There’s no meaningful evidence that imposing higher taxes on marijuana would steer people away from using it—contrary to a claim recently made by the The New York Times editorial board—according to a new scientific analysis of cannabis consumption and tax data.
The fact is that raising the prices of cannabis in state-licensed stores could cause people to turn to the black market for cheaper, untested marijuana. This poses serious risks to health and safety.
The new report, authored by Ohio State University (OSU) Moritz College of Law researchers Dexter Ridgway and Jana Hrdinová, drew on nationally representative survey data from federal sources and marijuana tax rates in states that have enacted legalization to test the idea that putting a higher premium on cannabis for adults could positively influence consumer behavior and deter heavy marijuana use.
In its editorial, the board emphasized that while the federal government imposes taxes on alcohol and tobacco sales, it doesn’t do the same for marijuana—which is no surprise given that the plant remains federally illegal, as do the state-licensed shops that sell it. In its editorial, the board stated that “the increase in tobacco taxes has been a major factor for its decline during this century with profound health benefits.”
The first step to reduce the abuse of marijuana should be federal taxes on pot. The editorial suggested that states should raise their taxes as well. “Today, some state taxes are as little as a few cents more on a joint.” Taxes on marijuana should be enough to discourage excessive consumption, and not just in cents, but dollars.
OSU said the notion that higher marijuana taxes lead to lower rates of usage is not a proven science. This was because states have different cannabis tax rates and consumers’ behavior has varied.
Researchers wrote: “The overall relationship between marijuana consumption rates (and in particular heavy usage rates), and tax rates is unclear at this time, when there is an ever-changing patchwork of state laws and industries.”
For example, they pointed out that Washington State has the highest marijuana tax rate (43.5%) and also the sixth highest use rate (22%) of the dataset. New Jersey is the state with the lowest tax rates (6.6%), and also the state that has the lowest use rate (14.4%). It ranks in the lower half of the nation.
The report states that “these patterns don’t imply taxes have no impact on consumption. However, they suggest that it is too simplistic to assume that marijuana users respond like smokers when taxed.”
OSU.
Ultimately, the OSU report—which assessed 2023-2024 survey data from the federal Substance Abuse and Mental Health Services Administration (SAMHSA)—concluded that “there is no apparent correlation between marijuana tax rate and marijuana usage rate.”
The researchers stated that “simply looking at tax rates or usage rates does not take into account the multitude of factors which can affect the rate of consumption, including the maturity of the market and the accessibility of products affected by the number of dispensaries in relation to the population. Also, since marijuana cannot cross state borders, how states regulate their number of licensed producers has a significant impact on the availability and price of product.”
The New York Times editorial clearly emphasized that, in terms of public health, it is important to limit the use or excessive potency of marijuana. It is necessary to collect additional data to evaluate the effectiveness of higher taxes in discouraging the highest-risk marijuana users. Policy progress will also require more than just taxation. This 2023 data suggests that state tax rate and marijuana usage do not have a simple, inverse relationship. A policy solution must take into consideration market structure and product availability, as well as the widespread availability of illicit products.
OSU.
Editorial board members, researchers and activists all seem to share the same view that decades of federal prohibitionist policy and the lack thereof are problems. States were passively allowed to take part in the cannabis experiment, without any federal protections or guidelines on issues like cannabis tax rates and potency limitations for marijuana products.
In states and towns across the U.S., marijuana laws continue to be considered or modified. The tax rate on cannabis is not a consensus, but governments are aware that they must find a way to balance the revenue needs of their government with the cost competitiveness of regulated products.
The Times’ editorial board also argued, in their piece, that “taxes are designed to be more beneficial for heavy smokers than those who only smoke occasionally.”
In the article, critics have questioned whether it is worth it to charge $10 for a joint instead of just $5. This would be a significant amount of additional money and could change a person’s behaviour. “It wouldn’t be a huge burden for someone that smokes only occasionally.”
As the OSU study argues, “there is reason to be concerned that significant increases in tax rates on marijuana products may cause users to shift to unregulated and dangerous illegal markets instead of deterring or reducing problematic cannabis consumption.”
Cannabis businesses licensed by state governments could soon take advantage of federal tax deductions that were prohibited under Internal Revenue Service Code 280E.
This latter effect will give cannabis a boost in the economy, however, because the federal government would still make it illegal for marijuana to be sold, the Times editorial team’s proposal of rescheduling products alone won’t create the clear path needed to implement a new tax.
The removal of the 280E tax penalty may also bring down the price of cannabis if the industry decides to share any savings with the consumers.
“The federal governments needs to play a role in finding solutions.” “Leaving taxes and regulations up to state governments could create a race towards the bottom, whereby people will cross states to get their marijuana,” said the board. The board said that Congress can establish a minimum floor for alcohol and tobacco as it did, however insufficiently. States can then build upon it.
The current Congress has not advanced any of the bills that included tax provisions for federal revenue.
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