Below is my column in the Wall Street Journal on the New York plan for subsidizing marijuana businesses with a preference for those with prior criminal records — or their family members. Legislators yielded to every political temptation in piling on dubious tax burdens and class-based preferences on this new market.
Here is the column:
New York state seeks people “with experience” to help establish what could become the biggest legal marijuana market in the country. “Experience” in this context doesn’t mean an impressive résumé, a history of working with venture funds or an MBA. Instead, New York will offer licenses and subsidies to people with marijuana convictions on their records.
New York legalized the possession and use of marijuana for adults last year and created a licensing system to govern eventual sales in brick-and-mortar stores. New Yorkers will even be able to get joints delivered right to their doors.
The application window for these licenses closes on Sept. 26. The state anticipates the first legal dispensaries will open before the end of the year. The size of the legal marijuana market in New York could ultimately be more than $7 billion annually.
Politicians are eager to tax and regulate all this commerce. The legal marijuana market could be the source of massive new tax revenue for New York. Many states have already piled excessive taxes on to legal weed sales. New York is planning an array of taxes, including a complex tax based on potency of the pot and rules preventing cannabis businesses from writing off standard business expenses. That is in addition to a 9 percent overall tax rate. https://www.syracuse.com/
marijuana/2022/03/getting- into-the-weeds-of-nys- cannabis-taxes.html But what legislators ignore is that all these taxes have the perverse effect of increasing black-market demand. After Prohibition ended, people didn’t continue to buy bathtub gin when legal and safer alcohol was available. But states also didn’t massively increase the price of newly legal alcohol to make bathtub gin more attractive. In New York, there is already a burgeoning $2 billion marijuana black market. https://www.bloomberg. com/news/newsletters/2022-07- 18/new-york-s-2-billion-of- illegal-pot-sales-threatens- the-legal-market
Under the new regulations governing Conditional Adult-Use Retail Dispensary licenses, New York is seeking “justice involved individuals” to apply to become licensees. A justice-involved individual is anyone who was “convicted of a marihuana-related offense” for anything from a small amount of pot to a major drug operation. (For some reason, the Office of Cannabis Management insists on spelling “marijuana” with an “h” rather than a “j.”) The program also has a curious legacy benefit. You can claim to be a justice-involved individual if you had “a parent, legal guardian, child, spouse, or dependent who was convicted of a marihuana-related offense in New York State prior to March 31, 2021.”
The logic of the state preference for ex-convicts is based in part on the idea that a history of illegally selling pot constitutes relevant “business experience.” Yet, the experience derived from running a criminal drug operation doesn’t translate well to the demands of a lawful business. Former street-level dealers have probably never struggled with regulatory compliance or tax accounting. Indeed, illegal operations deliberately avoid such responsibilities, preferring the simplicity of cash-for-contraband. As Milton Friedman noted, “the black market was a way of getting around government controls.” That isn’t behavior politicians in Albany or any other state capital should be looking to encourage.
In fact, the former felons with the most “experience” are the ones the state should be most worried about. Large, illegal marijuana farms tend to be associated with criminal gangs and other organized criminal elements. They deal violently with competitors and often set dangerous boobytraps for backpackers who wander unknowingly into fields where marijuana happened to be growing. These marijuana veterans may have lots of experience, but it is not necessarily the type of experience that we want as the foundation for a multibillion dollar market.
New York wants to kickstart the weed market by distributing $200 million from its Social Equity Cannabis Investment Fund to help pay for beneficiaries to set up shops and pay for overhead. Notably, the state indicated that it wants to limit application and documentation requirements as a way to make licensure accessible. This is money the state should recoup over time if it distributes licenses to competitive applicants. But pushing former criminals to the head of the line doesn’t seem the best way to ensure the money isn’t wasted. What led these ex-cons to commit drug violations was likely money, not marijuana. Most probably didn’t view pot as a calling.
In the end, the program may not even succeed in keeping dispensaries local. How does New York plan to prevent successful applicants from taking both the subsidies and licenses and selling them to the large corporations that the state supposedly wants to deter? If that happens, and there’s no reason to think it wouldn’t, New York will have succeeded in doing what the market would have done on its own, but at a cost of hundreds of millions dollars to taxpayers.
If anything, marijuana demand increased during the decades of prohibition. The market for legal marijuana doesn’t have to be a mess. States such as New York only need to step aside and allow the market to favor those with the best plans and most experience. Consumers in this and every market benefit from competition, which provides options and lower prices. The state benefits from sensible and fair taxation. None of this means that economics must prevail over equity concerns. But when creating the legal and regulatory foundations for a brand new market, politicians should let commodities take root before harvesting the proceeds.
