Why “$1.00 Marijuana Tax = $4.57 Social Costs” is Junk Science

During Sen. C. Scott Grow’s defense of SJR 101 in the Senate, he argued that any taxes reaped from marijuana sales would be outweighed by the healthcare, productivity, and other costs marijuana use would cause.

C. Scott Grow: “And a study done by the Centennial Institute, part of the Colorado Christian University in Denver, they found, with an independent group that did the study on their behalf, recognized researchers, found that for every dollar of tax revenue from drug sales, the State of Colorado pays $4.57 of taxpayer money for the economic costs caused by drug legalization. That cost does not include the cost of families and finances and suffering, the latter is arguably the greatest cost of all.”

Senator Grow claims a study from “the Centennial Institute” shows that for every dollar of marijuana tax, there is $4.57 in costs from marijuana use (note how the senator always says “drug,” though Colorado has only legalized “marijuana”).

That “study” was done in 2017 and has since been overwhelmingly rejected by reputable scholars as junk science. Reason Magazine called it “laughable.” Boulder Weekly called it “a dog’s dinner of statistical scraps that run the gamut from misleading to dishonest, irrelevant and embarrassing.”

And yet, Idaho’s Senate seems convinced that this discredited “study” sponsored by Colorado Christian University is the settled truth. Here’s Sen. Van Burtenshaw working out the math on Colorado’s marijuana taxes and unabashedly stating a cost conclusion without any awareness of its absurdity.

Van Burtenshaw: “I thought it was interesting that Sen. Grow brought up the revenues that come into these various states. In Colorado, in 2018 they collected $267 million in revenues from marijuana. Washington State collected $439 million. Additionally, for every dollar gained in tax revenues, Coloradoans spent approximately $4.50 to mitigate the effects of legalization. So what does that mean? That means Colorado spend 1.2 billion, and they gained $265 million.”

Colorado “collected $267 million” in marijuana taxes, Sen. Burtenshaw explains, so they must have spent “$1.2 billion” to “mitigate the effects of legalization” of marijuana.

Colorado has collected over $1.6 billion in tax revenue since legal marijuana sales began.

The $1.2 billion in “marijuana costs” that Sen. Burtenshaw is claiming for one year in Colorado is equal to the cost of damages from last July’s Hurricane Hanna that hit South Padre Island, Texas.

Colorado has collected over $1.6 billion in marijuana tax revenue since 2014. If CCU’s fake stat of $1 tax = $4.57 costs, then Colorado has suffered a mythical $7.45 billion in “marijuana costs,” or about the same economic damage as last September’s Hurricane Sally.

Gosh, with all the “marijuana costs,” we guess it’s a good thing Colorado isn’t also impacted by hurricanes.

Centennial “Study” Thinks Legalization Invents Marijuana

The most glaring failure of this junk stat to even approach real social science comes from this “study” seemingly pretending that prior to 2012, there was no marijuana smoking happening in Colorado.

Whatever “costs” exist from marijuana use (and they ain’t $4.57 per tax dollar), they existed prior to collecting any tax dollars, too.

But the CCU “study” makes no effort whatsoever to figure out what the baseline marijuana costs were before legalization. Without that baseline to compare to, the “study” simply attributes all marijuana “costs” to legalization, as if there were no costs that existed when marijuana was illegal.

To find out what legalization “costs,” you’d have to figure out how much more marijuana smoking was happening after you legalized.

In other words, before legalization, x amount of marijuana was smoked illegally (however much that was) and it cost $x in costs (however much that was). After legalization, the same x was smoked, plus the additional y that’s smoked after it was legal. That x+y amount of smoking would produce $x+$y in costs… but you can only blame legalization for the $y, not the $x+$y.

Then figure that before legalization, the $x in costs was mitigated by receiving $0 in tax revenue. After legalization, the $x+$y costs are mitigated by receiving $1.6 billion in tax revenue.

The question, then, is “does that $1.6 billion in revenue outweigh the $y costs?”

Centennial “Study” Invents “Health Costs” from “Marijuana Codes”

When someone tells you something causes healthcare costs in the state, you’d figure there’s some lines in the state budget you could point to and say, “there’s the money we spent to treat problems caused by marijuana smokers.” For instance, if you could show that marijuana smoking causes lung cancer (it doesn’t), you could tally up all the money the state spent in healthcare services for cancer treatment on those marijuana smokers.

But that’s not what this “study” does. It’s not counting money spent by hospitals on hospitalizations to treat problems caused by marijuana. It’s counting money spent by the state on marijuana smokers who’ve been hospitalized to treat problems that may or may not have anything to do with marijuana.

For instance, $381 million of “costs” are derived from people who are treated in hospitals who are charted with codes related to marijuana use, like “Code #305.20 = cannabis abuse, unspecific.” So, if you were a passenger in a car that was hit by a drunk driver, and the hospital tests your blood and finds THC in it, and then adds “305.20” to your chart, you were just “hospitalized as a result of marijuana use.”

Also, consider that when marijuana is illegal, the likelihood is lower that you want to admit that when you go to the hospital and the likelihood physicians are going to note it on your chart is lower when it could cause you legal troubles. Did more people end up in the hospital due to marijuana, or are more people just willing to admit it?

Another $54.8 million in “costs” are derived from showing that marijuana users don’t exercise as much as average Coloradoans, and it “costs an
extra $482 a year in medical costs for a person who is inactive.” That’s right, they’re saying marijuana users are lazy and that “costs” society. Never mind many are patients who can’t exercise and, for them, marijuana is reducing their health care costs.

