CA Pot Tax A Trick of Smoke and Mirrors?

California's $1.4 Billion Pot Tax Hopes May Be Up in Smoke

California's tax board says the state could reap about $1.4 billion by
taxing their biggest cash crop -- marijuana -- but their estimate
appears to be based on hazy "studies" conducted by marijuana advocates.

By Joseph Abrams
FOXNews.com

Thursday, July 23, 2009

With its state parks and summer schools on the chopping block,
budget-busted California could see a $1.4 billion windfall if it
legalizes and taxes the sale of marijuana, the state tax board found in
an analysis that was published last week.

But a close look at that $1.4 billion figure raises a timely and
important question:

What in blazes were they smoking?

To reach that amount, the board apparently relied on a source that
relied on a source that misquoted a book that misquoted a study, all
involving a hazy mix of out-of-date numbers, high margins of error and
complete guesswork that could be a mere $700 million off the mark.

California's Board of Equalization published its much ballyhooed
analysis last week of a bill that would tax pot like alcohol and also
levy an extra $50 fee on every ounce (which already costs about $400), a
green godsend the bill's sponsor says the state can't afford to pass on.

"It defies reason to propose closing parks and eliminating vital
services for the poor while this potential revenue is available," State
Assemblyman Tom Ammiano said in a statement.

According to the tax commission's report, Californians consume 16
million ounces of pot every year -- 1 million pounds exactly -- a
suspiciously round number the report said was derived from a "literature
review" of "law enforcement and academic studies."

That number would go up even more, it said, if prices dropped by half as
the drug became legal.

But FOXNews.com took a close look at the board's analysis and found a
$700 million kink in its accounting.

The board appears to have based its 16-million-ounce guess on a
problematic "study" conducted by the founder of a pot-growing university
in Oakland and by the director of California's branch of NORML, the
National Organization for the Reform of Marijuana Laws.

But the fact is, no one -- not even law enforcement agencies -- really
knows how much weed gets smoked in California, because self-reported
users can and do lie on government surveys.

Drug Enforcement Administration agents in California said they "don't
really track users," the Drug Czar's office said it doesn't follow the
amount of pot consumed, and the California Highway Patrol said they "do
not have those types of statistics."

So how did California's figures get so . . . high?

A spokeswoman for the tax board told FOXNews.com that the board
calculated its $1.4 billion guesstimate based on four publications, a
story on CNBC, some unnamed "Harvard studies" and Internet searches.

But the spokeswoman named only one source that addresses hard
consumption in California: a 3-year-old financial report to Oakland's
medicinal marijuana oversight committee, the one that was composed by
Professor Pot and the state's director of NORML -- two staunch advocates
of legalization.

The report offers an estimate of how much marijuana Californians smoke
in one year: 16 million ounces exactly -- the same even number the state
board is using.

But that 16 million ounce figure -- the heart of the matter -- was
clipped verbatim from another report prepared by NORML that has been
online in the same form for at least six years.

But after only a quick look, those numbers went up in smoke. The NORML
report based some of its figures on a book called "The Science of
Marijuana," which in turn appears to have misquoted an annual study of
regular smokers conducted at music festivals and pot rallies in Britain.

The book says the study found that daily marijuana users smoke about 2
ounces a month (56 grams), but the study actually found that they used
just over an ounce a month (34.25 grams).

NORML's numbers, which seemingly became the state's numbers, are really
a composite formed from the product of several old studies that measured
the number of Californians who smoked in the last month, who smoke
daily, the average amount a "daily smoker" smokes, the average amount a
"regular smoker" tokes and a guess at how much everyone else is using.

According to national numbers from the National Survey on Drug Use &
Health, there are now more people smoking month by month than when NORML
ran their numbers. But in referring to the British study, they
essentially tripled the amounts that regular users consume on a monthly
basis. Also, fewer smokers indulge daily than NORML thought.

And a few grams here and there really add up: Using the same essential
equation produced by NORML but updating the numbers with data from the
U.S. government's most recent national survey and the real figures from
the British study, FOXNews.com found pot consumption to be about half of
NORML's estimate -- between 8 and 10 million ounces a year.

That number still relies on guesswork and is cobbled together from
British and U.S. government estimates of self-reported data from
different years -- a hodgepodge mix just like NORML's debunked number.

But the California state estimate doesn't factor in at all a continuing
black market for untaxed marijuana that, without the extra fees, might
cost $1,000 less a pound. And as the analysis does note, the law "would
incur substantial administrative costs" for the tax board and would
actually kill other tax revenue the state already earns from cigarettes
and alcohol as citizens steer their money toward pot.

On the flip side, because self-reported drug use is probably a good deal
lower than real consumption, California could be seeing extreme green.
Another study mentioned explicitly in the tax board's review (one whose
full implications are seemingly ignored) indicates that Californians
could be consuming nearly 3 million pounds of pot a year.

So at the end of the joint is this bottom line: No one -- neither the
tax board nor weed advocates -- really knows how much the Golden State
is smoking. If the state legalizes marijuana, it could get a life-saving
lift for its crumbling economy, or it could could see all its
revenue-earning dreams go to pot.