A Study of Marijuana Taxes Finds a Hungry Audience

By his own admission, Schar School Public Policy PhD candidate Muhammad Salar Khan had never ingested marijuana, but in the course of performing a study of the effects of taxes imposed on legal marijuana sales in Oregon, Khan communicated with more than 40 who not only ingest it but use it as a commodity.

“It came as a gentle surprise to find that those in the burgeoning business of legal pot are serious-minded, results-driven professionals attempting to overcome obstacles in a marketplace filled with misconceptions,” Khan wrote in a widely circulated op-ed published by the higher education news service, The Conversation. The op-ed, which was circulated by the Associated Press, Salon, Reason, Phys.org, and dozens of other outlets, was called, somewhat whimsically, “It’s High Time Someone Studied Marijuana Taxes—So We Did.”

Khan’s findings presented local authorities with a thorough analysis of the economic consequences of taxes on a rapidly expanding billion-dollar industry. Oregon, where recreational pot is taxed at 25 percent, is a compelling case study for other jurisdictions considering legalizing marijuana.

“Many people shifted to untaxed medical marijuana immediately after marijuana legalization passed in Oregon as you can see by the rise of medical marijuana applications post-taxation,” Khan observed. “Medical marijuana patients may also buy untaxed marijuana for friends and family, further cutting into the revenue raised.”

Cross-border purchasing and consumer response to possible tax changes also require policy consideration by public officials. Khan’s study—less whimsically titled, “Marijuana Tax Incidence, Stockpiling, and Cross-Border Substitution”—offers recommendations supported by rigorous data analysis.