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California Stations Reject Ad Calling For Pot Legalization

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Three television stations in San Francisco and Los Angeles have rejected an ad promoting the legalization and taxation of marijuana, set to run on consenting stations and cable networks in the state beginning Wednesday.

Two ABC affiliates joined one NBC station in the decision to reject the spots. California Gov. Arnold Schwarzenegger, meanwhile, has called for a debate on legalizing marijuana.

"I think it's time for a debate," he said in May. "And I think that we ought to study very carefully what other countries are doing that have legalized marijuana and other drugs, what affect it had on those countries, and are they happy with that decision."

KABC in Los Angeles and KGO and KNTV in San Francisco apparently aren't interested in such a debate. "How can you debate it if they won't air both sides?" wondered Bruce Mirken, a spokesman for the Marijuana Policy Project, which is behind the ad buy that he called "modest but not trivial."

The ad will still be seen on other Bay Area and L.A. stations as well as in San Diego, Fresno, Santa Barbara, Sacramento and elsewhere in the state. "We haven't had any problem with cable, so one way or another we're going ahead," said Mirken.

The respective station managers did not return calls requesting an explanation as to why the ads were rejected.

"Standards rejected the spot. Unfortunately we will not be able to run the creative," wrote Michael Friedman of KNTV, the NBC affiliate in San Francisco, to an MPP representative. Friedman didn't return a call.

At KABC in L.A., the ad was rejected for purportedly encouraging marijuana smoking. Mirken spoke to station manager Arnie Kleiner, who didn't return a call from the Huffington Post. "His feeling wasn't that the ad was promoting a change in the law, but that it was promoting marijuana smoking," said Mirken, adding that Kleiner told him, "I'm not going to advocate the smoking of marijuana. Marijuana is illegal."

The ad makes the case that it shouldn't be. Instead of criminalizing marijuana, it should be taxed to help ease the state government's budget crisis, says a woman in the spot.

"The governor and the legislature are ignoring millions of Californians who want to pay taxes," says the woman. "We're marijuana consumers. Instead of being treated like criminals for using a substance safer than alcohol, we want to pay our fair share."

State Assemblyman Tom Ammiano of San Francisco has introduced a bill that would legalize, tax and regulate marijuana and there is a possibility voters may be asked to weigh in through a 2010 ballot proposition.

Taxing pot could pay for 20,000 teacher salaries per year, the ad claims, by raising $1.3 billion. The source of the revenue figure is Betty Yee, chairwoman of the State Board of Equalization, which oversees taxation.

One way to estimate the revenue that could come in the future from pot is to look at the tax stream that's already flowing thanks to legalized medical marijuana. In the fall of 2006, California clarified to its cannabis dispensaries that they were, in fact, responsible for paying its 7.25 percent sales tax, and had been since 2005. (Depending on the jurisdiction, some clubs are also required to add on a bit for local and county taxes.) Some club owners, backed by Americans for Safe Access, an industry advocacy group, had argued that, as quasi-pharmacies, their businesses were exempt, a line of reasoning dismissed by the state. Others, such as Steve DeAngelo, co-owner of Oakland's Harborside Health Center initially opposed the tax but came to support it, arguing that the perennially underfunded state would get addicted to the tax dollars generated by its pot clubs.

Harborside is charged an 8.75 percent tax, including the local tack-on. With revenue of around $1 million per month, its annual sales-tax bill comes in at something like $875,000 per year. And that's just one shop. Yee told me that there's no way to break out exactly how much money the state is getting from pot clubs because it doesn't require them to state on their tax forms what product they sell. ("Regardless of legal status, anyone can get a seller's permit," she explained.)

However, she did release the tax records of some clubs that had been raided by the federal government, noting that because they employed sizable numbers of people, they also paid state and federal income and payroll taxes. The Compassion Center, licensed by Alameda County, paid $3 million before being shuttered in October 2007 by the DEA. Nature's Medicinal, licensed by Kern Country, paid close to $1 million in 2007, which included $203,000 in state and federal income taxes, $365,000 in payroll taxes, and $427,000 in sales taxes. The Compassion Center employed and provided health benefits to fifty people; Nature's Medicinal twenty-five. (The demise of the latter wasn't universally deplored by the medical-pot community, however: It's alleged affinity for high-powered weaponry didn't jibe with the pacifist vibe the industry espouses.)

Focusing merely on the sales tax misses the broader effect on the treasury, as employees in the expanding industry themselves cough up payroll and other taxes. In the case of Nature's Medicinal, sales tax made up 42 percent of total taxes paid.

Even if that estimate is wildly overblown, the state is clearly already enjoying the tax money it gets from marijuana: a special notice sent to clubs by the Board of Equalization assured sellers they "may decline to provide information on products sold due to concerns about self-incrimination."

A November 2006 report by the City of Oakland's Measure Z Oversight Committee came up with similar figures. It estimated that Californians consume between $870 million and $2 billion in medical marijuana per year, generating sales-tax revenue between $70 million and $120 million. In 2004, when Oakland's clubs were thriving, it took in, according to city records, $2.3 million in taxes on more than $26 million in revenue. As the feds swept through, that dropped, in 2006, to just $477,000 in taxes on $5.5 million in revenue. Two million dollars pulled from an annual city budget of about $900 million isn't exactly spare change.

Expanding the taxation from medical marijuana to everyone would yield hundreds of millions of dollars more. The National Survey on Drug Use and Health reports that some two million Californians smoked marijuana in the last month. Given that it's a federal-government survey asking people about illegal behavior, the number could be a gross underestimate.
The effort to provide the state government with pot-tax revenue has been a risky one for all involved, but Obama's Justice Department has announced that it will not raid pot clubs that operate within state laws. That wasn't the case under President Bush.

Harborside opened the center in October 2006, on a day that three other clubs in the Bay Area were raided. "We had to decide in that moment whether or not we were really serious about this and whether we were willing to risk arrest for it," said DeAngelo. "And we decided we were gonna open our doors. And we did, and we haven't looked back since. The only way I'll stop doing what I'm doing is if they drag me away in chains. And as soon as they let me out, I'll be back doing it again."

The latter half of this article is adapted from Ryan Grim's new book, This Is Your country On Drugs: The Secret History of Getting High in America. He'll be reading Wednesday evening in New York at The Tank.