired=false, includefeaturenotification=true, defaultsort=reverseChronological, canvas_allcomments_id=washpost.com/km4ey0dajm, comments_period=14, includevoteofftopic=false, allow_videos=false, includesorts=true, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, childrenitemsperpage=3, includeheader=true, includeverifiedcommenters=true, defaulttab=all, includerecommend=true, includereport=true, maxitemstop=2, source=washpost.com, allow_photos=false, maxitems=7, display_ugc_photos=false, includepause=true, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!
Comments
SECTION: {section=business, subsection=null}!!!
INITIAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=m6yzjj840m, display_more=true, moderationrequired=false, includefeaturenotification=true, defaultsort=reverseChronological, canvas_allcomments_id=washpost.com/km4ey0dajm, comments_period=14, includevoteofftopic=false, allow_videos=false, includesorts=true, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, childrenitemsperpage=3, includeheader=true, includeverifiedcommenters=true, defaulttab=all, includerecommend=true, includereport=true, maxitemstop=2, source=washpost.com, allow_photos=false, maxitems=7, display_ugc_photos=false, includepause=true, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!!

UGC FROM ARTICLE: !!!

FINAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=m6yzjj840m, display_more=true, moderationrequired=false, includefeaturenotification=true, defaultsort=reverseChronological, canvas_allcomments_id=washpost.com/km4ey0dajm, comments_period=14, includevoteofftopic=false, allow_videos=false, includesorts=true, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, childrenitemsperpage=3, includeheader=true, includeverifiedcommenters=true, defaulttab=all, includerecommend=true, includereport=true, maxitemstop=2, source=washpost.com, allow_photos=false, maxitems=7, display_ugc_photos=false, includepause=true, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!
Show Comments
Next Story
Suzy Khimm | November 1, 2012