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How Legalizing Pot in New York City Became a Farce

New York can’t abide illegal marijuana shops, but neither can it get its licensing up to speed.

Jason L. Riley, WSJ

Feb. 14, 2023 6:15 pm ET

The law of unintended consequences refers to government actions that have unanticipated outcomes. It’s a concept often ignored by short-sighted politicians and policy makers. And it’s why New York’s clumsy effort to legalize the recreational use of marijuana in the name of social justice has turned into a farce.

Two years ago, New York passed the Marijuana Regulation and Taxation Act and became one of nearly two dozen states that have authorized the sale of pot. Gov. Kathy Hochul has said that the law is about “creating jobs and opportunities” and “supporting small businesses.” Proponents estimate that legal marijuana sales will generate $4 billion over the next five years.

A “major focus” of the law, according to the state’s new Office of Cannabis Management, “is social and economic equity.” Hence, half of all retail licenses are reserved for minorities, women, distressed farmers, veterans and “individuals disproportionally impacted” by the war on drugs.

People with marijuana-related convictions get first dibs on the new permits, and hundreds of millions of taxpayer dollars will be directed toward helping them purchase and renovate storefronts to peddle cannabis products. The same lawmakers who refuse to expand education options for low-income minorities trapped in failing schools are eager to help former drug dealers get back in the game.

New York City’s first legal marijuana dispensary opened in December, but government bureaucrats aren’t known for their expeditiousness, and the licensing rollout has been pitifully slow. The upshot is the growth of a sizable black market of unregulated pot dispensaries, including the Jungle Boys weed shop across the street from City Hall in lower Manhattan. The store has been raided twice by police since opening in the fall, according to the New York Post. But “like most of the other roughly 1,400 illegal cannabis shops operating citywide, Jungle Boys’ operators were undeterred.” They restocked the shelves and reopened two weeks after the raids.

Like his counterparts in Chicago and Philadelphia, progressive Manhattan District Attorney Alvin Bragg has taken a lax attitude toward prosecuting violent repeat offenders, even as the city’s crime rate has risen. Yet now he says his office can’t abide unlawful pot shops. Last week, Mr. Bragg announced a new partnership with local law enforcement and elected officials to crack down on the illegal businesses. “It’s time for the operation of unlicensed cannabis dispensaries to end,” Mr. Bragg said.

But isn’t a crackdown on illegal dispensaries at cross-purposes with the equity aims of the new law? Proponents wanted to legalize pot in the first place because blacks and Hispanics are arrested for drug offenses at higher rates than whites. By design, many of the people operating these pot shops are waiting for licenses that are reserved for racial and ethnic minorities. If Mr. Bragg is serious about going after them, he will inevitably be targeting the same groups that were disproportionately targeted under the old law.

The reality is that even if New York manages to produce enough licenses to meet demand, the black market isn’t going away anytime soon. California approved a ballot initiative legalizing the sale of marijuana for recreational use in 2016, but high taxes and regulations have made it impossible for the legal pot market to compete with the illegal market.

The San Francisco Gate reported last month that thousands of legal shops in the state are expected to go out of business this year. “You can’t make any money in this market,” said a former owner of one of the state’s first dispensaries. The story explained that illegal pot farmers and dealers continue to proliferate and undercut legitimate retailers. The manufacture and distribution of marijuana remains a federal crime, but pot companies are still required to pay federal taxes on any income. Worse, federal law “blocks pot companies from deducting most business taxes from their federal taxes, making pot businesses pay an effective federal tax rate as high as 80%.”

Nor does the experience of other states bode well for New York’s social-justice agenda. Colorado and Washington state voted to make weed legal in 2012. Marijuana-related arrests fell in both states overall as expected, but racial disparities didn’t go away. “Although arrest rates declined for all races and ethnicities,” reads a report from Colorado’s Department of Public Safety, “the marijuana arrest rate for Blacks (160 per 100,000) was more than double that of Whites (76 per 100,000) in 2019.” Before pot legalization in Washington state, black arrests for marijuana-related offenses were 2.5 times as high as they were for whites. After legalization, black arrest rates swelled to five times as high, according to a 2019 study published by the National Library of Medicine.

Justice Louis Brandeis said that “states are the laboratories of democracy.” New York policy makers might try studying up on what’s been tried elsewhere.

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