Colorado’s marijuana legalization experiment is making pot a lot cheaper

That’s good news for consumers — but not very good news for taxes.

Updated by German Lopez

Good news for marijuana enthusiasts: Legalization definitely seems to make your pot a lot cheaper. 

According to new data from the Colorado Department of Revenue, the wholesale price of pot has plummeted by roughly 22 percent since marijuana sales were first legalized in the state in 2014 — from $1,876 per pound to $1,471. And that’s down even further from a brief post-legalization spike, caused by a supply shortage, that drove pot prices to nearly double — at $2,865 per pound — of what they are today. For reference, the wholesale price of pot could reach as high as $5,000 per pound before legalization.

This likely isn’t the end of the price drop. Jon Caulkins, a drug policy expert at Carnegie Mellon University and co-author of Marijuana Legalization: What Everyone Needs to Know, estimates that the price could eventually hit just $30 or $45 per pound once mass production really kicks in. After all, pot’s price, even in Colorado, still has to account for the fact that marijuana is still illegal at the federal level and 42 states — meaning it still can’t be mass produced in most of the country.

Experts have long predicted the price drop. Mark Kleiman, a drug policy expert at the Marron Institute at New York University and also a co-author of Marijuana Legalization: What Everyone Needs to Know, has frequently argued that a legal marijuana joint should cost no more than, say, a tea bag. Both are, fundamentally, just plants. So once all the barriers put up by prohibition are dismantled — from bans on marketing to police raids that tear down large marijuana farms — and mass production can take root, the price of pot will likely plummet. 

For pot consumers, this may come as good news. But there are reasons, from taxes to public health concerns, to not go out celebrating a lower pot price just yet.

Pot’s price drop comes with risks and benefits.

The big risk: If marijuana is more affordable, chances are more people will try it and use it. While marijuana use is not necessarily bad by itself, more use generally means more people may abuse or overuse the drug — to the point that they may become unable to focus on their family, career, or studies. And the research has linked pot to some risks, including respiratory problems if smoked, schizophrenia and psychosis, car crashes, lagging social achievement in life, and perhaps pregnancy-related problems.

The falling price drop, as Stanford University drug policy expert Keith Humphreys explained at the Washington Post, also means that states may get less tax revenue from marijuana than they hoped: Most states that have legalized so far have done so by taxing pot as a percent of its price. So if the wholesale price is $30 or $1,400 per pound instead of $2,800, a percent of that is obviously going to get you less in tax revenue. The only way a state could make up for that is by massively increasing pot use, which, again, may have undesirable public health outcomes. (This is why some drug policy experts have argued that the best way to tax pot may be through a flat price per ounce, which is what California plans to do.)

At the same time, better access and affordability also mean that responsible pot users will be able to obtain the drug with few problems.

Since marijuana consumers will be able to legally access weed, the black market for pot will fall apart over time. This is perhaps the biggest benefit to legalization from a public safety standpoint: It helps eliminate a big source of money for drug cartels — what was formerly about 20 to 30 percent of drug export revenue, depending on the study. That means these cartels and other criminal groups that got revenue from marijuana sales will be less able to carry out their violent operations around the world.

Will this eliminate drug-related violence? Probably not. Drug trafficking organizations will likely try to shift to other sources of revenue, such as cocaine and heroin. But since pot is such a huge market, its legalization likely weakens violent criminal groups and reduces drug-related violence — even if it doesn’t eliminate both.

All of this is to say that, like any drug policy change, marijuana legalization and the price drop it causes will produce pros and cons. Whether those pros outweigh the cons is something we’ll see over time.