ANNAPOLIS — Lawmakers are being advised to change their thinking on how they would tax and regulate recreational marijuana if they ultimately decide Maryland should join the few states that have legalized possession and use of the drug by adults.
The advice comes on the heels of newly released research that suggests tax revenue would be highly volatile and susceptible to pressure from existing medical markets and even the black market. John Hudak, a senior fellow at the Brookings Institution, told members of the legislature’s joint Marijuana Legalization Workgroup Monday that legalizing recreational use of the drug would never fully eliminate illegal sales.
“One of the odd things that I think you’re going to need to do to overcome this is put yourself in the shoes of the average cannabis user. Typically when you’re having a policy debate, a legislator — a delegate or a senator — is not going to say: ‘How would a marijuana user think?’ Here, you really need to do that.”
Hudak said such a thought process — and thinking about recreational users as rational consumers sensitive to price and regulation — will help legislators develop a tax and regulation system that could maximize revenue while limiting access to illegal or so-called black market sales.
“Crafting a system in which someone in far western Maryland doesn’t have to drive all the way to Montgomery County to find their first marijuana dispensary is important,” said Hudak, adding that the General Assembly would have a series of choices to make that include the creation of a system “in which the black market can continue unabated or the legal market can continue in parallel.”
But he said the idea of eliminating the black market was “naive.”
Lawmakers in Maryland are examining whether to bring legal recreational marijuana to the state as a way to help offset the costs of a massive increase in education spending and as a social justice measure meant to sharply reduce the disproportionate effects of drug enforcement on minority communities.
Del. David Moon, D-Montgomery and a member of the work group, said the amount of money raised by legal marijuana in Maryland would likely not cover the cost of funding new Kirwan education recommendations.
“This is not going to finance Kirwan, but it seems unlikely that you can get close to Kirwan without this,” Moon said.
A study released Monday by the Pew Charitable Trusts warns states to be cautious about anticipating recreational marijuana revenues, calling them volatile. The report urges states not to count on the money to pay for new programs but instead to use it for savings on one-time expenses.
Maryland could become the first state in the mid-Atlantic region to legalize recreational marijuana. The District of Columbia has legalized the possession and use of the drug but has no legal dispensaries — a situation that could make Maryland a strong competitor. But in the District of Columbia, residents can grow plants for personal use, while gifting laws have given rise to so-called gray markets, in which businesses sell a legal product at an exaggerated price and throw in a quantity of marijuana as a gift.
“By allowing gifting, we’ve seen gray markets pop up across the country where you have a gifting economy,” said Mathew Swinburne, associate director of Network for Public Health Law Eastern Region at the University of Maryland Francis King Carey School of Law.
In such an economy, a business might sell a T-shirt or a sticker for $80 and throw in at no additional cost a quantity of marijuana that does not exceed the legal gifting limit. One business noted by Swinburne sells vintage baseball cards.
“If you’re a baseball fan you can buy a card for an inflated price and be gifted an amount of marijuana,” he said.
The Pew study also highlighted concerns about illegal sales in California, where government regulators said the recently established legal marijuana market does not present an “attractive alternative” to the black market, largely due to high prices.
Current estimates place the sales of untaxed and unregulated marijuana in that state at nearly $9 billion annually.
Hudak urged Maryland lawmakers not to be scared off by California’s current issues.
“California is a very unique case,” Hudak said. “California has been, for a very long time, the most robust cannabis producer in the world. Getting rid of that overnight is not going to happen.”