The Issues Behind Issue 3 in Ohio

August 4, 2017

Issue 3, also known as the Ohio Marijuana Legalization Initiative, was defeated by a significant margin in the polls last Tuesday, with 64.1% in favor and 35.9% opposed. If passed, the Ohio constitutional amendment would have legalized the sale and use of both recreational and medical marijuana and created 10 facilities with exclusive commercial rights to grow the substance. It sounded ahead of its time. And it was. It sounded like an oligopoly. And it was.

Therein lay the problems.

Issue 3 was quite liberal – too liberal – compared to the standards set in states that have legalized marijuana thus far. In one fell swoop, this legislation would have permitted marijuana purchases and consumption by medical patients and recreational users, whereas most states that have legalized marijuana have begun by legalizing it for medical use only, and then eventually (if at all) progressing to recreational.

For example, in progressive California, medical marijuana has been legal for nearly 20 years but the state has yet to adopt a policy legalizing recreational marijuana. In liberal Oregon, there was a 17-year gap between the legalization of medical marijuana (1998) and recreational marijuana (2015). Though nearly half the states have legalized medical marijuana, recreational marijuana still has an uphill battle to climb in most areas.

Ohio is a swing state, relatively resistant to change and not typically at the forefront of progressive politics. This state was a poor launch point for a forward-thinking joint medical-recreational marijuana measure, and as such, it failed.

What´s more, Issue 3 was designed to create a state-sanctioned oligopoly, locking in 10 Marijuana Growth, Cultivation and Extraction (MGCE) facilities backed by wealthy, even famous, investors who would have been granted indefinite and exclusive rights to commercially produce marijuana for Ohio consumers and patients had Issue 3 passed.

The amendment would also have granted a permanent low tax rate of 15% to cultivators and only 5% of retail sales. These rates would have generated relatively few benefits for the state compared to the much higher tax rates levied by other states with legalized marijuana, such as Washington, whose tax rate was recently reduced from 25% at each point of sale to a flat tax of 37%.

While a low tax rate might have meant lower prices for consumers, in order for the public to benefit, cultivators, manufacturers and retailers would have been required to pass on savings to the final consumer. With doubts circulating about potential collusion among the 10 cultivating facilities, the Ohio public likely did not trust that purchase prices would reflect the major discount that these facilities were receiving on their tax bills. 

Voters do not appear to have seen the cost of having a powerful oligopoly with exclusive production rights and low taxes outweighing the benefit of legalized marijuana.  According to pre-election polls, Ohioans generally support the legalization of medical marijuana, and some indicate they support recreational as well. Now that monopolies have been explicitly banned from the state´s constitution by Issue 2, and voters have made it clear that they are not interested in making rash decisions with their marijuana policies – those hoping to have marijuana legalized in the state would be wise to consider the multiple stumbling blocks that arose around Issue 3 and its campaign. 

Smart future legislation will be moderate – for example, only including a provision for medical marijuana for the time being. It will incorporate a fair tax rate and – with no other choice – will be sure to allow for market competition.

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