Monthly Archives: March 2015

Marijuana and Tax: It’s Complicated

The other day I was walking my dog through a park and I saw two children gleefully playing on a seesaw. As I returned home and got back to work the image of the seesaw stuck with me. The seesaw is a great metaphor for the legalized marijuana tax conundrum because it demonstrates the challenge of balancing interests. If we imagine California’s marijuana tax scheme as the seesaw, we can see the Golden State’s two primary objectives sitting at each end: generating state revenue on one end and reducing externalities (social harms attributed to marijuana use) on the other. Although both objectives can play nice, if the interests are not balanced and cognizant of the other, one end of the seesaw will crash into the dirt while the other soars sky high. And the dirt in this case isn’t the playground kind that can be dusted off; it is muddied public policy that would incentivize the black market.

The good news is that balancing these objectives is attainable and reasonable. First, generating state revenue is attainable once a system to tax marijuana is in place. Colorado is a great example of this: it gained a new source of revenue by implementing a multi-faceted tax approach that generated $52,570,081 in 2014. The recreational marijuana market generated $40,968,203 alone. Second, tax can serve as a mechanism to offset some of the most salient social harms attributed to marijuana use such as youth access and use, drug crime, and the health risks of ingesting unregulated products.

The difficulty of deciding how to tax marijuana is not only in trying to balance interests. The idiosyncrasies of the marijuana market add to the difficulty of creating a balanced tax structure. We have very limited data on the marijuana market due to its status as an illegal drug. As such, it is difficult to gather reliable information about marijuana users and how they respond to market changes. This creates a lot of guesswork and “best estimations” which may be wrong and could create problems once in play within a burgeoning market. In addition, the marijuana plant itself is unlike anything else we have taxed before. Alcohol and tobacco are the nearest in kind to marijuana but both substances are easier to tax by nature. We are able to tax distilled spirits by alcohol content because alcohol is a homogeneous material that lends itself easily to testing. Marijuana, on the other hand, is not homogenous and technology still needs to be developed for reliable potency testing processes. The heterogeneity of marijuana plants also distinguishes it from tobacco because taxing marijuana by unit or weight is not as effective as it is to tax cigarettes (details of this are discussed below).

In order to meet our objectives we need to establish the type of tax, basis for the tax, the rate, the collection point, and the market structure that will best achieve our objective(s). None of these variables is mutually exclusive and there are various ways to stack them. For example, marijuana can be taxed by weight, potency, price, or even by product type (e.g., raw material, edibles, concentrates). The tax can be imposed on growers, processors, retailers, consumers, or some combination of these. Each of these combined, however, has different degrees of efficacy. If we really want to meet both objectives (revenue and reducing negative externalities), we’ll need to consider the different benefits and drawbacks to each approach. Each approach will require different tradeoffs and will have real-life effects on consumer usage, safety, and even business sustainability. The discussion on how to tax marijuana is lengthy and complicated. Today, the goal is to start the conversation by looking at the various tax bases and how each can help California meet its tax objectives.

Let’s move now to discussing how the various tax bases fare on the seesaw of generating revenue and offsetting externalities. First, a tax based on price is easy to administer but does not necessarily help control prices. This will not bring in much revenue if post-legalization prices plummet as predicted by many in the industry. Revenue aside, there are numerous other reasons price control is desirable. The most salient is thwarting youth access. It is well established that youth substance use rates are particularly price sensitive. Youth access and use decrease as prices increase. One important caveat to a price-based tax is that it only remains easily administrable if it functions in a horizontally integrated system. Rather than have “jacks of all trades,” horizontally integrated systems feature distinct entities with limited roles within the market (e.g., growers, processors, and retailers). The RAND study “Considering Marijuana Legalization” explains that a horizontally integrated system is preferable when imposing price-based taxes because they depend on the existence of a real price—normally, on an arm’s-length sale between unrelated parties. On the other hand, if prices do start and remain high, a price-based tax can be too high and push consumers into illegal black markets. Going back to the seesaw image, it is apparent that a price-based tax alone cannot achieve both objectives of legalizing marijuana. The seesaw of marijuana tax objectives can only come close to being balanced if we compromise the amount of revenue generated for more positive impacts on social harms. Further, the outcome of a balanced seesaw depends on multiple variables aside from price alone.