Mr. Turley is the Shapiro Professor of Public Interest Law at George Washington University.
78 thoughts on “Reefer Madness: The New York Law on Legalized Marijuana is a Triumph of Politics over Logic”
California leading the way as usual. The retail operations are pervasive, many locales actually competing to see how fast they can try and cash in. Only…the feebler-than-feeble law enforcement against 100% outlaw operations means that anybody who wants to buy weed can readily acquire it for a big discount, absent the taxes and fees making the legal retailers so non-competitive many are warning they will go out of business without regulatory relief. The open street-level sales of every other still-technically-illegal drug is another factor, further strengthening the totally outlaw (and frequently cartel-controlled) smuggling and financing schemes.
The legislature appears poised to legalize LSD too, without any means of controlling for strength, contaminants, etc. The legislators’ role model appears to be “Zombie Apocalypse”.
When President Franklin Delano Roosevelt appointed Joseph P. Kennedy as the SEC’s first chairman, and was criticized for doing so because of Kennedy’s background in criminal activities and stock market manipulations, Roosevelt privately said in response, “It takes a thief to catch a thief.” When Roosevelt made that decision at the formation of the SEC, there may have been a certain logic to appointing Kennedy.
But there’s no rational argument today for giving preference to criminals with marijuana business background in New York State’s licensing. In fact, the opposite is true.
The only exceptions that rationally could be made for individuals with marijuana-related convictions would be if those individuals had a demonstrated record of going straight and performing admirably in legitmate business activities for at least 5 years. Otherwise, New York State’s stupid program of favoring criminals will simply encourage and incentivize more crime, achieving the opposite effect of what NYS claims to be wanting to accomplish. In other words, the newly licensed criminals will be looking for ways to make running the newly lawful marijuana dispensaries as expensive as possible to run. Why would they do that? Because if legal marijuana is too expensive for consumers, there will be a continuing booming market for less expensive black market (non-taxed) sales.
Then, there is that pesky little detail that cultivating cannabis requires more than double the water of most commodity crops, requires nitrogen (made from natural gas), phosphate (mined). Don’t forget all the other carbon spewing components to the process such as diesel for the farm equipment, water wells, greenhouse heaters, etc. But, hey, that doesn’t happen in my backyard, therefore it doesn’t occur. Let’s not concern ourselves that Lake Mead, for example, is now at 28% capacity from severe drought.
I lived a number of years in the heart of agriculture and oil country. We had two fuel refineries, carbon black plants, fertilizer manufacturers, many other petrol chemical plants and dairies that California had run out of business. It stunk to high heaven from the meat packing plants and petrochemical activities but the jobs were good and the people wonderful and kind. Corn subsidies were so good that corporate farmers were breaking out CRP land, thousands of acres, to grow corn for use as silage and to produce ethanol to augment gasoline even though this was in a water deprived area. They were depleting ancient aquifers to grow corn to mix with fuel!
Little do the über-elite climate activist truly understand where the gasoline for their SUVs, boat and private plane came from. They consume fine cheese, have their steak dinners and heated their homes and ran their Wolf stoves with natural gas from that area. The feel good that their fuel is blend of ethanol and gasoline that comes from the unknown place that we do not speak about, out in the hinterlands.
If these elites and out of touch politicians were truly serious about climate change, they would become vegan, never again touching any dairy products. They would sell their private jets, agree never to heat or cool more than 2000 square feet at any given time of their many coastal mansions. They would only send their children to public schools, never fill or heat their swimming pools. They would dump all leather products and pledge to keep their travel to bare minimum to help save the planet. They would also be a little less enthusiastic about ushering in the burgeoning cannabis industry….wait….what are the chances they have financial stake at the ground floor of the industry?
I guess Obama really did stop the rising seas, seeing as he’s built another seaside manse in Hawaii to go along with the one in Martha’s Vineyard.
Even as they wailed about greehouse gas, the Obamites added fast food items to the EBT approved list. If they were REALLY worried about the environment they would have BANNED EBT for plastic-wrapped junk foods, one of the absolute worst GH gas producing things. The contents are produced using massive nitrogen fertilizer derived from fossil fuels and the now-metallicized plastic bags they are wrapped in are an environmental atrocity, totally non-recyclable. This, as their health “experts” howl about how “the children are hungry” at the same time there is a crisis of obesity and diabetes and “the minorities are most seriously affected”. And they are being targeted in a food desert! (Like Wal-Mart, Target, and Costco).
Obesity rate 1961: 12% 2020: 42% Diabetes rates for Blacks and Hispanics twice those for Whites according to the HHS Office of Minority Health (worst of all is Native Americans and the lowest are Those Darn Asians beating everybody else, again.
