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Originally published March 21, 2012 at 8:09 PM | Page modified March 21, 2012 at 11:14 PM

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State: Potential I-502 pot revenue double what supporters predict

A state analysis says an initiative to legalize marijuana could raise at least $560 million a year in new taxes.

Seattle Times staff reporter

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A marijuana-legalization initiative on the November ballot could raise at least $560 million a year in new taxes — well more than double what the Initiative 502 campaign itself had predicted.

That estimate, produced this week by the state Office of Financial Management (OFM), suggests that a legalized marijuana system would raise at least $130 million more a year in taxes than the current state liquor monopoly.

But I-502's fiscal impact also appears to be based on guesses, because no state has legalized and regulated marijuana for recreational use. The state analysis, a fiscal note for lawmakers, is the first independent attempt to pin down the numbers since I-502 qualified for the ballot.

It briefly addresses one unanswered question should I-502 pass: What would the federal government do? The analysis said revenues would be "adversely impacted" if federal authorities cracked down, as they threatened to do when California voters were mulling legalization in 2010. Marijuana is illegal under federal law.

The initiative, the first marijuana-legalization measure on a statewide Washington ballot, has drawn national attention because of a roster of supporters that includes two former U.S. attorneys, an FBI supervisor, judges and public-health experts.

It would legalize and heavily tax 1-ounce sales of marijuana to people 21 and over from state-licensed stores. Most of the revenue — at least $433 million the first full year — would come from the 25 percent surcharge at each step from grower to retailer, the OFM estimated. Business and sales taxes would raise an estimated $130 million more.

The analysis doesn't yet estimate revenue from newly legalized hemp production, or cost savings from decriminalization of small amounts of marijuana. A fuller analysis is under way.

But this analysis provides a guesstimate of what a legal marijuana industry might look like. It estimates 100 state-licensed growers supplying more than 300 marijuana stores that — based on federal drug-use surveys — would sell 187,666 pounds to at least 363,000 customers.

But the state analysis includes a second scenario, with 10 percent higher consumption. In that case, the total tax revenue would be $606 million. By fiscal year 2017, the revenue could be near two-thirds of a billion dollars.

Regardless, the state estimates are far higher than the $215 million that I-502's campaign estimated would be raised from the excise taxes. Campaign director Alison Holcomb said those estimates were based on a previous legislative proposal, which predicted lower consumption rates.

"The campaign has always wanted to be conservative in the estimates on the revenue because we honestly don't know what a legal marijuana market will look like," said Holcomb, previously the drug-policy coordinator for ACLU of Washington.

The analysis was prepared by Gov. Chris Gregoire's budget staff, but Gregoire does not support I-502, said spokeswoman Karina Shagren.

"This doesn't resolve the conflict with federal law," said Shagren.

Gregoire instead has petitioned to reclassify marijuana from a federal Schedule I drug to Schedule II, allowing it to be prescribed and sold in pharmacies for medical use.

Thus far, opposition to I-502 is led by a group of medical-marijuana patients who say the initiative's proposed driving-under-the-influence provisions would make it impossible for many patients to legally drive. That group, No on 502, had raised no money as of late February.

I-502 has raised $1.2 million since last May, but spent nearly $760,000 on paid signature gathering to qualify for the ballot, according to public-disclosure reports.

Jonathan Martin: 206-464-2605 or jmartin@seattletimes.com. On Twitter @jmartin206.

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