Marijuana can also be taxed by weight. Similar to a price-based tax, a weight-based tax is also easy to administer. It also has the distinct feature of bringing in a steady amount of revenue since it isn’t determined by market price. The difficulty of a weight-based tax is in the details. For instance, the weight of each marijuana plant changes over time due to drying and trimming and weight changes aren’t exact among each plant. We have to establish timelines for when marijuana plants should be weighed and our timelines may not coincide with the initial objectives of taxing the product. The main concern, however, is the risk that it will incentivize production of higher potency products. This is a disadvantage for three reasons. One, consumers may unwittingly ingest more potent products, which may lead to health and safety issues. Two, the tax base wouldn’t encourage consumers to purchase less potent products. Third, potential revenue for higher potency products would never be captured within the market.

Another option is a tax based on potency or product type which has the benefit of addressing more externalities but would be difficult to administer given our current lack of knowledge regarding marijuana compounds. It’s important to clarify that for purposes of brevity in this post, I am conflating potency and product type (some edibles might be less potent, others might be more). A tax based on potency and/or product type can be used to shape usage patterns and implicitly impose limits or restrictions on how marijuana can be consumed. Therefore, it is advantageous in the sense that it addresses more social harms related to marijuana use. For example, California could impose a higher tax on products that typically yield higher potency and are more difficult to dose appropriately (e.g., edibles and concentrates). This could encourage users to purchase products, such as raw marijuana, which is typically smoked. This could be a desirable outcome because our familiarity with this form of marijuana enables us to better predict behavioral outcomes and leads to shorter durations of intoxication. In contrast, California could promote lung health and discourage smoking marijuana by taxing the raw material higher than other ingestible forms. Potency could be measured by the amount of THC, CBD, or THC:CBD ratio. However, the difficulties and inaccuracies in current technology for testing potency pose an immediate obstacle to the feasibility of such a tax. Plus, even a single marijuana plant can have inconsistent potency throughout. Finally, our experiences with the tobacco and alcohol industries have taught us that higher taxes do not always have positive impacts on public health.

At its inception, any potency-based tax should have at least three features. First, a potency-based tax would have to be set in ranges. These potency ranges would need to be set high enough to discourage divergence to black markets. Second, any potency tax would need to include a provision for revision based on timely reviews of any developments in new information regarding potency ranges and/or limits. Third, the previous feature necessarily requires at least some of the revenue be dedicated to research that can advance the system. Research could explore various topics such as testing modules, scientific improvements in measuring potency, and studies on the effects different products and potency had on users’ intoxication levels.

This discussion of the various ways to tax is only the tip of the iceberg and will be covered in more detail in future posts. Of particular interest is the history of alcohol and tobacco taxes. Both can serve as a great resource for what works and what doesn’t in terms of taxing to affect use and offset social harms. After we cover the lessons learned from above, you can join me in the related discussion of which market structure (vertical or horizontal integration) better facilitates particular tax methods. Join me next time for a discussion on sin taxes and the impact they can have on the burgeoning marijuana market.

Alexa Quinn for Drug Law and Policy

Follow Drug Law and Policy on Twitter @DrugLawPolicy or Alexa @aquinn_dlp. You can also contact Alexa Quinn by email: aquinn.dlp@gmail.com.

Why Tribes Don’t Need Your Permission

Late last year the U.S. Department of Justice made an announcement that American Indian tribes may grow and sell marijuana on tribal land so long as they adhere to the federal conditions required of states that have legalized marijuana, and with the consultation of the local U.S. Attorney’s office. As a result of the announcement many tribes, including the Pomo and the Red Lake Band, are seeking to implement a regulatory framework that would adhere to those federal conditions. Others have voiced concern that the vague wording of the DOJ memo will leave tribes vulnerable to prosecution on the federal, state or county level. But what if California tribes did not need the permission of the federal government to cultivate marijuana without the threat of criminal prosecution?

The United States Supreme Court has recognized an exemption for tribal lands from the application of state law. For example, in Washington v. Confederated Tribes of Colville Indian Reservation the Court held that “tribal sovereignty is dependent on, and subordinate to, only the Federal Government, not the States.” However, where Congress has delegated this power to states, state law would be enforceable on tribal land.

Under Public Law 280, the federal government delegated criminal law enforcement to California and a handful of other states, making the state penal code enforceable on tribal land. This rule is subject to one caveat: if the state generally permits the conduct at issue, subject to regulation, it must be classified as a civil or regulatory charge, rather than criminal, and thus PL-280 would not authorize its enforcement on an Indian reservation. Furthermore, the definition of generally permitted conduct is extensive. The Supreme Court held in California v. Cabazon Band of Mission Indians that “even to the extent that the State and county seek to regulate short of prohibition, the laws are preempted” from application on tribal land. One possible conclusion is that by regulating marijuana, even for medical purposes, California has preempted state or county marijuana laws from applying to tribes.

Tribal law still applies, of course. And some tribes have strict anti-drug policies, which may be enforced by tribal police on those lands. However, those tribes that are within the borders of a state with PL-280 in effect would be able to independently determine how to regulate marijuana without the need to invoke the protection of the recent memo. What this means is that for tribes seeking to benefit from the restrictive nature of the marijuana market the fear of criminal prosecution can be at least somewhat alleviated (however, this blog post does not constitute legal advice; anyone seeking to take action must consult with a licensed attorney).

In my next post I will be considering whether PL-280 would also allow for “casino-style” recreational marijuana use, or the use by non-tribal members while on tribal lands, and if so, whether what the ramifications of such use would be.

Are High Drivers High Risk?

at-checkpoint

The danger of driving under the influence of alcohol (DUI) has been solidified for some time. The development of DUI laws and enforcement has been grounded in scientific research about crash risks and the effects of alcohol are easy to measure. However, driving under the influence of marijuana (DUIM1) presents an entirely different issue. It may not be wise to assume that similar laws, tests, and enforcement methods should apply. If there is anything to take away from the body of DUI policy, it is that it was developed to decrease accidents rather than indirectly prohibit alcohol. If marijuana is to be legalized, there is likely to be an increased level of enforcement to prevent the dangers of DUIM. However, such enforcement is only necessary if these dangers actually do exist.

DUIM is a criminal offense in California and will continue to be even if marijuana is legalized.2 A California roadside survey conducted in 2012 found that 7.4% of drivers tested positive for some amount of THC, a psychoactive component found in marijuana. To put that into perspective, 7.3% of drivers tested positive for alcohol. Although the occurrence of intoxicated drivers may be almost identical for alcohol and marijuana, the similarities quickly diverge when it comes to the crash risk these drivers present. DUIM after legalization is only an issue if high drivers actually present a danger to themselves and society.

The National Highway Traffic Safety Administration (NHTSA) recently released the results of a study that was “the largest and most comprehensive study to address alcohol and drug crash risk in the United States.” This study was conducted in 2012 over a 20-month period in Virginia and tested thousands of drivers using blood, urine, and saliva for the presence of THC. The NHTSA took care to match characteristics of control drivers with those of crash-involved drivers as closely as possible. These characteristics included age, gender, ethnicity, and alcohol use. When the variables of age, gender, ethnicity, and alcohol use were not accounted for, the results showed an increase in crash risk for those who tested positive for THC. However, when the analysis accounted for these variables, the correlation vanished – the NHTSA study did not find an increased crash risk associated with THC use. In contrast, drivers at a .08% blood alcohol level (the legal limit in every state) had about four times the chance of crashing.

The NHTSA study is the first large-scale study of its kind conducted in the United States, and so it stands to be the best indicator of an actual, observable crash risk for DUIM in California. The study found no increased risk, and it calls into question whether increased enforcement is actually necessary. This leads one to wonder how these results are even possible. Marijuana is a psychoactive drug, and an analysis of numerous studies (Sewell) “concluded that marijuana causes impairment in every performance area that can reasonably be connected with safe driving of a vehicle, such as tracking, motor coordination, visual functions, and particularly complex tasks that require divided attention[.]” Despite these effects, the Sewell analysis found that most marijuana intoxicated drivers show only small impairments on actual road tests while more experienced marijuana users showed almost no functional impairment.

The study attributes these results to evidence that marijuana intoxicated drivers are are able to compensate for the effects of their intoxication. For example, they will drive slower, increase their distance from cars, and try to overtake less. On the other hand, alcohol intoxicated drivers will underestimate their impairment, and will even drive more aggressively compared to sober drivers. A year after the Sewell analysis, a study was completed that seems to agree with their findings. In 2010, a double-blind, placebo-controlled study of 21 heavy cannabis users was conducted, rating each individual’s performance on tasks that tested their ability to track, make quick decisions, multitask, and react to a stop. This study found that marijuana generally did not affect task performance, concluding that “heavy cannabis users develop tolerance to the impairing effects of THC on neurocognitive task performance.”

These studies help explain the surprising results of the NHTSA study, and together, they show that DUIM may not be the public safety hazard that it is often thought to be. However, there are concerns that legalization will change the landscape of marijuana use, causing both an overall increase in DUIM related crashes, along with an increased crash risk by creating new users who are unable to successfully compensate for their intoxication. This concern is not without merit, but it cannot be expressed with certainty either.

The DMV has found that out of fourteen states that have allowed access to medical marijuana, three of them showed an increase in DUIM crash rates from the time of access to 2009. California was one of these states, showing an increase in 2.1 percentage points for fatal crashes where a driver tested positive for marijuana intoxication. This may seem insignificant, but it was a 196% increase. However, this uptick occurred in 2004 when medical marijuana was initially decriminalized, and there was no significant growth for 6 years after. From these results, the DMV suggested that medical marijuana is simply providing more access to a stable population of patients rather than creating new users. If the effect of legalization is to follow the same pattern, it will not create an explosion of new, inexperienced users, but it will increase access for experienced users, the ones who have shown the ability to drive safely in experiments and studies.

More importantly, if the goal of DUIM policy is to reduce crash risk, an increase in the total number of DUIM related crashes does not show that there is an increased risk of crashing. The DMV study explicitly states that determining the crash risk of DUIM was neither the intent nor purpose of the study. Accident totals were not adjusted for the increased use of marijuana in states where medical marijuana was allowed. Greater access to marijuana increases the number of people who are intoxicated, and when those people get into accidents, there is an increase in accidents involving marijuana intoxicated drivers. Confused? Here is an analogy: If there is greater access to yellow shirts, then an increase in accidents involving drivers in yellow shirts is likely to occur (provided that people want to wear yellow shirts). It does not follow that wearing a yellow shirt causes accidents, and similarly, the DMV results establish nothing about the actual risk of crashing.

The NHTSA study, on the other hand, was purposefully designed to discover such risk, and it found that drivers intoxicated on marijuana do not have a heightened risk of accidents compared to sober drivers. If the goal of DUIM policy is to reduce accidents, there must be a heightened risk to reduce. Even if marijuana is legalized, it cannot be assumed that an increased crash risk will come along with it.

It would be a shame to make the trek through all this technical, scientific data for it to merely be an academic exercise. But it unfortunately is. Questioning the necessity of increased enforcement will likely be nothing but a philosophical pursuit. It is almost assured there will be an increased focus on DUIM enforcement whether it is useful or not. In reaction to marijuana legalization, Colorado and Seattle have enacted new DUIM laws, funded training programs for their officers, and instituted new field tests for discovering marijuana intoxicated drivers. While California still awaits legalization, counties such as Los Angeles have already taken similar steps in officer training and field-testing. With legalization comes enforcement, and the state will have to design policy and procedure to prevent DUIM in a fair and just way. Many of us will also have to find a way to forget that our tax dollars are being spent on a problem that may not exist.

