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Potential Tax Revenue from a Regulated Marijuana Market A Meaningful Revenue Source

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  • Michael R. Caputo
  • Brian J. Ostrom

Abstract

. Dissatisfaction with current drug policy measures has led to a push for the regulation of drugs, especially marijuana. On the premise that such regulation is a real possibility, estimates of potential tax revenue from a regulation scheme and critical comments on other estimates of the size of the marijuana market are presented. For 1991, potential tax revenue is estimated to range from 2.55 to 9.09 billion dollars. The uncertainty surrounding the price elasticity of demand for marijuana, home cultivation of marijuana by individual users, and the extent to which purchases may still be made from the black market are discussed, as are their implications for potential tax revenue.

Suggested Citation

  • Michael R. Caputo & Brian J. Ostrom, 1994. "Potential Tax Revenue from a Regulated Marijuana Market A Meaningful Revenue Source," American Journal of Economics and Sociology, Wiley Blackwell, vol. 53(4), pages 475-490, October.
    • Handle: RePEc:bla:ajecsc:v:53:y:1994:i:4:p:475-490
    DOI: 10.1111/j.1536-7150.1994.tb02619.x
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    References listed on IDEAS

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    1. Chaloupka, Frank, 1991. "Rational Addictive Behavior and Cigarette Smoking," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 722-742, August.
    2. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 675-700, August.
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    Cited by:

    1. Ziggy MacDonald, 2004. "What Price Drug Use? The Contribution of Economics to an Evidence‐Based Drugs Policy," Journal of Economic Surveys, Wiley Blackwell, vol. 18(2), pages 113-152, April.
    2. Kenneth W. Clements & Yihui Lan & Xueyan Zhao, 2005. "The Demand for Vice: Inter-Commodity Interactions with Uncertainty," Economics Discussion / Working Papers 05-30, The University of Western Australia, Department of Economics.
    3. Kenneth W. Clements & Xueyan Zhao, 2005. "Economic Aspects of Marijuana," Economics Discussion / Working Papers 05-28, The University of Western Australia, Department of Economics.
    4. A. Ramirez-Hassan & C. Gomez & S. Velasquez & K. Tangarife, 2023. "Marijuana on Main Streets? The Story Continues in Colombia: An Endogenous Three-part Model," Papers 2306.10031, arXiv.org.
    5. Auriol, Emmanuelle & Mesnard, Alice & Perrault, Tiffanie, 2023. "Weeding out the dealers? The economics of cannabis legalization," Journal of Economic Behavior & Organization, Elsevier, vol. 216(C), pages 62-101.
    6. Joseph J. Sabia & Jeffrey Swigert & Timothy Young, 2017. "The Effect of Medical Marijuana Laws on Body Weight," Health Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 6-34, January.
    7. Kenneth Clements & Yihui Lan & Xueyan Zhao, 2010. "The demand for marijuana, tobacco and alcohol: inter-commodity interactions with uncertainty," Empirical Economics, Springer, vol. 39(1), pages 203-239, August.
    8. Clifford F. Thies, 2012. "The Relationship Between Enforcement and the Price of Marijuana," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 28(Fall 2012), pages 79-90.
    9. Auriol, Emmanuelle & Mesnard, Alice & Perrault, Tiffanie, 2019. "Defeating Crime? An Economic Analysis of Cannabis Legalization Policies," CEPR Discussion Papers 13814, C.E.P.R. Discussion Papers.

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