The New York Times Editorial Board has revisited its early enthusiasm for marijuana legalization and now calls for stronger regulation — including significantly higher taxes.
Some of the proposals are persuasive. Restrictions on very high-potency products and crackdowns on unfounded medical claims are sensible regulatory interventions. But the call for much higher taxes deserves closer scrutiny.
Cannabis taxation operates through two effects: how much people use, and where they buy it. If higher taxes push legal prices too far above illicit ones, heavy users may simply shift back to untaxed supply. In that case, we reduce legal sales without reducing overall use.
Legalization without regulation was naïve. But regulation without attention to market structure risks recreating the illicit market legalization sought to displace.
My analysis: