This document summarizes a report on marijuana legalization in Vermont. It finds that marijuana use is more prevalent in Vermont than the rest of the US. Currently, Vermont spends $800,000-$1.1 million annually prohibiting marijuana. The report discusses 12 policy alternatives to the status quo and models potential tax revenue from legalization, finding it could be in the tens of millions annually from Vermont users alone. However, regulation costs and uncertainty around impacts on substance use make projections difficult.

1. Marijuana Legalization in Vermont:
Assessing the Policy Landscape and
Some Revenue Implications
Greg Midgette PhD
April 17, 2016

2. Slide 2
• Commissioned by
State of Vermont
• Eight chapters,
80,000+ words
• Does not make a
recommendation
• Not a cost-benefit
analysis
• Goals: Provide insights
for discussions and
highlight uncertainty

3. Slide 3
Quick Background on Vermont

4. Slide 4
Marijuana prevalence in Vermont
higher than in rest of country
0%
2%
4%
6%
8%
10%
12%
14%
2002/2003 2013/2014
% using
marijuana
in past month
Year
US
Northeast
Vermont
Source: NSDUH

5. Slide 5
Marijuana prevalence in Vermont
higher than in rest of country
0%
2%
4%
6%
8%
10%
12%
14%
2002/2003 2013/2014
% using
marijuana
in past month
Year
US
Northeast
Vermont
Source: NSDUH

6. Slide 6
Marijuana is primary substance for
14% of treatment admissions
Source: Vermont Department of Health, 2014. Only includes those receiving
treatment at state-funded treatment facilities.

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How much did Vermont spend
prohibiting marijuana in FY 2014?
• In year after decriminalization, criminal
cases decreased 80%
– But total marijuana cases increased 20%
– Collected $200,000 in fines

8. Slide 8
• In year after decriminalization, criminal
cases decreased 80%
• Few incarcerated only for marijuana
– 5 in FY 2014
– 3 behind bars at one point
How much did Vermont spend
prohibiting marijuana in FY 2014?

9. Slide 9
• In year after decriminalization, criminal
cases decreased 80%
• Few incarcerated only for marijuana
• Net costs: $800,000 - $1.1 million
– For those ages 21+: $550,000 - $750,000
How much did Vermont spend
prohibiting marijuana in FY 2014?

10. Slide 10
The Legalization Discussion

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Extreme options
Commonly-discussed options
Middle-ground options—Small scale
Middle-ground options—Large scale
Report discusses 12 alternatives
to status quo supply prohibition

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Extreme options
Commonly-discussed options
Middle-ground options—Small scale
Middle-ground options—Large scale
Senate Bill 95

13. Slide 13
Extreme options
Commonly-discussed options
Middle-ground options—Small scale
Middle-ground options—Large scale
Senate Bill 241

14. Slide 14
Extreme options
Commonly-discussed options
Middle-ground options—Small scale
Middle-ground options—Large scale
House Committee Amendments to SB 241

15. Slide 15
Projecting Tax Revenues from
Marijuana

16. Slide 16
Tax revenue:
Many factors to consider
• Actions of other jurisdictions
– How long would Vermont be only east coast
jurisdiction that legalized production?
• Collateral effects
– E.g., effect on spending on alcohol and tobacco
and, hence, their taxes
• Other effects on tax revenue
– Tourism, employer taxes, productivity losses
• Focus here is on revenue from MJ sales

17. Slide 17
Approach for projecting effects on
taxes paid by Vermont users

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• Police enforcement
– Underage use
– Impaired driving
– Time/place violations (like open bottle laws)
– Residual black market
– Bootlegging (tax evasion)
• Regulatory costs
Cannot ignore offsetting costs

22. Slide 22
Washington forecasted spending
~$9 million on I-502, 2012-2015

23. Slide 23
Cost of regulation: Key points
• Regulation could be more expensive than
VT’s current (weakly enforced) prohibition
• For any “large-scale” legalization option,
both start up regulatory costs and on-going
costs could well be in low single-digit millions
of dollars per year
• Start up costs
– Incurred before sales generate tax revenue
– Many paid “in-kind” (extra work load)

24. Slide 24
When it comes to annual revenues,
think orders of magnitude
• About $1 million: Current prohibition cost
• Low to mid-single digit millions: Developing
and regulating large-scale options
• Tens of millions: Tax revenue from VT users
• Hundreds of millions: Tax revenue from out-of-
state residents if federal government does not
intervene and VT industry ramps up before
nearby states legalize

25. Slide 25
Other potential costs
• Increased use/abuse could create other costs
– Greater need for marijuana treatment
– Greater need for prevention messaging
– More impaired driving
– Costs to employers of juggling conflict with federal
drug-free workplace requirements
• All highly uncertain
– In some cases not even clear costs will exceed
savings

26. Slide 26
Giant wildcard: Legalization’s
effect on use of other substances
• Interactions on product/supply side also
unknown

27. Slide 27
Concluding thoughts
• Vermont should be commended for
seeking a rigorous study beforehand
• Uncertainty abounds
• There are many options
• All involve tradeoffs
• What option is “best” depends on
observer’s values/objectives