Jeffrey Miron, an economics professor at Harvard University and a senior fellow at the Cato Institute, a libertarian group ... said that as long as federal marijuana laws continued to be unsettled, collecting taxes would be challenging. Moreover, he said, there is no way to predict how many customers would continue to buy on the black market.
After Prohibition ended in 1933, states levied taxes on alcohol, in part because they were desperate for revenue after the Great Depression. But that shift, Dr. Miron noted, was undertaken with the full support of the federal government.
“It’s easy to get a little overexcited that legalizing marijuana is going to solve the world’s budgetary problems,” Dr. Miron said. “But the question for the tax revenue part of this will be how much the federal government allows these markets to come completely above ground.”
via www.nytimes.com
The revenue collected from a tax will hinge on the relative price-elasticities of demand and supply. The less price elastic the demand for a good, the more revenue can be collected with a tax--because people still buy the good even at higher prices. With federal support for marijuana sales it is likely that demand for legal marjuana would be much less price elastic, and a state tax would raise much more revenue for the state than without federal support--making the tax more effective at raising revenue.
But then again, I guess it depends on whether the goal of the tax is to raise revenue.
And I wonder if the demand for Doritos has increased in Colorado?
If so, maybe they should tax Doritos instead.
