The states of Colorado and Washington ushered in what is likely to be a continuing trend when in November 2012 voters approved ballot measures legalizing the recreational use of marijuana. Both states started implementing the laws this year.
However, legalization advocates who crafted the measures are discovering that a number of governmental controls they included to maximize the likelihood of passage are coming back to bite them.
In Colorado, marijuana stores opened Jan. 1. Stores in Washington opened in early July. But the rollout of the recreational marijuana market has been hampered by restrictive taxation, licensing and other regulations, such as zoning restrictions and strict inspections.
Washington imposes a 25 percent excise tax on both wholesale and retail sales of marijuana. Colorado imposes a 15 percent tax on wholesale purchases and a 10 percent sales tax on retail sales.
Initiative 502 in Washington allows the state to issue up to 334 licenses for marijuana stores, yet only 24 had been issued as of earlier this month. This included just a single, 620-square-foot store in all of Seattle the first week stores were allowed to open. In addition, there were 2,600 applications for grower licenses, but only 80 licensed have been issued.
And since licenses were only issued in March, there has not been time to grow enough crops to meet demand. This will abate over time, however, and prices will fall a bit as supply increases.
High prices are, indeed, a problem. Because of all the state taxes and regulations, prices for legal marijuana are reportedly two to three times higher than the black market price on the street.
"There's no way they are going to eliminate the black market with something that's totally unresponsive to a market at all," marijuana activist Douglas Hiatt told U.S. News & World Report. "You're going to see very quickly the problems when you try to do things Soviet style. When you're using universally rejected planning economy theory, you're going to reap disaster."
