California marijuana use may double if legal: RAND

SAN FRANCISCO Wed Jul 7, 2010 2:57pm EDT

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SAN FRANCISCO (Reuters) - Legalizing marijuana in California could drop prices of the drug to nearly a tenth of current levels while its use could double, research group RAND Corporation reported on Wednesday.

Voters in the most populous U.S. state will decide in a November referendum on whether to make the use and cultivation of marijuana legal.

Even if it is approved, marijuana would remain illegal under federal law and it is unclear how national authorities might respond.

Under the state initiative, local governments would decide whether to allow sales and cultivation, but all adults would be allowed to use marijuana under state law.

A separate state bill would legalize marijuana and tax it at a rate of $50 an ounce, a move a state tax board calculated would raise $1.4 billion.

The RAND study calculated that the untaxed price of high quality marijuana could fall to as low as $38 per ounce from around $375 per ounce today. The price and rate of taxation would drive both levels of usage and a possible black market.

"Even under a scenario with high taxes ($50 per ounce) and a moderate rate of tax evasion (25 percent), researchers cannot rule out consumption increases of 50 percent to 100 percent, and possibly even larger," RAND said in a statement.

However such estimates were imprecise because legalization would be such an unprecedented move, researchers said.

A recent Reuters/Ipsos poll showed state voters nearly evenly divided on legalization, which is seen as a way to boost revenue through taxation and to cut costs of law enforcement.

Many, however, fear drug use will boom, raising healthcare costs and creating new problems.

The state devotes around $300 million annually to criminal justice costs related to marijuana, RAND calculated. The state could become a big exporter of marijuana, especially if the federal government takes a passive role, researchers said.

"California could actually make a lot of money from taxing marijuana and then exporting it to other states," researcher Beau Kilmer told journalists on a conference call.

(Reporting by Peter Henderson, editing by Alan Elsner)

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