At $340 per ounce retail (+ 25% excise tax applied three times along the way), will Marijuana (Cannabis) become Island County’s biggest cash crop?

Author:BillB

Types of Cannabis Plants

In July, 2012, Island County Commissioner Helen Price-Johnson told her south-end island constituents that the “cash crops are flourishing“, but she didn’t specify as to which cash crops she was alluding. In Island County, Washington, the average value of crops sold per acre for harvested cropland is $328.57. Depending on its quality, a single ounce of marijuana presently sells for $200 – $250 in Washington State.

In 2012, Washington State voters passed the Washington Marijuana Legalization and Regulation, Initiative 502, a recreational marijuana law. Revenue projections assume a retail sale price of $12 per gram ($340 per ounce) under I-502.

 

Way back in 1996, marijuana allegedly ranked as the #2 cash crop in Washington State, just behind apples, and Washington was ranked the #5 state in marijuana production nationwide. A 1997 ranking, gave marijuana a more modest 5th place cash crop ranking in the Evergreen State, following apples, wheat, potatoes and hay, but ahead of cherries, grapes, pears, hops and barley.

Under previous and still-existing law (Medical Cannabis RCW 6951.a) only authorized patients:

  • Can grow up to 15 plants and
  • Can possess up to 24 ounces of usable cannabis, but
  • It is not legal to buy or sell it.

Under Initiative Measure 502 individuals twenty-one years of age or older are legally authorized to possess and use:

  • One ounce of useable marijuana.
  • 16 ounces of marijuana infused product in solid form; or
  • 72 ounces of marijuana infused product in liquid form.
  • Marijuana-related drug paraphernalia.

The Washington State Liquor Control Board has created a Fact Sheet that delineates many of the provisions I-502, including definitions of a “Producer”, “Processor” or “Retailer” and who gets to pay the 25% excise tax each time a regulated product changes hands. The estimated producer price is $3 per gram ($85 per ounce) and the estimated processor price is $6 per gram ($170 per ounce).

Using I-502′s presumed sales and tax structure, a single ounce of marijuana sold valued at $340 retail will net the state of WA $148.75 in excise tax, plus “any/all applicable general, state, and local sales and use taxes”. Since the average retail sales taxes in WA State is presently (mid-year 2012) at 8.83%, tack on about another $30, for about $180 total in state taxes for each ounce of cannabis sold.

In Colorado, voters also passed a recreational marijuana law, the Colorado Marijuana Legalization Initiative, Amendment 64 on the same day upon which Washington’s I-502 approved voter approval. The Colorado measure limits cultivation to six marijuana plants per person. Under I-502, “Grow-your-own” pot is still banned in Washington. Both states prohibit public use.

In an article claiming that “Colorado And Washington Are The First Places In The World Where Weed Is Truly Legal“, Beau Kilmer, codirector of the RAND Drug Policy Research Center and coauthor of Marijuana Legalization: What Everyone Needs to Know, was quoted stating:

  • “If production moves from basements and backyards to industrial farms and huge greenhouses … we would expect the production cost to plummet”
  • “So much depends on not only the federal response but the type of production [the state regulations] allow,”…”Ultimately that will influence the retail prices and the tax revenues.”
I have not seen evidence of downward retail price pressure upon, for example, beer, even though home-brewing is legal in Washington State, and those laws were recently loosened earlier in 2012. Of course, unlike cannabis, beer has been readily available at the retail level in hundreds of iterations for many decades following the repeal of Prohibition in the United States.

These new issues will work themselves out as time moves forward. In the meantime, just below is a look backwards, to 1936′s “Reefer Madness”: a colorized and restored version of a (now) cult classic.

presently sells for

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3 comments

  1. avatar

    I am a little unsure how this new law will reduce major illegal grow operations because of the high tax rates. As with everything that is heavily taxed we will still see people attempting to circumvent the high taxes using every method available.

    We currently see people going out of state to buy alcohol products because of the high taxes in this state. We continue to see people buying tobacco products either online or out of state to circumvent the high tobacco taxes.
    With “illegal” marijuana currently going for $250.00 an ounce or less it is foolhardy to think that this version of a value added tax that will almost double the price to the consumer will lead to illegal grow operations closing shop and moving on.

    Wherever there is a way for the citizens to circumvent high taxes the citizens will take advantage of it.

    On another note it is rather presumptuous to think that many people will attempt to go legal with the state that currently grow pot. With it being illegal in the federal governments eyes registering with the state would seem like a foolish move especially if the Feds force the state to supply them with the list of taxed and legal in the states eyes growers. The Federal penalties against those that produce illegal substances is still quite severe and anyone that thinks they can get away with it is quite foolish.

    Chris Williams is facing 80 years in a Federal jail for growing state legal medical marijuana in Montana:

    Although he could take a plea deal that would lessen the term to 10 years he is standing his ground on principle…

    Who in their right mind would register with the State of Washington only to make themselves a target of the Feds?

  2. avatar

    It was interesting to me that the Oregon Cannabis Tax Act Initiative, Measure 80 (2012) failed at the polls, while both WA and CO passed similar laws.

    A few things I’ve read have suggested that a main reason Measure 80 failed in Oregon was simply that not enough $$ had been supplied to advertise in favor of it.

    A number of media outlets over the last few days have run articles with themes like “Washington and Colorado await the federal response” after passing their recreational marijuana laws. The example you cite was, of course, was a violation under a “medical marijuana” law. It WILL be interesting to see if/how the feds start standing up (or not) WA and CO in the coming weeks / months.

    A few other news outlets have played with the theme that “Washington and Colorado have no plans to promote “marijuana tourism”, thus promoting the issue themselves.

  3. avatar

    I found this on the WNT Facebook forum under the article “Whidbey officials gear up for new marijuana law“, and I am borrowing this posting as I think it is relevant to this topic:

    “Speaking of producing marijuana — don’t forget the hefty profits. My neighbor, at 1117 View Ridge Dr. in Penn Cove Park, a residential neighborhood located just south of Oak Harbor, is putting the finishing touches on his 6,000 square foot commercial marijuana production facility. I urge you to take the time to drive by and check it out! The new warehouse facility as built in the owners backyard is something to behold: complete with a residence for his security guards — it boasts 10 foot high stockade fencing, multiple security cameras, high intensity night lights, enormous underground storage tanks and yes, pit bulls (described as dangerous by their owner). This is the first of many such processing plants coming to Island county neighborhoods. Our prime location in the heart of The Ebey’s Landing National Historical Reserve means this marijuana facility will garner much attention. The owner is hoping marijuana is as big a business in Island county as it is in Mexico.”

    Ebey’s Landing National Historical Reserve is is a unit of the National Park Service near Coupeville, Washington.

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