1. I choose to use the term DUIM here instead of using the more common term of driving under the influence of drugs (DUID). DUID is often the term used for marijuana intoxicated driving under the California Penal Code. This is because the pertinent section of the code does not distinguish between drug types other than alcohol, so all non-alcohol intoxication can be referred to as DUID. For this reason, I choose to use DUIM in order to specify that I am only talking about marijuana intoxication and not the countless other drugs that DUID can refer to.
2. California Penal Code section 23152(e)

Legalization Regulation From the Ground Up: Humboldt County Is Turning Its Black Market Green

Humboldt-County-sign

Humboldt County is the ideal location for drug policy reform; the problem is that there are too many solutions and a rapidly approaching deadline. The legalization of recreational cannabis use in California is like a train speeding down the tracks to a bridge that hasn’t been built. The bridge could take many forms but the architect’s creativity may be limited to what has been done before–instead of what could be done better. In 2016 California voters will have the unique opportunity to do something better and turn a black market green, both economically and environmentally.

California Cannabis Voice Humboldt (CCVH) is working to pass an ecologically sustainable land use ordinance for Humboldt County that would provide a path to legitimacy for Humboldt County Cannabis Farmers. The work of CCVH and that of other local interest groups seeks to preserve the expert horticulture and grassroots organic living of a region known as the “Emerald Triangle” by both cannabis connoisseurs and the Office of the National Drug Control Policy. Humboldt has a multitude of constituencies (including law enforcement, entrepreneurs, cannabis users, generational growers and local citizens not involved in the industry) who do not want twenty-five percent of the local economy to crash. The one thing all parties can agree on is that cannabis legalization in California will have a disproportionate impact on Humboldt County, a position supported by Jennifer Budwig’s landmark 2011 University of Washington study.

Humboldt County relies on the illegal marijuana industry for 25% of its economy. This does not mean that everyone in the region is involved in illegal activities, but everyone who is involved in the illegal industry participates in other legal industries like grocery shopping, eating out, buying fertilizer, tools, property, and using gas. Budwig estimates that the public services like fire, police and schools are entirely supported by the “round trip dollar” economic boost produced by the legal activities of people involved in the marijuana industry.

This type of heavy reliance on a cash crop is not new for rural America, but encouraging “bottom up” planning is. In January, 2011, then-newly-elected Colorado Governor John Hickenlooper initiated one of the most aggressive “bottom up” economic development planning strategies ever devised in the United States. The strategy was outlined in his Executive Order, which provided that:

             “In order to grow Colorado’s economy, it is vital to engage Coloradans across the state in developing a comprehensive and collaborative approach to economic development. This new approach is designed to identify the needs, priorities, vision, strengths, and weaknesses of each of the state’s counties, and incorporate them into 64 economic development plans, tailored to each county. These plans will roll up into fourteen regional plans that will comprise a comprehensive, statewide economic development plan.”

 

Two years later when recreational marijuana was legalized in Colorado, each county/city regulated its respective cannabis market, and the cannabis industry created thousands of jobs. It is important to take pause to imagine the future of Humboldt, on the brink of the biggest economic shift of its primary cash crop and the potential gains of the California economy, in deciding how best regulate recreational use. In theory, California could create 58 tailored plans based on the needs, priorities, vision, strengths, and weaknesses of each of the counties.

Humboldt CCVH is advocating protecting small marijuana growers in order to preserve the little guy. At a recent county board of supervisors meeting CCVH packed the house with standing applause when Mr. Bruner encouraged the board to “help the small farmer to understand he doesn’t have anything to be ashamed of. She doesn’t have anything she shouldn’t be proud of.” In support of the proposed ordinance, Bruner, the business manager at the Wonderland Nursery in Garberville,  said that the ordinance and eventual legalization of recreational marijuana could work financial wonders on the county’s economy and tourism industry while preserving its small farms and local businesses.  Bruner cautioned that past legalization in other states have appealed to larger corporate farms and environmentally unsustainable growing practices, and that a continuation of past practices would limit the ability for a county like Humboldt to reap the rewards of what has become its trademark crop.

This is the situation now with medical marijuana, failed retailers and growers have returned to the illegal market because of the legal complications that came from the lack of clear regulatory boundaries or guidelines in the Compassionate Use Act.  CCVH and other advocacy groups want to improve upon medical marijuana regulation and get ahead of recreational cannabis regulatory issues to preserve their way of life, encourage legal activity and help struggling local economies.

