Higher taxes and prices may reduce legal marijuana consumption, but nearly 90% of the estimated decline could be offset by consumers switching to illegal products, according to a new study published in Health Economics.
Researchers from The Ohio State University and Chosun University surveyed 1,525 U.S. adults aged 21 and older who reported using recreational marijuana during the previous 30 days. Participants completed nine hypothetical purchasing exercises involving legal flower, illegal flower, edibles and marijuana vape cartridges.
The scenarios varied the products’ pretax prices, THC levels and tax rates. Participants were also randomly assigned to scenarios involving taxes based on product price, weight or THC potency.
Researchers found that higher pretax prices and tax rates significantly reduced both the number of marijuana products participants selected and the total amount of THC they would consume.
A 10% price increase was associated with a roughly 3% reduction in the consumption of legal flower, a 3% reduction for illegal flower, a 2% reduction for edibles and a 4% reduction for cartridges.
However, legal and illegal flower were found to be substitutes, meaning consumers became more likely to choose illegal flower when the price of legal flower increased.
Based on the study’s estimates, a 10% increase in legal marijuana prices would reduce THC consumption from legal products by approximately 33.5 milligrams while increasing THC consumption from illegal flower by 29.7 milligrams. Researchers said this means approximately 89% of the estimated reduction could be offset by purchases from the illegal market.
“Given the sizable illegal market, a large portion of the consumption reduction due to taxes may be offset by switching to illegal products,” researchers said.
The study also found that increasing tax rates from the equivalent of 20% to 60% of pretax prices progressively reduced consumption. Raising the rate from 60% to 80%, however, did not produce a statistically significant additional reduction.
The type of tax used did not significantly affect overall marijuana or THC consumption. Potency-based taxes did reduce participants’ preference for higher-THC products, while price-based taxes further discouraged the selection of more expensive products.
Higher THC levels were associated with greater consumption. Compared with the lowest-potency options, medium-low to high THC levels increased the number of units selected by between 13% and 25% and increased total THC consumption by between 72% and 197%.
Researchers said the findings indicate that potency taxes may shift consumers toward lower-potency products, even if they do not reduce overall consumption. They also said THC caps could directly reduce projected THC intake.
The results were based on hypothetical purchasing decisions rather than observed dispensary transactions. Researchers also noted that although participants were recruited from a nationally representative panel, statistical weights were not applied to the analysis, potentially limiting how broadly the findings can be generalized.
