Tuesday, August 06, 2013


Hey all. Been a while.

This is a test. More to come.


In the last few months I've been pulling together information on the Cannabis issue. It's clear that attitudes have change since the Woodstockers and 60s hipsters starting using the weed for fun and to make various statements about personal freedom, government intrusion into private affairs and the possibility of a shortcut to the expansion of consciousness. A lot of arguments were pure crap. Regardless of the rationale for using Cannabis, the point for using it comes down to the simple rush of getting loaded.

Whether it's Purel, pot or pills, getting loaded is one of those proclivities we can't seem to resist. One side of the arguments goes like this - "If we can't resist it, let's legalize it and stop the law enforcement." The argument is boiled down to three words "Legalize and tax."

On the other side we have the "resist your base instincts" argument. This group wants to retain all the legal sanctions against all drugs except for the ones we already have - alcohol and tobacco. It's clear this isn't working. There's a powerful attraction in the psyche to altered states and no penalty except death will deter the determined. This seems to work fine in some Muslim countries and places like Singapore. But the question is, do we really want to live under that sort of tyranny?

Polls show that the overwhelming majority of Americans are in favor of some sort of legalization. Some go so far as to claim that we can pay off the national if we just tax Cannabis.

The legalization arguments seem to fragment its supporters over the question of how you define legal. What's legal to me, clearly isn't what's legal to a Mendocino County grower and what's legal to him is nowhere near how lawmakers would define it.

Let's start with the broadest possible definition of legal. Let's make Cannabis as legal as scented candles, carrots or coffee mugs. In that scenario any adult would be able to grown, use or distribute Cannabis. It would also be legal to import it from anywhere in the world. You could log on to the Arellano Felix website or the Hmong Collective site in the Far East and order as much as you want. Just like ordering bolts of cloth from India or fountain pens from China. The only taxes that might be collected here would be small import duties (if the government wants). Of course, if everyone's allowed to grow, I could also send my pal in Minnesota a few pounds that I grow in the yard when his plot is buried under six feet of snow. The government wouldn't get any tax at all from that.

If the Feds did want to impose a tax on casual sales, they'd need a tax collection and monitoring entity that would dwarf the combined size of the IRS, DEA, Commerce Dept. and so on. How many government employees would it take to monitor every back yard, hydro plot and farm yard in the country? Whatever taxes collected would be immediately sucked up by the bureaucracy necessary to monitor it.

Every "legalize and tax" advocate I've spoken to has yet to make that calculation. Taxation doesn't happen magically. It requires a bureaucracy. And a government bureaucracy requires huge amounts of cash to operate. Don't forget it needs things like free medical benefits for life, healthy retirement packages, unionization, collective bargaining, OSHA standards enforcement on the private sector they monitor, environmental impact studies and all the rest of the impedimenta to free enterprise. So collecting pot taxes isn't going to come cheap. It may not even pay enough to cover the overhead.

One faction that used to wave the "legalize" flag, the large illegal growers, aren't so sure they want legalization after all. They have made the calculation and they don't like the consequences. In any legalization scheme, the growers would be the first ones to come under scrutiny. They'd be the first to be visited by the EPA, Labor Department, Department of Agriculture, Farm subsidy bureaucrats, labor unions, OSHA, BLM, ATF, IRS and all the other government and non-government stakeholders. First Five will be out there with its hand out wanting a piece of the pot taxes - for the children - not to mention the second-hand-smoke people, the American Lung Association and all the health care people.

Frankly, the growers don't want any part of that. They've essentially dropped out of the "legalize" coalition and they're happy remaining in the shadow world between legal and illegal. It's more profitable there and there's no paperwork, accountants, tax lawyers or the U.S. Dept. of Cannabis breathing down their bong.

There are some that advocate treating Cannabis like liquor and tobacco. The argument is that if we can tax those two, we should be able to successfully tax cannabis. That depends. Unless we're talking moonshine, making decent liquor is a capital- and skill-intensive process. Unlike throwing some Alaskan Thunder seeds in the ground and letting nature take care of the rest, making Jim Beam, Bushmill's or Chevas Regal is beyond the capacity of the average individual. It's easy to tax liquor because it's hard to make and hard to hide. Growing pot is easy. Even a stoned kid could do it. Same for tobacco. But growing enough tobacco for your own use would require way more effort than it's worth. It's cheaper to make a run to the Quiki Mart.