In 2016 California voters have a unique opportunity to help Humboldt County turn its black market green. In order to do that we need comprehensive policy reform based on the wealth of knowledge and experience of those living behind the Redwood Curtain. The next blog will take a deeper look into the proposed legislation by CCVH and other proposed solutions from the ground up.

Keri Gross for Drug Law and Policy – Follow us on Twitter @DrugLawPolicy

Diversion from the Black Market Also Involves People, not just Plants

Much of the focus in the coverage of state regulated marijuana has been on the plants, the product, and the money. Michelle Alexander, Associate Professor of law at Ohio State University and renowned author, has illuminated the irony of a movement where whites are now looking to marijuana with dollar signs while communities of color still suffer the consequences of the failed war on drugs. “Here are white men poised to run big marijuana businesses, dreaming of cashing in big—big money, big businesses selling weed—after 40 years of impoverished black kids getting prison time for selling weed, and their families and futures destroyed. Now, white men are planning to get rich doing precisely the same thing?” This highlights the importance of focusing on the people, especially those communities who have been affected most, in the rehabilitation of California’s relationship with marijuana.

No matter how you view marijuana reform, any chance of a successful rehabilitation of California’s drug policy must focus on people. Some see marijuana reform as a civil rights issue, citing the failed war on drugs and overcrowding of prisons as evidence that change is needed. If you view reform as a civil rights issue, how do you reconcile that belief with a system where the people who have been the most adversely affected by the war on drugs are now precluded from taking part in the state-regulated market? Others see drug use as something that isn’t going to change, so the government might as well collect additional tax revenue. If you are part of the group who sees dollar signs from tax revenue, the success of taxation depends on a shift from the black market to the legitimate market. This would depend on those currently operating in the shadows being able to operate, or get hired by, legitimate businesses. Regardless of the policy goal, the most important aspect of rehabilitating California’s relationship with marijuana is the shift from the black market to the legal market, which includes the people.

Black market marijuana is grown and sold by a black market labor force. What happens to that labor force when marijuana is legalized? The Cannabist recently published an article on black market growers in Colorado’s state regulated market. Titled “A divided weed world: Black market growers and legit industry jobs,” the article addresses the problems of merging the black market and the legitimate marijuana trade. First, there are the legal hurdles to overcome. If a person has a certain criminal record, he or she legally cannot receive a business license. Those looking for employment at a cannabusinesses must be of good moral character, meaning any criminal history will be considered. Additionally, black market growers aren’t financially incentivized to enter a legal market, where they will take a significant pay cut if they can even get a job. The competition for work is high and most available jobs are entry-level, paying $10 per hour.

Additionally, the legitimate marijuana business is wary about including those who previously operated in the shadows. Being “in any way connected to black market growers (or any type of crime) is the kiss of death in this business.” Not only is it a legal issue, legitimate marijuana businesses are split on the benefit of including black market growers in their operations. Some business owners cited applicable knowledge and experience as the positives of a black market background, but applicants are “better off never mentioning he or she has experience growing and selling their own.” Even in the absence of a criminal record, there is a “stigma that comes with being a black market grower.” There is the concern about bad habits that would be carried over and the sometimes-rocky transition of going from being your own boss to integrating into an already established and functioning business.

While the Cannabist article explored some the problems faced by a small segment of the black market in Colorado, it provides a lens with which to view the broader problem of integration into the legal market in California. Not only will there be growers needing to transition to the legitimate market, there will be trimmers, processors, and dealers. Street level dealers and trimmers do not have the same level of specialized skill and knowledge as growers. Dealers may arguably have more of a tendency to flout laws, for example by selling to minors. Each different area of employment will bring to light different problems and policy considerations.

There is also the criminal history of black market workers to consider. A criminal record makes it difficult to find any gainful employment, but this will be exacerbated in the legitimate marijuana market by regulations that exclude the justice involved from receiving licenses or being hired. The effect of criminal records for both licensing and employment purposes will have a greater impact on communities of color in California, where Latinos are arrested at higher rates than whites, and Blacks are arrested at an even higher rate. While there will be disparate impacts from barriers based on criminal history in California, there are also race-neutral reasons for excluding the justice-involved in the state regulated market that require consideration. For example, it would be reasonable to refuse a business license to an individual convicted of financial crimes to prevent money laundering. Also, because legitimate marijuana is still a cash-only business, barring convicted tax evaders or embezzlers would be sensible policy.

