The Case for Hemp-America has Handed this Profitable Market to Other Nations

By continuing to treat the harmless plant as a drug, the United States has handed over the profitable market to other nations.

August 9, 2009 – For reasons I don’t fully understand, Americans seem to have lost the common sense that has always been a hallmark of our culture. Once again, we seem to be routinely shooting ourselves in the foot by adopting public policies that run counter to our own best interests. A good example is outlawing the use of hemp, one of the most beneficial crops in the history of the world, by burdening it with unnecessary and restrictive regulation in the name of fighting the so-called war on drugs.

Hemp is a harmless plant that is the source of an almost endless list of benefits. Wikipedia notes that it can be used in everything from food products to clothes as well as having multiple industrial or commercial uses, such as “paper, textiles, biodegradable plastics, construction, health food and fuel.”

China, France and Canada are all major producers of hemp and, although more hemp is exported to the United States than to any other country, our government generally does not distinguish between marijuana and a type of hemp that is used only for industrial and commercial purposes.

The North American Industrial Hemp Council says, “The U.S. Drug Enforcement Agency classifies all C. sativa varieties (of hemp) as ‘marijuana.’ While it is theoretically possible to get permission from the government to grow hemp, DEA would require that the field be secured by a fence, razor wire, dogs, guards and lights, making it cost-prohibitive.”

The Marijuana Tax Act of 1937 “placed an extremely high tax on marijuana and made it effectively impossible to grow industrial hemp … (and) the Federal Bureau of Narcotics lumped industrial hemp with marijuana, as its successor, the U.S. Drug Enforcement Administration, does to this day.” As Groucho Marx famously quipped, “Those are my principles. If you don’t like them I have others.”

Other facts about hemp offered by NAIHC include:

» “Hemp has been grown for at least the last 12,000 years for fiber (textiles and paper) and food.”

» “Much of the bird seed sold in the United States has hemp seed (it’s sterilized before importation), the hulls of which contain about 25 percent protein.”

» “Rudolf Diesel designed his engine to run on hemp oil.”

» “Construction products such as medium-density fiber board, oriented strand board and even beams, studs and posts could be made out of hemp. Because of hemp’s long fibers, the products will be stronger and/or lighter than those made from wood.”

» “More than 25,000 products can be made from hemp.”

» “To receive a standard psychoactive dose (of hemp) would require a person to power-smoke 10 to 12 hemp cigarettes over an extremely short period of time. The large volume and high temperature of vapor, gas and smoke would be almost impossible for a person to withstand.”

» “Hemp fibers are longer, stronger, more absorbent and more mildew-resistant than cotton.”

» “Fabrics made of at least one-half hemp block the sun’s UV rays more effectively than other fabrics.”

» “Hemp can be made into a variety of fabrics, including linen quality.”

» “Hemp grows well in a variety of climates and soil types. It is naturally resistant to most pests, precluding the need for pesticides. It grows tightly spaced, out-competing any weeds, so herbicides are not necessary. It also leaves a weed-free field for a following crop.”

» “Hemp can yield 3 to 8 tons of fiber per acre. This is four times what an average forest can yield.”

The bottom line is that by treating hemp as a drug, the United States has effectively shut down one of the most profitable and useful crops in history and has once again essentially abandoned the market to other nations that have a more realistic attitude.

We are preventing our farmers from growing a crop that has almost unlimited uses. It’s cheap and easy to plant and cultivate, and could potentially rejuvenate the small farming industry in the United States. While spending billions of dollars in what has been an almost fruitless effort to keep small farmers on the farm, we also have been unwilling to simply let them do it for themselves by allowing them to cultivate perhaps the best cash crop they could grow.

By stubbornly refusing to change or adapt our thinking, we are once again preventing one of our own industries from producing an important product and leaving a major market to our competition. By Harris R. Sherline. Source.

Please also see:
Can Hemp Products Save the World?

 

Taxing Marijuana-How the The Tax, Regulate and Control Cannabis Act of 2010 Works

July 30, 2009 – California voters may soon get a chance to weigh in on whether marijuana should be legalized and taxed by the state. If enacted, this may help the state’s budget by providing revenue from a brand new source, while also freeing up money that previously went to enforcement efforts against marijuana growing. Of course, marijuana would still be illegal under federal law, but this may be a turning point in the legalization movement — the point where politicians desperate for tax revenues see dollar signs instead of prison bars when looking at the cannabis plant.

And make no mistake — this is not medical marijuana we are talking about. From the wire service report:

A proposed ballot measure filed with the California attorney general’s office would allow adults 21 and over to possess up to an ounce of pot. Homeowners could grow marijuana for personal use on garden plots up to 25 square feet.

Now, 25 square feet sounds like a lot, but it’s really only a plot five feet by five feet. Assumably, this was written into the ballot measure so marijuana (at least initially) wouldn’t be sown by agribusinesses in 1,000-acre fields. But even with the land-use restriction, the initiative is remarkable for the lack of other restrictions. No mention is made of “medical” or “medicine” or any of that — just “adults.”

There are even two ballot measures to choose from. The second one is even less restrictive:

The Tax, Regulate and Control Cannabis Act of 2010 would set no specific limits on the amount of pot adults could possess or grow for personal use. The measure would repeal all local and state marijuana laws and clear the criminal record of anyone convicted of a pot-related offense.

