Corvallis, OR: The imposition of taxes on adult-use retail sales of cannabis products is associated with temporary changes in purchasers’ behaviors, according to data published in the journal International Tax and Public Finance.
Investigators affiliated with Oregon State University and George Mason University assessed cannabis purchasing trends in Oregon immediately prior to and following the imposition of new retail taxes.
Researchers reported that the imposition of retail taxes was associated with a stockpiling of cannabis products just prior to policy’s enactment (e.g., customers purchased larger-than-usual quantities of untaxed medical cannabis products), as well as with an increase in cross-border substitution afterward. "[I]n response to the tax-induced price increase in Oregon, it appears that proximity to the Washington recreational market caused some consumers in Oregon and in Washington to substitute Washington marijuana for Oregon marijuana," authors concluded.
A 2018 study published in the journal Addiction concluded that most consumers are willing to pay higher prices overall for cannabis products available in the legal marketplace, but that excessive taxation on these products – specifically those that drive marijuana’s total price above $14 per gram – induces many buyers to return to the illicit market.
For more information, contact Paul Armentano, NORML Deputy Director. Full text of the study, "Marijuana tax incidence, stockpiling, and cross-border substitution," appears in International Tax and Public Finance.