In Michigan, we’ve become accustomed to walking into restaurants and stores — BTB aside — completely aware that the price advertised to us is six percent less than the actual cost of any item. At work, we’re subjected to hefty payroll and social security taxes (mostly at a net loss for us millennials), and soon many of us will be subject to health care taxes. On a broke college student’s budget, our monthly sales tax expenditure could pay for a six pack (or two).
In May, voters in Michigan will decide whether to approve a one-percent sales tax increase in Michigan. This revenue could generate more than $5 billion in state revenue to be spent on our crumbling roads, an investment Michigan desperately needs. But as with most taxes, the sales tax’s negative effect on the poor is disproportionate. Before we start digging into the pockets of every living and breathing Michigander, we should consider tapping into the lucrative excise sin tax market.
Michigan already actively participates in sin taxation. Cigarettes in the Great Lakes state are among the priciest in the nation. A whopping $2 is slapped onto every pack of cigarettes. Tough luck for smokers in Michigan, but not as bad as New York, where your Marlboro Menthols are taxed $4.35. Excise sin taxes like the cigarette tax also disproportionately affect Michigan’s lowest income residents, and yet they give us that warm and fuzzy feeling. Instead of punishing everyone, we’re taxing only those that choose to partake in activities that are seen as “harmful.” In 2011, Michigan brought in $2.3 billion dollars of revenue from sin taxes. People love to smoke, drink and gamble, regardless of the legality, safety or cost. Illegal marijuana use, soon to be a $35-billion industry in the United States, is contributing nothing to Michigan’s current state revenue.
Several counties in Michigan, Washtenaw included, have already relaxed penalties and even decriminalized the use of marijuana. Ann Arbor, widely regarded as Michigan’s coolest college town, has students celebrating Hash Bash every day of the year. University students can be caught bragging to their Spartan friends about avoiding pesky MIPs simply by walking across the street from their dorms before lighting up. In Ann Arbor, chances of getting caught are low, and if you’re of age, the penalty of being caught with marijuana is just a measly $25 fine.
The state of Michigan has already legalized marijuana for medical use, and in 2010, Michigan generated $10 million in revenue from medical marijuana applications. Medical marijuana dispensaries are all over, further proving a high demand for the stuff. Green Planet, open seven days per week, is conveniently located across the street from our very own Ross School of Business. For now, don’t try to go in without your golden ticket: a medical marijuana card (approximately $100).
Ethics aside, there is clear demand for marijuana in Michigan, and for the most part, the supply levels are underestimated and under-taxed. Colorado’s recent legalization of the recreational use of marijuana is a prime example of why voters in Michigan should follow suit. In 2012, voters in Colorado legalized the recreational use of marijuana, under the enactment of Colorado Amendment 64. Under this law, adults over the age of 21 were legally granted the rights to grow six marijuana plants and possess up to one ounce of pot.
I asked my cousin Saul*, Colorado native and an occasional marijuana enthusiast, how legalization had affected pot smoking in Denver.
“Now, instead of picking up from my guy, I go to a dispensary. It’s a little bit more expensive, but not enough to change the amount I buy. About $4 more for one-eighth of an ounce ($44 versus $40). Since Denver is a big city, there are large dispensaries to buy it in bulk, and weed isn’t too expensive. In smaller mountain towns, weed is a lot more expensive now than it was before.”
It’s clear that legalization has changed the way that people buy weed in Colorado.
If you stroll into a dispensary in Colorado, you don’t need a medical marijuana card, but you’re going to need your wallet. Marijuana sold for recreational use is slapped with a sin tax of almost 30 percent in Colorado, versus the 2.9-percent tax on marijuana purchased for medical reasons. While Saul’s demand for marijuana seems to be inelastic at the price level of $40 per one eighth-ounce, this is likely not the case for those living outside Denver, or on a tighter budget.
As for life in Denver, “Nothing has really changed,”Saul said. “There are a lot of people moving out here, and since smoking publicly is still not legal (on a federal level), no one is getting too reckless. People are mostly just using it to enjoy outdoor activities.”
Stores in Colorado began selling recreational pot in January 2014. At the end of 2014, Colorado saw its tax revenues expand in a way that had previously been reserved for accountants’ dreams — $51 million in extra tax revenue from recreational use alone in 2014, to be exact. Not the $5 billion Michigan needs for our roads, but still a significant amount, and one which is expected to grow every year.
So maybe there’s a reason beyond laziness as to why stoners aren’t advocating and organizing more for pot legalization. According to the influence laws of supply and demand, marijuana use will actually decline if legalized in Michigan. Prices will go up, and Michigan will generate millions of dollars in tax revenue, which we could use toward investing in our roads. There’s really no reason for lawmakers or voters in Michigan to fear marijuana legalization, unless of course, we’re worried that it will make pot too expensive.
*Name has been changed
Lauren Richmond can be reached at lerichmo@umich.edu