One response to the above is to say, “Let’s get to work now paving the way for Congress to implement one of these clever tax strategies.” Others might instead say, “That’s a bridge too far. I just don’t trust Congress to pass a legalization bill that delivers dynamically adjusting taxes clever enough to prevent an alcohol-style legal marijuana industry from exploiting the compromised self-control of the minority of high-frequency users.”
Fortunately, the range of options is not limited to either just preserving the status quo or jumping all the way to an alcohol-style legalization. There are many intermediate options, including restricting production and sale to small, nonprofit co-ops whose charters obligate them to meet only existing demand and not to promote greater use.
My colleagues and I have written about such options elsewhere, but it is worth noting here one that preserves — indeed leverages — most of the character of the alcohol model while doing a much better job of protecting public health than any of the state models implemented to date.
The main reason for wanting to adjust taxes over time is to control prices. If Congress cannot delegate tax-rate-setting, perhaps it would be willing to delegate price-setting. Among the various ways to implement this would be following the dictum that “marijuana should be regulated like alcohol” in the sense of having three distinct tiers of producers, distributors, and retailers; in this case, a government agency would be the only authorized distributor.
That agency would be the sole buyer from a competitive, licensed, private industry of legal producers, and the sole seller to licensed retail outlets. If desired, the licensing could still be handled by the states, subject to minimum federal standards. (Some favor replacing brick-and-mortar retail stores with direct-mail-order delivery to customers; under that scheme, the government agency would be the sole seller to those individuals.)
The agency would be a monopolist and so could — with the guidance of a public-health board — adjust prices at will to strike a balance between minimizing the black market and minimizing abuse. It could adjust relative prices of different product forms, potencies, and the like, to nudge people toward safer forms. Indeed, when warranted it could more than nudge. For example, if a scientific advisory board concluded that butane hash-oil extracts posed unacceptable health risks that extraction with CO2 did not, it could sell only CO2-extraction products.
Likewise, the agency could set the wholesale price somewhat the way a public utility does, ensuring that producers earn a fair and reasonable profit — but not more. The net revenues from selling at much higher prices than producers are paid would produce revenue for the government just as taxes would, even though technically there would be no (federal) taxes.
Some might argue that government operations can be inefficient. This is true, but when the societal problem involves prices falling too low, inefficiency is not a paramount concern. Likewise, nervousness that government will overreach (also a valid concern) can be partially assuaged by noting that many experts on alcohol policy believe the “Nordic model” of state control leads to substantially lower rates of alcohol abuse than does the private-profit model.