Think of the energy and destruction to the environment these large houses, that remain empty most of the year, cause. Think of the energy needed to heat or cool them and the energy consumed to go from one house to the next.
Obama is a hypocrite.
” New York will offer licenses and subsidies to people with marijuana convictions on their records.”
Since NY has gotten crazier, I wonder how many people one will need to murder to obtain the title of the high executioner at the NY gallows?
As an aside, I note the blog today is saner. That is good. The blog is much thinner, while the email portion remains ridiculously weighty from senseless comments.
Substance ingestion is a natural and God-given right and freedom and is fully constitutional.
Laws denying the right of substance ingestion are unconstitutional.
Incurring property damage and bodily injury are actionable crimes.
Government has no authority to participate in free enterprise or commercial activity or to favor any particular enterprise or industry.
Government has no authority to employ the tax code to enhance or detract from any commercial enterprise, industry or activity.
The Department of Agriculture is unconstitutional.
The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.
I agree with your premise when it comes to any plant-based medicine. Look up Genesis ONE, verses 28-29.
And yet the demented US Supreme Court validated the criminal USDA in Wickard v. Filburn, you can’t grow your own chicken feed on your own land to feed your own chickens, outside the purview of the USDA! (This was another gift from the Franklin Roosevelt administration).
Oh, so you CAN read the Constitution. Pass it around. I’m certain even the visitors to the Turley Blog can read it, if they just try.
Marijuana Quality Is Still Guess Work For Consumers
Here in California, Marijuana dispensaries have been legal for 6 years. ‘Medical Marijuana’ was legal for many years before that.
The convenience of going to storefronts is such that no one seriously misses the days of street dealers. ‘Hooking up with dealers’ was always annoying.
But the quality of Marijuana strains is still guess work for the consumer. Aroma, colors and textures can be deceptive.
A particular strain of weed can look perfectly fine at the dispensary counter. The aroma might smell sweet and fresh. However only when you smoke it will you know how good the strain really is. And you may not know until hours ‘after’ you smoke.
Sometimes weed can taste good and provide a strong, initial high. Yet 2 hours later that high might give way to sudden burnout. And ‘no’, you can’t just smoke more to get the high back.
Once burnout sets in, only a good nap renews you. Marijuana is like coffee in that regard. If you’re really tired, no amount can make you fresh again.
Fine Marijuana burns evenly, tastes good and provides a strong 6 to 7 hour high. Fine Marijuana has no real burnout point. Instead the consumer comes down so gradually they barely notice the transition.
But again, purchasing fine Marijuana is often guess work. Just because Blue Dream was good last month is no guarantee that the current strain of Blue Dream is equally as good. What’s more price is not always an accurate indicator. Fine weed is sometimes available at generous discounts that seem suspiciously cheap.
Therefore the Marijuana industry could arguably benefit from the professionalism that big tobacco and distillers provide. So Blue Dream has the same quality every time.
But Marijuana is probably more like wine in the sense that every harvest is a unique vintage that can never be exactly replicated. For this reason, non-licensed vendors might always find a clientele as long as their product compares to fully-licencsed stock.
Your explanation is very helpful.
Outlaw-grown weed (and probably a lot of legally-grown too) is sometimes contaminated with pesticides. Indoor-grown weed is most seriously subject to fungal issues that prompt growers to use materials that are actually banned from use on edible produce, also from mite insects some unprincipled growers use “systemic” insecticides against, these are poisons drawn into the tissues of the plant that can’t be washed off and have long residual effects.
The best thing they could have done is legalize small-grow “cottage” operations and let people buy a license with a regulated ceiling on how many plants. Some counties have banned outdoor grows, exactly the opposite of what makes sense–thus growers use electricity to grow indoors when 100% “renewable” product could be had for free from healthy sunshine. The cartels are all over the public lands too, and the weak enforcement in California actually promotes this like an incentive.
The concept of word salad must be rather new to you.
Word Salad: a confused or unintelligible mixture of seemingly random words and phrases.
Regardless of whether you understand the sentence or not, by definition it’s not a word salad; however, by definition it definitely is a run on sentence.
Run-On Sentence: Run-on sentences, also known as fused sentences, occur when two or more complete sentences are squashed together without using a coordinating conjunction or proper punctuation, such as a period or a semicolon.
Correct your rhetoric in the future.
Steve, those insanely long and boring comments aren’t meant to be read. They’re main purpose is to ‘bury’ the comment underneath. It’s an attitude like, “I’ve got to screw everyone to prevent that guy’s comment from being seen”.