Tuesday, October 30, 2012

No on I-502, Marijuana

With about a week before my ballot has to be back in the government's hands, I'm filling it out bit by bit. So far I've voted yes on both I-1185 and I-1240, and approved R-74.
I-502, Marijuana

The Issue: I-502 would make it legal under state law (but not federal law) to possess and sell marijuana under a system of strict regulations. Marijuana producers could not have any financial interest in marijuana retailers and vice versa. Licenses to produce, process or retail marijuana would cost $250 to apply plus $1000 per year per location, with samples regularly submitted to state labs for testing.

Furthermore, marijuana would be taxed at 25% at each level of production and distribution, prior to state and local B&O and sales taxes. At the legally-mandated minimum of two steps of production (producer -> retailer), state taxes on marijuana would be approximately 68%. Total tax, including the state average for local sales taxes, would be over 70%.

I-502 also establishes many alcohol-equivalent rules for marijuana use. For example, marijuana possession would remain illegal for those under 21, driving under the influence of marijuana would be illegal for everyone, open containers in public would be prohibited, etc. The pro-502 website is here. The official anti-502 website, which is pro-legalization, is here.

My Position: I don't fully buy the arguments supporting the drug war, but I also don't buy a lot of the arguments opposing it. My libertarian leanings run up against path dependency, and I remain agnostic on the drug war as a whole.

I am opposed to I-502 because it won't bring any of the benefits of legalization, yet will create a massive new state bureaucracy under the guise of legalization.

My Reasons:

1) I-502 will directly contradict federal law, under which marijuana production, distribution and possession will all remain illegal. If passed, the initiative is likely to be struck down entirely or in part in federal court. (The counterargument is that I-502 allows but does not require violations of federal law, so that it is not pre-empted and will not be struck down. However, I-502 does seem to require violations of federal law by state marijuana regulators, particularly the prohibitions on possession and distribution of marijuana. The feds may also consider it money laundering to accept funds raised from the marijuana tax.)

2) Even if I-502 is not struck down, the threat of federal prosecution for marijuana crimes will prevent the benefits of legalization from being realized. Licensed marijuana producers, processors and retailers will have their names, addresses and precise details of their businesses recorded in a state database. Any guesses on how long it takes that database to get into federal hands? Anyone who opens a marijuana business is betting big on that never happening. New producers will be discouraged from entering the market; existing producers will be discouraged from becoming licensed.

3) Furthermore, the regulatory system set up by I-502 will place legal marijuana sellers at a substantial disadvantage to illegal sellers. Legal marijuana sales will have a cumulative tax of at least 68%, and possibly more than 100% if the production and distribution chain contains more than two steps. Then there's the significant regulatory burden placed on legal sellers-- the fees they must pay to the government, or to third parties because of government requirements; the restrictions on where they can sell, where and how they can advertise, what other businesses they can be involved in; and all of it with the threat of federal prosecution still hanging over their heads. Again, new producers will be discouraged from entering the market, and existing producers will be discouraged from becoming licensed.

4) The existing (illegal) marijuana market is an international one, yet legal marijuana sellers under I-502 will be limited to Washington state, both in who they buy from and who they sell to. With the other disadvantages placed on legal sellers, they will never be able to compete with existing illegal sellers, and those illegal sellers have scant incentive to become legal.

Whatever benefits full legalization might provide, we won't see any of them under I-502. Meanwhile, the state will spend tens of millions of dollars setting up a bureaucracy to regulate a market that will likely fail to materialize.

I will be voting NO on I-502.

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