Research Report Considering Marijuana Legalization Insights for Vermont and Other Jurisdictions Jonathan P. Caulkins, Beau Kilmer, Mark A. R. Kleiman, Robert J. MacCoun, Gregory Midgette, Pat Oglesby, Rosalie Liccardo Pacula, Peter H. Reuter C O R P O R A T I O N For more information on this publication, visit www.rand.org/t/rr864 Published by the RAND Corporation, Santa Monica, Calif. © Copyright 2015 RAND Corporation R® is a registered trademark. Limited Print and Electronic Distribution Rights This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited. Permission is given to duplicate this document for personal use only, as long as it is unaltered and complete. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial use. For information on reprint and linking permissions, please visit www.rand.org/pubs/permissions.html. The RAND Corporation is a research organization that develops solutions to public policy challenges to help make communities throughout the world safer and more secure, healthier and more prosperous. RAND is nonprofit, nonpartisan, and committed to the public interest. RAND’s publications do not necessarily reflect the opinions of its research clients and sponsors. Support RAND Make a tax-deductible charitable contribution at www.rand.org/giving/contribute www.rand.org Preface Marijuana legalization is a controversial and multifaceted issue that is now the subject of seri- ous debate. In May 2014, Governor Peter Shumlin signed Act 155 (S. 247), which required the Secretary of Administration to produce a report about various consequences of legalizing mari- juana. This document was prepared for the Secretary of Administration in response to that leg- islation. It aims to inform the debate in Vermont but does not make a recommendation about whether Vermont should change its marijuana laws. The study was supported by the State of Vermont and by Good Ventures, a philanthropic foundation that makes grants in consultation with GiveWell, an organization that researches charities and advises donors. RAND Drug Policy Research Center The RAND Drug Policy Research Center conducts research to help decisionmakers in the United States and throughout the world address issues involving alcohol and other drugs. In doing so, the center brings an objective and data-driven perspective to this often emotional and fractious policy arena. The center is part of RAND Health and RAND Justice, Infrastructure, and Environ- ment. RAND Health’s mission is to serve as the world’s most trusted source of objective analysis and effective solutions for improving health. It is dedicated to reducing the cost of health care while improving the health of individuals, communities, and populations in the United States and worldwide. RAND Justice, Infrastructure, and Environment is dedicated to improving policy and decisionmaking in a wide range of policy domains, including civil and criminal justice, infrastructure protection and homeland security, transportation and energy policy, and environmental and natural resources policy. Questions or comments about this report should be sent to the project leader, Beau Kilmer ([email protected]). For more information on the RAND Drug Policy Research Center, see http://www.rand.org/multi/dprc.html or contact the director ([email protected]). iii Contents Preface ........................................................................................................... iii Figures ...........................................................................................................vii Tables ............................................................................................................ ix Summary ........................................................................................................ xi Acknowledgments ............................................................................................ xix Abbreviations .................................................................................................. xxi CHAPTER ONE Introduction ..................................................................................................... 1 A Brief Overview of Marijuana Policy ......................................................................... 1 Report Overview ................................................................................................. 5 CHAPTER TWO The Marijuana Landscape in Vermont ...................................................................... 7 Introduction ...................................................................................................... 7 Marijuana Laws in Vermont .................................................................................... 7 Marijuana Prevention and Treatment in Vermont ........................................................... 8 Indicators of Marijuana Use in Vermont .....................................................................10 Estimating the Size of the Marijuana Market in Vermont in 2014 .......................................15 Criminal Justice Costs Associated with Marijuana Prohibition in Vermont .............................19 Concluding Thoughts ......................................................................................... 26 CHAPTER THREE Consequences of Marijuana Use ........................................................................... 27 Introduction .................................................................................................... 27 Limitations of Existing Studies ................................................................................29 Consequences of Marijuana Consumption on Health .....................................................31 Consequences of Marijuana Consumption on Other Outcomes ........................................ 40 Consequences of Marijuana Prohibition .................................................................... 42 Substitution for or Complementarity with Other Substances ............................................ 43 Concluding Thoughts ..........................................................................................47 CHAPTER FOUR Supply Architectures ..........................................................................................49 Introduction .....................................................................................................49 The Commonly Discussed Options ...........................................................................51 v vi Considering Marijuana Legalization: Insights for Vermont and Other Jurisdictions The Middle-Ground Options ..................................................................................57 The Extreme Options ...........................................................................................67 Concluding Thoughts ..........................................................................................69 CHAPTER FIVE Taxation and Other Sources of Revenue ..................................................................75 Introduction .....................................................................................................75 Bases for Taxing Marijuana ....................................................................................76 Collection Point ................................................................................................ 87 Mechanisms for Changing the Tax Burden................................................................. 88 Fees and Auctions .............................................................................................. 92 Other Revenue Considerations ............................................................................... 97 Concluding Thoughts ......................................................................................... 98 CHAPTER SIX Regulation .................................................................................................... 101 Introduction ................................................................................................... 101 A Regulatory Checklist ....................................................................................... 102 A Closer Examination of Eight Regulatory Decisions for Legal Marijuana ........................... 106 Concluding Thoughts ........................................................................................ 112 CHAPTER SEVEN How Legalization in Vermont Could Influence Tax Revenue, Consumption, and Public Budgets ................................................................................................... 115 Introduction ................................................................................................... 115 Potential Revenue from Taxing Vermonters’ Marijuana Consumption When the Only Competition Comes from the Black Market ......................................................... 116 Sales to Marijuana Tourists and Exports ................................................................... 131 Threats to Tax-Revenue Collection in the Longer Run .................................................. 138 Cost of Regulation ............................................................................................ 143 Concluding Thoughts .......................................................................................