High Stakes: A Call to Legalize Marijuana

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Oakland, CA

California Desperately Needs Tax Revenue, Prompting Some to See Green in Making Grass Legal

(CBS)  A high-stakes political battle is underway in the cash-strapped state of California. At issue is the narrowly-defined liberty people have there to grow and sell a certain plant . . . and the desire of some folks to have the state government TAX it. John Blackstone reports our Cover Story:

In Oakland, Calif., Richard Lee runs a string of businesses, from coffee shops to glass blowing that are helping revitalize the once-decaying downtown.

But Lee's business empire is built on an unusual foundation: Selling marijuana  In the back of his Blue Sky Coffee Shop there's a steady stream of cash buyers, and not just for coffee. "In the front you get the coffee and pastries, and in the back you get the cannabis," Lee said.

A salesman told customers, "You're welcome to pull the bags out and smell the herb as you like." What's going on here is illegal under federal law, but permitted under California law that since 1996 has allowed marijuana for medical use. A dozen other states have similar laws. One customer named Charles said pot is exactly what his doctor ordered.

"So that's what relieves my anxiety and allows me to cope and feel good," he said.

Lee has dubbed his Oakland neighborhood "Oaksterdam" . . . with a nod to Amsterdam and its liberal drug laws. His goal is to make this a tourist destination, with marijuana its main attraction. "Does that worry people around here?" asked Blackstone.

"No, people around here love it 'cause they see how much we've improved the neighborhood," Lee said.

Next door to where Lee sells marijuana, Gertha Hays sells clothes. She says the dispensary brings people from all walks of life. "There's no particular pothead," she said, "so everyone comes over there."

"So these aren't just druggies in there?" Blackstone asked.

"No, not at all. If you look and see who comes up and down thethe block you'll see it's so diverse," Hays said.

Part of the Oaksterdam neighborhood is a nursery growing a cash crop: Medical marijuana is now estimated to be a $2 to 3 billion business in California. "Yeah, there's a lot of people making a lot of money," lee said.

(CBS)
There are now several hundred medical marijuana dispensaries in California . . . and much more marijuana being sold on the street. "We estimate, overall, [the] California cannabis industry is in the neighborhood of around $15 billion," lee said. While there is disagreement over the real size of the marijuana market it's big enough to have captured the attention of lawmakers trying to fill a huge hole in the state budget. Assemblyman Tom Ammiano is pushing legislation to legalize pot so the state can inhale new taxes.

"I thought it was high time, no pun intended, for this to be on the table," Ammiano said. "I'm trying to beat everybody to the punch with the jokes, because I get a lot of 'em," he laughed.

There are many who ridicule the idea, but the state tax board estimates Ammiano's proposed tax of $50 an ounce could bring in $1.5 to 2 billion a year.

"We find that highly unlikely," said Rosalie Pacula, of the Rand Drug Policy Research Center. She says California is likely to be disappointed by the revenue raised on marijuana that now sells for about $150 an ounce.

"If you try to impose a tax that is that high, you have absolutely no incentive for the black market to disappear," she said. "There is complete profit motive for them to actually stay."

The tax proposal, though, has started an unusual political discussion. According to one poll, 56 percent of California voters say marijuana should be legalized and taxed. Even California's Republican governor has not snuffed out talk of legalization.

"No, I think it's not time for that, but I think it's time for debate," Gov. Arnold Schwarzenegger said. "All of those ideas for creating extra revenues, I'm always for an open debate on it."

Check out reports on the debate over legalization in CBSNews.com's special section "Marijuana Nation."