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Legal marijuana is an all-cash business. That’s why it can’t beat the black market

Legal marijuana is an all-cash business. That’s why it can’t beat the black market
A grower attends to a crop of marijuana plants in Gardena on Dec. 27. (Richard Vogel / Associated Press)

To the editor: Missing from your editorial recommending against a state effort to cut taxes on marijuana businesses is any mention of the fact that legal marijuana is an all-cash business.

There’s hardly any incentive for a marijuana seller to report 100% of its sales and pay taxes on them. There’s little the state can do to track a marijuana business’ actual sales (and collection of tax) because there’s no electronic funds trail to audit.

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Unless and until the state can come up with a credit-card clearing system that’s shielded from the feds along with a state-created banking institution, marijuana will remain an all-cash business with essentially purely voluntary reporting.

David Birch-Jones, Palm Springs

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To the editor: Without question, raising prices works to reduce consumption. The efficacy of this marketing tool has been clearly demonstrated empirically, particularly with respect to alcohol and tobacco.

All hedonic compounds, from sugar to marijuana, should be taxed at the highest rates possible that do not support the formation of black markets. Careful crafting of flexible taxation systems is essential.

The federal Harrison Narcotics Tax Act of 1914 was not effective in either raising tax revenues or reducing consumption of cocaine and opium. The distribution of these drugs retreated to black markets that persist today.

Instead, regulators should be empowered to adjust tax levels perhaps quarterly as black market competition rises and wanes.

John L. Graham, Irvine

The writer, a professor emeritus at the UC Irvine Paul Merage School of Business, is author of the book “Spiced: The Global Markeing of Psychoactive Substances.”

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