California Looks for Cash Under Proposal to Legalize Marijuana

California voters will decide today whether to legalize marijuana for personal use and defy the federal government to enforce anti-drug laws in the state.

Support for Proposition 19 has waned in polls, even as its predecessor, legalizing medical marijuana in 1996, has inspired referendums today in Arizona and South Dakota, and been adopted in 13 other states.

“If it passes, it sends a signal around the country that Californians think it’s time to change the law,” said Mark Baldassare, chief executive officer of the Public Policy Institute of California, a nonpartisan research group based in San Francisco, in an interview yesterday. “It would have some far-reaching consequences as far as discussion about legalizing marijuana in other states as well as at the federal level.”

The proposition would allow people 21 or older to possess and transport as much as an ounce (28 grams) of marijuana for personal use. It also would allow local governments to tax and regulate its commercial production, distribution and sale. High- quality marijuana sells for about $375 an ounce, according to a Rand Corp. study in July.

At stake is the potential for “hundreds of millions of dollars annually” in new revenue, according to the ballot language posted on the California Secretary of State’s website. San Jose, the center of Silicon Valley, and at least 10 more cities have measures on their ballots today proposing taxes on pot crops and sales if Proposition 19 passes.

Californians consume about 1 million pounds of pot annually, according to the state’s tax administrator, the Board of Equalization.

Waning Support

Enthusiasm for the marijuana proposal has fallen in the past month, with 42 percent of likely voters supporting it and 49 percent opposed, according to a Field Poll released on Oct. 31. Backers included billionaire investor George Soros, who contributed $1 million to support the effort.

U.S. Attorney General Eric Holder said the Justice Department would “vigorously” enforce federal law “against those individuals and organizations that possess, manufacture or distribute marijuana for recreational use, even if such activities are permitted under state law,” according to an Oct. 13 letter.

Legalizing marijuana might cut its price by as much as 80 percent, as growers shift from secret operations to legal production, according to Rand’s study. The Santa Monica, California-based research institute said the untaxed retail price of high-quality marijuana could drop to as low as $38 an ounce, the study found.

To contact the reporter on this story: Alison Vekshin in San Francisco at avekshin@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net.

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