Considering Marijuana Legalization Carefully

Background and Aims

In 2014 the legislature of Vermont, USA passed a law requiring the Secretary of Administration to report on the consequences of legalizing marijuana. The RAND Corporation was commissioned to write that report. This paper summarizes insights from that analysis that are germane to other jurisdictions.

Method

Translation of key findings from the RAND Corporation report to the broader policy debate.

Results

Marijuana legalization encompasses a wide range of possible regimes, distinguished along at least four dimensions: which organizations are allowed to produce and supply the drug, the regulations under which they operate, the nature of the products that can be distributed and taxes and prices. Vermont's decriminalization had already cut its costs of enforcing marijuana prohibition against adults to about $1 per resident per year. That is probably less than the cost of regulating a legal market. Revenues from taxing residents' purchases after legalization could be many times that amount, so the main fiscal cost of prohibition after decriminalization relative to outright legalization may be foregone tax revenues, not enforcement costs. Approximately 40 times as many users live within 200 miles of Vermont's borders as live within the state; drug tourism and associated tax revenues will be important considerations, as will be the response of other states. Indeed, if another state legalized with lower taxes, that could undermine the ability to collect taxes on even Vermont residents' purchases.

Conclusions

Analysis of possible outcomes if Vermont, USA, legalized marijuana reveal that choices about how, and not just whether, to legalize a drug can have profound consequences for the effects on health and social wellbeing, and the choices of one jurisdiction can affect the options and incentives available to other jurisdictions.