Bet that would save a few dollars on prisons. And even if these ballot measures fail, state legislators are introducing bills to do exactly the same thing. So, while it should not in any way be seen as inevitable, it now appears possible that California may soon legalize and tax marijuana, used for recreational purposes.

While the concept of taxing marijuana is a new one for most people to consider, it actually has a long history. The very first federal law dealing with (pun intended) marijuana was the Marihuana Tax Act of 1937. Earlier laws outlawing “narcotics” had left out marijuana (or, in the spelling more common at the time, “marihuana”), so this was a more specific law dealing only with cannabis (and hemp). It ostensibly levied a tax on marijuana, which was widely used in medical products of the day. The tax was pretty low (the base rate for a doctor was one dollar for a tax stamp, per year), but the penalties for not paying the tax were the real purpose of the law. The law did not make marijuana illegal, so what the feds would clap you in prison for was not ponying up the tax. This had to be softened during World War II, when hemp was necessary for military supplies (hemp ropes, before nylon became widespread) and the planting of hemp was actually encouraged by the federal government (as in the “Hemp for Victory” movie put out by the feds in 1942).

Later, in the 1950s, marijuana was flat-out made illegal at the federal level. And then, at the beginning of the 1970s, the Controlled Substances Act codified all illegal drugs, and superceded the 1937 Marihuana Tax Act.

But taxing illegal drugs, including marijuana, didn’t end there. The next iteration of taxing marijuana came as a result of individual states being annoyed at the federal government. I believe the first of these was Arizona, which (in the late 1970s and early 1980s) had to watch as the feds made a lot of money off the drug traffickers moving through their (border) state. In the 1980s, the big weapon used in the Drug War was property confiscation. So the federal Drug Enforcement Agency (DEA) would catch a semi truck full of bales of weed on an Arizona highway, and they would impound the truck. Later, they’d sell the truck in a government auction, and the DEA got to keep the money. Arizona was annoyed at being cut out of the profits, so they instituted a state tax on marijuana and other illegal drugs. This way, when the semi was auctioned, they could claim “unpaid taxes” on the cargo, and get their cut of the money raised. Many other states followed suit, and passed their own drug taxes for the same purpose — forcing the feds to share the spoils. They all sold (and some still sell) drug tax stamps for this purpose (Nebraska’s stamp unquestionably has the most creative design).

So, once again, the purpose of the tax was disingenuous. The states had no interest in making drugs legal, they just wanted a cut from any busts the feds made in their state. But now, for the first time, California seems to be seriously considering both legalization and taxation simultaneously — in other words, they are interested in the tax revenues themselves, rather than a back-door method of gaining windfall taxes from federal busts.

But I would caution the state lawmakers — and the people advocating for the new laws — to be conservative in estimating the revenue gained from these taxes. This is a by-product of the 100-year history of the Drug War itself. When you read in a newspaper that “$6 million worth of drugs captured” this dollar amount is often vastly overstated. And, even taking such estimates seriously, there’s a factor that most people don’t even take into consideration, which shouldn’t be ignored.

Say you want to estimate how much money California would make off a new marijuana tax. You come up with an estimate of how much pot is sold in the state (let’s call it $100 million, just for argument’s sake — since I have no idea what the actual figure is). You then estimate how much the market will grow, due to it now being legal. But then you’ve got to subtract anyone who grows their own at home, since they won’t be selling it to anyone (the tax is usually levied on point of sale, but I guess if it was a production tax they’d theoretically tax peoples’ back gardens as well). Finally, you come up with a figure.

But the big factor most people will miss is that the price of something which was previously illegal will go down if it is made legal. The price of moonshine during Prohibition was about ten times what hard alcohol sold for afterwards. Meaning, overnight, that “$100 million” market becomes “$10 million.” When something is illegal, most of the price is for the risk involved in producing it and getting it to the customer. Remove the risk, the price always drops. Always. Especially if a law passes without a “25 square foot” restriction, because then farmers out in California’s Central Valley will start growing massive amounts of marijuana (and as every economist knows, when the supply goes up, the price goes down).

So California should be careful when estimating what effect a (legal) marijuana tax would have on the state’s coffers. An easy way to avoid some of this problem would be to design the tax on “weight” rather than as a sales tax (percent of purchase price, in other words). Then the projections for anticipated revenue might be a little easier to make, because the price per ounce to the customer wouldn’t really matter, as the state would be guaranteed a certain dollar amount no matter how low it went.

A recent poll showed that 56% of California voters already approve of the concept of legalizing and taxing marijuana for personal, recreational use. Meaning that a ballot initiative has a fairly good chance of passing. I would just caution everyone to be realistic when making estimates as to how much tax revenue would be raised by doing so. California has such massive budget problems right now that a marijuana tax certainly couldn’t hurt the state’s cash flow. And, with the voters apparently ready to approve such a scheme, it looks entirely possible that it could happen. But overestimating the revenues expected could actually undermine the case for doing so. The advocates for legalization and taxation should be careful when drawing up their estimates, and keep their promises of tax revenue realistic, to better convince voters of the practicality of the idea. By Chris Weigant.