Bids to legalize pot focus on tax issue

The debate over how much tax money recreational marijuana laws could produce is playing an outsize role in the campaigns for and against legalization -- and both sides concede they're not really sure what would happen.

Three states -- Colorado, Oregon and Washington -- could become the first to legalize marijuana this fall.

Pro-marijuana campaigners say legalization could prove a windfall for cash-strapped states with new taxes on marijuana and reduced criminal justice costs.

State government skeptics warn legalization would lead to costly legal battles and expensive new bureaucracies to regulate marijuana.

In all three states asking voters to decide whether residents can legally smoke marijuana, the proponents promise big rewards, though estimates of tax revenue vary widely:

Colorado's campaign touts money for school construction. Ads promote the measure with the tag line, "Strict Regulation. Fund Education." State analysts project somewhere between $5 million and $22 million a year.

Washington's campaign promises to devote more than half of marijuana taxes to substance-abuse prevention, research, education and health care. Washington state analysts have produced the most generous estimate of how much tax revenue legal pot could produce, at nearly $2 billion over five years.

Oregon's measure, known as the Cannabis Tax Act, would devote 90 percent of recreational marijuana proceeds to the state's general fund. Oregon's fiscal analysts haven't even guessed at the total revenue. They have projected prison savings between $1.4 million and $2.4 million a year if marijuana use were legal without a doctor's recommendation.

"We all know there's a market for marijuana, but right now the profits are all going to drug cartels or underground," said Brian Vicente, a lawyer working for Colorado's Campaign To Regulate Marijuana Like Alcohol.

There are numerous questions about the projections.

No one knows for certain how many people are buying black-market marijuana. No one knows how demand would change if marijuana were legal. No one knows how much prices would drop, or even what black-market marijuana smokers are paying now, though economists generally use a national estimate of $225 an ounce.

"It's difficult to size up a market even if it's legal, certainly if it's illegal," said Jeffrey Miron, a Harvard University economist who has studied the national tax implications of the legalization of several drugs.