After Citizens voted to legalize recreational marijuana in 2012, it went on sale in Colorado at the beginning of this year, and in Washington State just this past week.  Realizing that, like other so-called vices, alcohol, gambling and prostitution, politicians see the opportunity to levy taxes on such products and services.  Additionally, when it is legalized, the prices drop and organized crime finds such vices less attractive financially there.

No doubt, both residents and politicians in other states have begun considering a similar move, in order to increase their own tax receipts, rather than lose them to Colorado or Washington.  At first, there is the urge to consider the legalization of gambling–first in Las Vegas, then in Atlantic City and eventually in many other areas where it seems that Indian Reservations just cropped-up–as a blueprint for legalizing marijuana.  However, the two are not the same and the impact, I believe, will probably be different.

Gambling casinos prefer to box-out hotels and restaurants, which are not associated with casinos, to the point that their business drops-off and, in some cases, they close.  With legalized pot, however, it is more of a personal thing: quantities that can be owned or purchased are limited.  Similar to alcohol consumption, there are laws against public intoxication and driving while under the influence.  Legalized pot probably wouldn’t increase crime and prostitution like gambling does.  But there is another issue that remains to be seen as to how it works out in Colorado or Washington State.

In most states, there will be pockets of Conservatives and Liberals, with a mixture of the two in between.  Since issues like the legalization of gambling, prostitution and any intoxicants are generally decided through a voter referendum, a sales pitch is usually made.  So far, the usual blueprint includes the promise that the tax revenue derived from the gambling, marijuana, prostitution etc., will go to support such universally popular issues as education and programs for senior citizens.

What the sales pitch leaves out, however, is what will happen to the tax revenue that supported those very same programs prior to the legalization of any of the vices.  Just check your own state and see whether the spirit of those promises were, in fact, kept.  It can be somewhat like a shell game.  Thus, the revenue that supported, let’s say, education and senior programs is diverted to the politicians’ pet projects, and the new revenue, more or less replaces it.  So, the net effect is;  “No Change”!

Here’s where two questions come up:  did those popular projects improve in any way; and, what happens when the vice revenue drops off?  For instance, what happens when tourists from surrounding states no longer visit Denver or Seattle to do a little weed, after their states legalize it?  Will the politicians merely take funds from the pet projects to maintain equivalent funding?  Don’t bet on it!

Normally, the original politicians who invented that shell game are long gone from office by the time the schlitz hits the fan.  And, the politicians in office at the time the short-fall is projected would probably do what any “self-respecting” politician would do:  offer to raise taxes; reduce services or both.  Surprise! Surprise!

So, when your state or local politicians want to make you an offer you can’t refuse, be sure to grab onto your pockets, your wallet or purse and the keys to your car.  Be sure to ask the following questions:  how much is currently supporting those popular programs; will the revenue that currently supports them continue to do so, or will it be diverted elsewhere–where and why; and, lastly, what happens when that new tax revenue source drops off?  If your state or local government is merely replacing one funded revenue source with an unfunded one, while emphasizing how great that would be for you, it’s really just “Bait and Switch”!


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