Theodore Caputi | Millions, billions and trillions

The Quixotic Quaker| Math for marijuana

By Theodore L. Caputi 12/08/15 12:34am

The words “billion” and “million” may rhyme, but they’re very different values. Consider the following: If you started out with $1 billion the day Christ was born and spent $1,000 every day since, you’d still have $264 million left today. But if you began with only $1 million and spent the same amount, you’d be broke in under three years.

Researchers have shown that humans have trouble comprehending big numbers. The problem is: Marijuana legalization proponents have used this inability to their advantage.

This is how the pro-marijuana lobby — intentionally or not — misleads people with financial data. Boasting about “multi-million dollar” tax revenues from marijuana sales in states like Colorado, legalization proponents convince the public that marijuana is not the only green substance raining down over Denver. But those multi-million dollar revenues are not as impressive when viewed in perspective.

For example, High Times ran the highly publicized article (written by the AP), “Pot is Making Colorado So Much Money They Literally Have to Give Some Back to Residents.” The article chirped happily about a tax refund offered to Coloradans supported by the whopping $56 million in tax revenue brought in by recreational marijuana sales in their first year (January 2014 to December 2014). The story took off and was featured in national news outlets including The New York Times and The Huffington Post.

$56 million sure sounds like a lot of cash. But how much is it, really? Is it enough to make a significant difference for, as the article describes, Colorado schools? And then enough left over to give some back to residents?

Probably not. Colorado spent $13.5 billion (with a b) on education in 2013. This means that if every penny of marijuana revenue went directly to education, it would increase the state’s education spending by less than one-half of 1 percent. With a population of 5.3 million people, the total tax revenue from marijuana legalization equals a little more than 10 bucks a person — just about enough to buy two lattes at Starbucks. Even the phrase “drop in the bucket” seems generous.

Of course, revenues are not the same as actual profit. Profits come after costs are accounted for, and unfortunately for policymakers, it’s tough to accurately measure the costs of marijuana legalization. There are the direct costs — increases in state spending on addiction services, increased use of the criminal justice systems, increased rates of DUI and even costs associated with collecting the tax. For example, the governor’s 2015-2016 budget requests $33.6 million just for enforcement and oversight of the new recreational marijuana marketplace (an amount equaling more than 40 percent of total tax revenue from marijuana in the fiscal year of 2014-2015).

There are plenty of other indirect costs that are harder to measure. How do we measure the decreased productivity of stoned workers? Or the pain and suffering of someone with a substance use disorder? Because these costs are subjective, either side of the marijuana debate can make assumptions that will support their agenda’s argument. That said, it’s tough to say whether legal marijuana is turning a profit at all.

Most troubling is that the stories surrounding revenue data are often biased and factually inaccurate. When Oregon legalized marijuana this October, optimistic headlines again exalted the revenue numbers. Several claimed that revenues from the first week were $11 million, but these numbers have been criticized. Even the director of the Oregon Cannabis Business Council said, “I think it was exaggerated.”

And remember that doobie dividend High Times described? It was later discovered that the marijuana tax revenue had nothing to do with the taxpayer refund. Still, High Times has not removed the article from its website. Not surprisingly, the truth was not as well promoted as the lie.

Whether you support marijuana legalization or not, I urge you to be skeptical of overzealous articles about marijuana revenues. A million falls far short of a billion — and even a billion doesn’t go as far as it used to.

The actual numbers are important. Place these numbers into perspective before drawing your own conclusions about the value of marijuana legalization.

Please note All comments are eligible for publication in The Daily Pennsylvanian.