Marijuana Tax Debate: Cash-Strapped States Eye Pot Tax To Increase Revenue Stunted By Recession

Advocates of marijuana legalization say instating a marijuana tax could significantly increase the income of cash-strapped states. Skeptics say, however, that marijuana tax advocates are not being realistic.

Some lawmakers have claimed that a tax on legal marijuana could put money into budgets still smarting from the recession, according to Politico.

"I've seen some estimates in the high tens of millions, as much as $100 million for Colorado." Such a tax would be ideal in Colorado, whose voters legalized recreational marijuana use this past 2012 election, stated Representative Jared Polis, who is pushing for federal marijuana legalization in Congress.

If the projections are valid, Colorado could make "substantial dent in needed school improvements, particularly in poorer districts," Polis added.

Dale Geiringer, director of California's National Organization for the Reform of Marijuana Laws, said that legalizing the drug would bring at least $1.2 billion to his state. Politico wrote that Geiringer's study assumes that a traditional sales tax plus an additional $50 levy per ounce would apply to marijuana.

However, skeptics paint a bleaker picture of the marijuana tax.

Politico cited Harvard economics professor Jeffrey Miron saying, "This is not a cash cow that can solve anyone's fiscal problems." Miron is a pro-legalization scholar at the Cato Institute.

Miron added that Geiringer's numbers are three times than they realistically should be. "There is a lot of exaggeration about how big the revenue can be," Miron said.

Another concern is that if taxes for legalized marijuana are too high, users will seek out cheaper untaxed marijuana from illegal dealers. Nobody knows for sure what the new price point would be.

Polis explained, "You want to make sure the black market doesn't have an advantage over the regulated market because if it does, then the whole concept fails and people will continue to buy marijuana illegally - so there has to be a price advantage for the legal market."

A nationwide legalization that taxed marijuana like alcohol and tobacco would, according to Miron's estimates, net about $6.4 billion in new tax revenue. $4.3 billion would go to the federal government, and $2.1 billion would remain for the states.