Financial Regulatory Forum

ANALYSIS – California, other U.S. states eye marijuana tax to raise cash

By Kim Dixon and Lisa Lambert

WASHINGTON, March 30 (Reuters) – The color of money may soon turn a new shade of green as U.S. states across the country consider legalizing and then taxing marijuana to cure chronic budget problems.

California came the closest to taxing tokes last week by putting an initiative on its November ballot. The top marijuana-producing state could raise $1.3 billion annually, according to the California Board of Equalization, which collects taxes.

As the state struggles to close its multibillion dollar deficit, supporters say the legalization fight will be close, though the scope of potential conflicts with federal law is uncertain.

“If you can tax it, it’s just one more way to make money for the government,” said Linsey Isaacs, a 20-year-old rental agent in New York City, who does not smoke marijuana. “To me it’s better than cigarettes, healthwise, and if they can tax cigarettes, then I don’t see anything wrong with taxing marijuana.”

California’s current budget gap may be large at $20 billion, but it is not unique, and the outcome will be closely watched. The National Governors Association says the recession will not end in some states until 2012.

California probes credit rating agencies

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