Last week, I noticed that there’s a measure on the November ballot to impose a sales tax on revenue earned by cannabis dealers in Pacific Grove. I went on the Pagrovia Facebook site to ask if anyone was writing a ballot argument against it.
An aside on ballot arguments: In California, when you get your sample ballot in the mail in September, it’s quite thick because typically each proposition has someone or some people arguing for or against it. When I moved to California from Canada in September 1972, and one of my fellow Ph.D. students brought his thick set of ballot arguments to UCLA, I thought this was the one of the strangest things I’d seen. In those days, I thought of Canada as being more socialist than the United States. I still do. For that reason I was surprised that various levels of California governments used tax dollars to subsidize the propagation of particular viewpoints.

Back to the issue. One person on the Pagrovia site answered that he might be willing to sign if I did the hard work of writing. What made this offer particularly interesting to me is that he and I have tangled before in front of the Pacific Grove city council. I’m an avid pickle ball player who wants the city government to allow us to use some of the tennis courts for pickle ball. He lives by the courts, can’t stand the noise, and opposes allowing us.
On the Pagrovia site a few months ago, I had said something nice about him and he reported it, without mentioning me by name, in his local newspaper. I always like reaching out to former political opponents and so this offer from him interested me.
I wrote up the argument and took it to his place. He answered the door and we had a nice conversation. He quickly realized that he had thought I was writing an argument against a different measure, namely the measure to allow cannabis sales in Pacific Grove. So he wasn’t interested in signing. He pointed out, though, that probably the same people were behind both measures. Some people wanted to allow cannabis sales and they figured out that the way to sweeten the deal was to tell Pacific Grove voters that the city government budget would increase with the sales revenues. The city government is always trying to figure out ways to extract more money from us.
Why not combine them in one measure? Possibly because sometimes there’s a rule against including disparate items in one proposition.
That made me rethink. On the one hand, I wanted the government to allow sales. (I hadn’t known that they weren’t allowed; I’m not typically in that market.) On the other hand, I didn’t want the discriminatory tax. I had pointed out in my ballot argument that the proposed 6 percent tax on gross revenues is not small, but huge. I linked to this 2018 post by AEI economist Mark Perry. But what if my ballot argument persuaded people to be against the tax and against allowing sales?
That was a dilemma. I had very little time to think it through. The deadline was the next day at noon. I let the deadline pass and didn’t submit the argument, even though a California friend of mine, who has written ballot arguments to successfully fight a number of tax measures, thought it was really good.
For those of you who agree with me that sales should be allowed and that there shouldn’t be a discriminatory gross revenue tax against sellers, did I make the right call?
Another aside: Fun ending to my conversation with the pickle ball opponent. He said, with a twinkle in his eye, that the big thing that divided us was not cannabis but pickle ball. I grinned and said, “Yes, but in a sense we both won. We get to play on Monday, Wednesday, and Friday, and you get peace and quiet the rest of the time.”
READER COMMENTS
Sanchit
Aug 23 2022 at 9:53am
The formatting for some reason removed my paragraph breaks, here is a more readable version of the comment:
Better to have an imperfect market that exists, and allows some free exchange of goods between willing buyers and sellers, than to have no market at all. So my first reaction would be to allow both ballot measures to pass.
My first thought of a counterpoint against the tax would be that with the tax, people willing to buy and sell cannabis would choose transact in regions outside of Pacific Grove in order to avoid the tax. If the 6% tax is sufficiently punitive, then Pacific Grove would not see any new stores open up in the area, thus making both new sales and tax revenue = 0. Though in reality, I would expect some sellers to see the benefit to open shop in PG, there would still be some deadweight loss as a result of implementing the tax.
Todd Ramsey
Aug 23 2022 at 10:05am
Another complication to your quandary: Illegal marijuana sales are thriving in California because of high taxes on legal marijuana sales:
https://www.politico.com/news/2021/10/23/california-legal-illicit-weed-market-516868
Perhaps due to the ease of growing marijuana combined with reduced enforcement of laws against illegal grow operations?
Next step: the marijuana “revenuers” from California Department of Cannabis Control (yes that’s a thing) will start busting up the illegal grow room “stills”.
Pierre Lemieux
Aug 23 2022 at 11:58am
Can we read you whole argument as showing that political bargaining can lead to a win-win situation for two parties (in the pickle-ball case) or to a loss for a third party (or all third parties) to a horse trading (exchange of vote) agreement (the authorization-cum-tax case)?
Jared
Aug 23 2022 at 3:24pm
“For those of you who agree with me that sales should be allowed and that there shouldn’t be a discriminatory gross revenue tax against sellers, did I make the right call?”
I think your motivations are sound, and the effect of you writing against the tax alone on the legalization measure is ambiguous* at best, so I think it was a decent call.
Btw, yes: the law that that legalized recreational weed sales allows municipalities, by council vote or referendum, I believe, to decide whether recreational dispensaries may operate within city limits.
*Ambiguity not due to your a lack of persuasive power on your part, but to the unknowable connection between the measures in others’ thinking.
David Henderson
Aug 23 2022 at 4:10pm
Thanks, Jared.
If course if the proponents had combined both propositions into one–legalize and tax–then I would have been quite willing to write a pro argument.
TMC
Aug 23 2022 at 4:11pm
You likely won’t get both of what you want, so I’d say the lesser evil would be legalization even though it would be taxed.
Mactoul
Aug 24 2022 at 1:38am
Libertarianism is rational thought but i wonder if consuming marijuana is conducive to rational thinking.
If so, encouragement of marijuana is inconsistent with general public good and the consistent libertarian position would be to discourage marijuana.
Jon Murphy
Aug 24 2022 at 8:43am
I disagree. Libertarians promote many freedoms even if they are not conducive to rational thinking: drinking, smoking, gambling, voting, etc. Indeed, discouraging something for no other reason than it not being conducive to rational thinking (however “rational thinking” is defined) is distinctly paternalist and illiberal.
Capt. J Parker
Aug 24 2022 at 10:09am
I can’t answer your question Dr. Henderson because I think something is amiss with marijuana legalization. This is an emotional rather than a reasoned reaction driven by seeing a boyhood friend, who was a brilliant student, totally give up on academic achievement early on in high school because of a cannabis addiction.
In Massachusetts there is a 10.75% excise tax, the standard 6.25% state sales tax and an optional 3% local sales tax. A 20% total tax. Marijuana excise taxes bring in more than revenue than special taxes on alcohol. In addition there are annual licensing fees for retailers of $10,000. Legalization was supposed to push out organized crime but the former mayor of Fall River, MA., Jaisel Correia was sentenced to 6 years in prison for extorting money from marijuana retailers in exchange for license renewal and approval.
Would Massachusetts politicians have approved marijuana legalization if there was no tax windfall? I know the libertarian answer is no special taxes and no licensing, treat marijuana like any other product people want to voluntarily produce and consume. But what about the externalities created by the marijuana industry? Unlike say air pollution, marijuana externalities are unevenly distributed and can be devastating on those affected.
Cyril Morong
Aug 25 2022 at 11:18am
What do you think Coase would say about these Pickle Ball controversies?
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