Cannabis, on the other hand, requires virtually no capital and only a modest level of skill. Some argue that making "really good" weed requires careful cross-breeding, pollination, measured amounts of the correct nutrients and some basic understanding of biology. Frankly, the cat's out of the bag on that. What happened with nuclear weapons also happened with the "boutique" pot culture. It's called proliferation of technology. If a 7th Century dictatorship can build nukes, surely a 21st. community college grad can grasp the essentials of producing exotic pot. The boutique varieties are just as easy to being replicated by the home gardener as exotic roses or camellias.

The only reasonable way of truly gaining the full tax benefit from Cannabis is to strictly regulate and control the production, transportation, distribution and sales. This, however, goes contrary to the countercultural ideal of cannabis as nature's gift to Pink Floyd and Jerry Garcia fans. Regulation starts with deciding who can grow it, how you grow, where you grow it, how you transport it and so on down the line to where the chain of custody is monitored and accounted for at every step. That would also mean that growing for personal consumption would once again become illegal. There would be a permit application process, years of deliberation and lobbying, the inevitable backroom deals and the likelihood of bribes and corruption at worst. At best, the permits would go to the deepest pockets.

This approach has zero appeal to everyone except the government and huge corporations. The only entities currently in a position to create this level of production and control are Big Pharma and Big Tobacco. They're the only ones who have the capital and production/distribution infrastructure to ensure compliance with government mandates and tax collection controls. Every pack of Newport Lights and American Spirit sold in the U.S. has a tax stamp on the bottom of the cellophane wrapper. This is the sort of monitoring the government would demand of widespread Cannabis sales. Will the day come when the government will happily step in and make sure Joe Hemp's Humboldt Trip Weed Lights has a tax stamp?

The pot culture reacts to this scenario the same way Vegans react to cattle ranching. Pot isn't and shouldn't be about boosting the bottom line for Phillip Morris or Merck. And tax collecting isn't about ensuring that pot stays cheap and available. Whenever states or the Feds run out of money, the go-to tax targets are the sin taxes - liquor, tobacco and gambling. Nobody ever feels bad about taxing the evil enterprises. Cannabis will not be immune to this. Tax-wise, it will be lumped in with smokes and stupid juice.

Politicians don't want anything to do with administering the Cannabis industry. They don't want to be in the pot business in any way. But, based on the few pols willing to talk about this, they'd be happy to tax the hell out of pot. Just as long as it's not them that makes the final decision on legalization. No career politician wants to go down in history as the guy (or woman) who finally opened the pot floodgates. Even the current POTUS, a documented former user and most liberal president ever, has emphatically refused to legalize the Devil's Weed. Why? Because despite the glowing predictions of a crime-free future and all that alleged tax money, there's going to be a social, economic and medical downside. With pot so available, why are people who can easily get a medical card still doing Ecstasy, bath salts, crack, heroin, meth and toad juice? Because they want a specific high that's not available with the weed. Legalizing weed will probably keep the strictly weed user out of jail. But the reality, as any street cop will tell you, is that habitual users tend to be spectrum users. They ingest anything to get a buzz. And when they're caught for possession, they're carrying more than just pot.

Is there an anwer?

It depends on what you're trying to achieve. If you want a big tax influx to the government, the only course to achieve that is a large, intrusive bureaucracy, banning individual growing, licensing a handful of corporate super-growers and being happy with whatever price point and tax rate is imposed. Just like liquor and tobacco.

If you want total, unrestricted legalization, there will be no tax revenues. That scenario will predictably depress prices to rock bottom levels. Every offshore producer and in-country grower (small and large) will create an oversupply situation. That's good news for users and bad news for growers, cartels and smugglers. Let's call this the Jerry Garcia scenario. The suppliers with the deepest pockets will survive. The others will go out of business.

If we look into the future of the Garcia scenario, you can see the possibility of big corporations entering the market. It is legal, after all, and you can't prevent Merck or Genentech from getting into a legal business. And if you do, they'll hit you with a restraint of business suit that will probably stand up in court. They'll be in a position to package and market the hell out of their product. And the possibility exists that they may come to dominate the market. The home grower can still be self-sustaining but human nature being what it is, especially the nature of chronic users, growing your own may lose its appeal.

Basically, this is a long roundabout way of getting people thinking about their definition of legal. Clearly every faction in this argument defines it differently. If we were all working from the same definition, maybe someone could craft a law we can all live with without having our pockets picked either by smugglers, mega corporations or the government.