Furthermore, economic requirements, wages, and competition will be a contributing factor to keeping black market workers from turning legit. The licensing structure and any vertical integration requirements could prevent individuals from opening their own businesses. Like in Colorado, those making money in the black market will not be incentivized to transition to the legal market at a significant pay cut, where their wages will also be taxed. In California, where we have one of the nation’s highest wealth gaps and where Black and Latino communities have much higher poverty rates than whites, economic barriers also adversely affect communities of color. This reinforces Michelle Alexander’s point that those with the money and the privilege will be the people profiting off of marijuana reform.

My future posts for the Drug Law and Policy Blog will delve into the barriers to entry into the future state-regulated market for black market workers in California, with a focus on policy that will best serve to bring them into the fold. Ultimately, there is a general lack of information in about the black market in California, including the racial make up of the labor force, so there are questions that will go unanswered. This fact remains true – without transitioning the black market workforce to the legitimate market, marijuana reform will not succeed in the way we hope. Stay tuned for more information as I wade through the murky waters of black market industries and the ever-evolving arena of state-regulated marijuana.

The Fight for the Future of Commercial Marijuana Land Use

The land use issues raised by marijuana are constantly changing around us, creating new legal landscapes that have a very real effect on our day to day lives. As the laws regarding marijuana become increasingly decriminalized, even legalized, a new kind of store front can be found in the communities in which we live. By surveying the current land use issues in states like Washington, Oregon, Alaska, and Colorado, it will become increasingly clear what types of regulation help achieve our communities’ policy goals and the aspects that frustrate them. The regulatory framework for marijuana land use issues in these states will then be juxtaposed with California’s to help us evaluate how our own regulatory framework is effecting our goals of minimizing social harms and maximizing social benefits. Ultimately this can help with how we approach regulatory issues in the future, with the impending closures of San Jose dispensaries as an immediate example.

I am a second year law student at Santa Clara University School of Law, and focus on Land Use, Water Rights, and Commercial Real Estate. I have worked at places that have been greatly affected by these areas of law and hope to make changes that will help improve people’s lives and businesses. I pursue these areas as the sine qua non to making this goal possible. With an understanding of these fields, I also have a niche focus in the area of Wine Law. I see parallels to the wine industry, and thereby fiscal opportunity and well-being for Californians as the cannabis market gains increasing legal stature.

But What Does it all Mean, Man?: The Difference Between Decriminalization, Legalization, Regulation and why it Matters.

When discussing marijuana reform, we often hear terms like decriminalization, legalization, and regulation. These terms have taken on a multitude of definitions and many of us have no idea what the words we are using mean. Frequently they are used synonymously. This is a potentially crippling problem, and its consequences are widespread. As stated in my introduction, I’m exploring a fundamental flaw in discussing marijuana reform. This first substantive post deals with two facets of the problem: demonstrating the problem and suggesting a definitional framework to fix it. The problem is this: it is very easy to fall into the trap of using decriminalization, legalization, and regulation synonymously. This is widespread and many of us are guilty of using these terms interchangeably.

A quick note, for this series, I am advocating the use of the word reform in its most neutral manner – changing the laws regarding marijuana. There are a million ways to do this, as best exemplified by Transform’s publication “How to Regulate Cannabis: A Practical Guide.” Transform’s guide will be used in later blog posts to place current reform schemes on the spectrum of state action created by the definitional framework.

In his article “Preemption under the Controlled Substances Act”, Robert Mikos puts forward a clear and easily understandable framework for discussing federal preemption. However, when he turns to marijuana reform, Mikos becomes guilty of perpetuating this problem. He is by no means the worst offender, but his article is extremely helpful as it demonstrates not simply the problem, but why it is important. Before we go on a crusade against anyone for his/her word choice, I want to make it clear that there is no single way to regulate marijuana – there are millions. I also want to emphasize that each of these possible reforms is distinct from one another and should no longer be used synonymously.

