California's Prop 19: The First Step Toward a National Marijuana Industry?

Will California's Proposition 19 get passed or go up in smoke? If approved, the controversial ballot measure would legalize most marijuana-related activities in the state for people age 21 and over, reversing decades of prohibition. Prop 19 is being closely scrutinized by media pundits, academics and historians, and U.S. government officials are promising to continue to enforce the federal Controlled Substances Act in California and elsewhere. The measure is also raising questions about the financial aspects of any future, legal marijuana industry in the U.S.

Advocates of Prop 19 say it could bring billions of dollars into financially strapped California. The state's branch of NORML (National Organization for the Reform of Marijuana Laws) estimates a legal marijuana market there -- beyond the current medical marijuana dispensaries -- would bring in at least $1.2 billion in tax revenues. All that marijuana, it says, would increase employment. State pot sales could also be "on the order of $3 billion to $5 billion, with total economic impact of $1 billion to $18 billion including spin-off industries such as coffeehouses, tourism, plus industrial hemp."

A Revenue Producer or a Legal Quagmire?

Prop 19 supporters also say it would save California over $200 million in law enforcement costs. " Legalization will move the marijuana industry above ground, just as the repeal of alcohol prohibition restored the legal alcohol industry," wrote Jeffrey Miron, a senior fellow at the Cato Institute, earlier this year. "A small component of the marijuana market might remain illicit -- moonshine marijuana rather than moonshine whiskey -- but if regulation and taxation are moderate, most producers and consumers will choose the legal sector, as they did with alcohol."

"I think the dollar impact can be huge," says Mac Clouse, a professor at the University of Denver's Daniels College of Business. He believes legalizing and controlling marijuana, using the sale of alcohol as a guideline, could turn pot into "a major revenue-producer for the state."

But Clouse and other observers still have their doubts about Prop 19. The measure also calls for municipal governments to enforce and control marijuana revenue and fees -- a fact that would make marijuana "sin taxes" in California not only unique, but, according to Prop19's critics, uniquely unwieldy.

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"Proposition 19 was drafted by activists and pollsters rather than by people who know the laws involved," Mark Kleiman, a professor of public policy at the UCLA School of Public Affairs, recently told LA Weekly. "Proposition 19 can't tax marijuana. It says that every locality has to decide, so localities will compete with each other to get the lowest taxes. It's a race to the bottom."

"Proposition 19 is probably not well thought out enough," says Clouse. "It's a big enough thing to [not regulate] on a local basis. If you do it on a local basis, you still keep some of the problems we have, with unequal enforcement."

Outright opponents of the measure say it could have severe, unintended consequences for business in California. One anti-Prop 19 group warns that employers would be unable to enforce federal drug-free workplace regulations, while facing new obstacles during attempts to discipline employees believed under the influence. "If passed," the group says on its website, "Proposition 19 promises to be a legal quagmire for California businesses, raising significant liability issues."

Clouse believes Proposition 19, if passed, could be a big step toward the national legalization of marijuana -- while simultaneously raising many new questions. For example, he says, "If it's legal in some other state outside of California, could you then legally import it from, say, Michigan? What about imports internationally? This begs the issue to look at it from a national and international viewpoint."