Centennial “Study” Invents “Productivity Costs” from Income Losses

A whopping $423 million in “costs” attributed to productivity are calculated like this: A certain percentage of kids who are expelled from school or drop out are marijuana smokers. Over their lifetime, not having a high school diploma means they lose out on $334 thousand in lifetime income. Multiply that by all those kids’ lifetimes and you get $423 million.

In other words, if only they didn’t smoke marijuana, they wouldn’t have been high school dropout ditch diggers who smoke marijuana, they would have been college graduate brain surgeons who drink martinis. Or as Reason put it, “It is quite a stretch to count a high school dropout’s future loss of income as money ‘spent’ by Coloradans.”

Worse, they are calculating a lifetime loss of income by these undereducated marijuana smokers as part of the annual “costs” from marijuana smoking, the kind of mistake that will earn you an “F” in a freshman statistics class.

Besides, if you wanted to mitigate the losses of lifetime income for kids who get caught with marijuana, how about not kicking them out of school in the first place? Or raising some marijuana tax revenue to help nontraditional students attend college?

Centennial “Study” Fails Simple Common Sense Tests

Sen. Burtenshaw explained, “In Colorado, in 2018 they collected $267 million in revenues from marijuana. Washington State collected $439 million. [F]or every dollar gained in tax revenues, Coloradoans spent approximately $4.50 to mitigate the effects of legalization.”

So, if that means Colorado suffered $1.2 billion in “costs,” then did Washington suffer $2 billion in “costs?” Even though Colorado has 5.8 million people and Washington has 7.6 million? Even though fewer people regularly smoke marijuana in Washington than Colorado? Even though Colorado’s effective marijuana tax rate is 33.3% and Washington’s is 47.1%? If we raised the taxes to 80%, would there be even more “costs?”

Of course not. There is no causal relationship between how much money you make in taxes and what the thing you’re taxing costs. This why reputable researchers at the Centers for Disease Control use “cost per drink” and “cost per person” in evaluating the social costs of alcohol use. The only reason to tie the “costs” to the taxes is to make it politically seem like the taxes aren’t worth it, not to statistically determine what the actual costs from marijuana are.

Centennial “Study” Claims Marijuana’s 71% as Costly as Alcohol

CDC: Each alcoholic drink costs the State of Idaho $1.62 in social costs

Hearing Sen. Burtenshaw claim that marijuana has cost Colorado $1.2 billion made us wonder how that compares to the cost Idaho bears from the use of its one legal mind-altering drug, alcohol.

It turns out that booze cost Idaho in 2010 about as much as Sen. Burtenshaw claims marijuana cost Colorado in 2017.

We looked up the stats in the National Survey on Drug Use & Health, broken down by state for the two-year period of 2018–19.

Idaho has about 846,000 annual alcohol drinkers.
Colorado has about 1,247,000 annual marijuana smokers.

Alcohol cost Idaho, according to the CDC, $1.1 billion, which works out to $726 per person, or more precisely, $1,345 per annual drinker. Marijuana cost Colorado, according to Sen. Burtenshaw, $1.2 billion, which works out to $212 per person, or more precisely, $958 per annual toker.

The alcohol costs may be higher since 2010, but if we take this calculation at face value, this works out to a fantastical claim that marijuana causes about 71% as much social cost per toker as alcohol costs per drinker.

Anyone with common sense can tell you that alcohol—and the impaired driving, domestic abuse, hangovers, cancer, cirrhosis, and alcoholism that come with it—is far more harmful to users and society than marijuana.

For a more realistic take on the costs of marijuana to society, look instead to this study from Canada that showed “The annual cost to Canadian society from each tobacco smoker was $800, for each alcohol drinker $165, and for each cannabis consumer $20.”

In other words, a more realistic claim that marijuana causes about 12% as much social cost per toker as alcohol costs per drinker.

Conclusion: Taxing Marijuana is Worth It

Nobody is claiming there isn’t a risk from legalizing marijuana. Nobody is claiming there are no harms to society from marijuana use.

But marijuana use exists independent of its legality. Whatever costs are borne by Idaho from the 202,000 Idahoans smoking it every year, Idaho is paying those costs now and taking in $0 in tax revenue to mitigate it.

C. Scott Grow: “I’ve also heard concerns about the foregoing of tax revenue from the legal sale of drugs. But the reality is this: In Colorado, tax revenues from the sale of marijuana represent less than 1% of Colorado’s overall tax revenues.”

Sen. Grow seems to just accept that Idahoans are spending at least $9.5 million per month in the city of Ontario, Oregon (pop. 11,000) alone, giving $1.9 million in tax money to the state of Oregon to help fund schools, drug rehabs and prevention, and law enforcement.

Then Idaho gets to pay for all the marijuana costs when Idahoans bring their marijuana back home to smoke.

We happen to think that the $285,000 in monthly tax revenue that Ontario reaps from mostly Idaho marijuana shoppers is a lot of money. Since allowing marijuana sales in July 2019, the little border town has made $3.6 million from a 3% city marijuana tax.

Meanwhile, right across the river from Ontario in Fruitland, Idaho, they failed by five votes in November 2019 to pass a $2.6 million bond to expand the size of their police department and fix up City Hall. They tried again in May 2020, falling short by 75 votes. How must it feel to watch Fruitland suffer while Ontario is booming?

Towns like Fruitland and others throughout the state could use the jobs, business, and tax revenue our neighbor states are generating from Idahoans. Let’s come to our senses, join the 21st century, and realize that a constitutional prohibition of marijuana now would be as much a failure as constitutional prohibition of alcohol in the 20th century.

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1 thought on “Why “$1.00 Marijuana Tax = $4.57 Social Costs” is Junk Science

  1. Pingback: Debunking a Plethora of Pot Prohibition Falsehoods in the Coeur d’Alene Press – Idaho Citizens Coalition for Cannabis

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