Mikos looks at marijuana reform under the lens of federal preemption of state laws.   Federal preemption is triggered when both the federal and state governments have laws on the same issue. Generally speaking, federal law is the supreme law of the land, and Congress can therefore void state laws if it so chooses. Those last four words are key – and as Mikos explains, any preemption question requires asking what Congress intended.

In looking at marijuana reform through the federal preemption lens, there are three different brands of preemption that must be accounted for: field preemption, direct, and obstacle preemption.

Given our current state of congressional gridlock, it’s hard to imagine what 535 members intended by voting on a single bill. Fortunately, sometimes Congress makes it easy for us. This introduces our first brand of preemption: field preemption. Field preemption occurs when Congress has explicitly stated that it intends of occupy the entire field of legislation on a particular issue. A state is therefore unable to make valid law on the issue. However, the Controlled Substance Act specifically states that it does not occupy the field, and Mikos argues that field preemption is not relevant to marijuana reform.

However, the other two brands of preemption are implicated by marijuana reform. Mikos calls these direct and obstacle preemption. A direct preemption occurs where it is physically impossible to follow both state and federal law. Obstacle preemption is where a state law gets in the way of accomplishing the full purpose of Congress. Mikos also introduces a counter concept to preemption: commandeering. Commandeering prevents the federal government from forcing a state to make a law.

While Mikos successfully defines preemption, his argument begins to run afoul of the terms specific to marijuana when he casually uses terms like decriminalization, legalization, and regulation.   Mikos attempts to connect the brands of preemption and commandeering to different styles of reform schemes. It is easy to see how this can be useful – if one type of reform invokes a specific kind of preemption, policy makers can take steps to minimize their exposure to federal preemption.

In failing to define decriminalization, legalization, and regulation, Mikos has run afoul of one of the biggest problems facing marijuana reform: we have no idea what these words mean. When discussing commandeering, Mikos defines legalization as removing state laws and regulation as creating state laws. However, he uses the term regulation throughout to refer to a wide range of possible reform schemes. Mikos also refers to states that have legalized marijuana and elaborates by discussing decriminalization. What started out as a brilliant way of categorizing various reform schemes in terms of their federal consequences is muddled by a lack of clarity as to what those reform schemes are.

To remedy this, and prevent further confusion, I am proposing a linguistic shift in terminology when discussing marijuana reform. First, the words legalization and regulation have become broad beyond saving. They can continue to be used in that broad sense (like reform), but when discussing the specifics of a reform scheme, they should not be used in the same manner. Instead, I propose a spectrum with three points on it. Each represents a level of state action – many reform schemes may be at one place on the spectrum as to an issue like taxation, but on another in regard to criminal penalties. As such, these are extremes – it is doubtful any reform scheme will be fully contained by a single term.

Total Decriminalization: A reform scheme in which a state has removed any law regarding marijuana from its books. Growing, possessing, and selling marijuana are not forbidden by state law, but they are also not regulated or controlled by any state agency.   Total Decriminalization falls squarely within the commandeering principle and involves no action from the federal government. This is distinct from the somewhat loose use of the word decriminalization to describe a state that has significantly reduced penalties for marijuana possession. Total Decriminalization has no preemption implications – as commandeering prevents the Federal Government from forcing a state to pass a law, the federal government cannot prevent a state from repealing a law.

State Regulation: A reform scheme where the state has laws allowing marijuana use, growth, and sales, and regulates third parties. The state authorizes individuals to grow, sell, and use subject to state regulation. This most squarely falls inline with Mikos’ definition of obstacle preemption – arguably the easiest form of preemption for a state to fight. In a State Regulation reform scheme, a state would only have to show that its reform did not get in the way of the intent of the CSA.

State Participation: A reform scheme where the state has a direct role in production and sale of marijuana. Instead of private parties growing marijuana subject to the state regulations, the farm would be owned by the state and the farmers would be state employees. Likewise, all sales would be done by government agencies. State participation closely follows direct preemption – something much more difficult for a state to fight than obstacle preemption.

By shifting to using these three terms Mikos’ preemption argument becomes clearer, and abundantly more useful. As we will see over the remainder of this blog series, the linguistic efficiencies granted by this framework are significant and resolve many simple issues to allow time to be focused on more complex policy choices.