High taxes and extensive regulation can make doing business, including providing a quality product at a low price, difficult to impossible. It looks like the New York state government is about to demonstrate this fact, as have some other marijuana-legalizing state governments before it, with the roll-out of its recreational marijuana legalization.
Burdened with high taxes and regulations galore, expect new legal marijuana stores to have a tough time competing against sellers in the established illegal market. In a Wednesday Reason article, J.D. Tuccille provides an overview of why legal recreational marijuana appears likely to fail in supplanting the illegal market in the state. Concluding his examination of the matter, Tucille writes:
A legal market with high taxes and overly stringent regulations is still a market in which people aren't arrested and jailed. Rules can be loosened to what people will tolerate, as they have been elsewhere. But New York officials have yet to learn that markets function based on the choices of participants. The wishes of government regulators who want to use them as social-engineering tools and ATMs don’t really matter. Marijuana markets will thrive so long as there are customers to be served. The question is whether they will thrive in the open under light taxes and regulations, or underground to escape the heavy hands of politicians.
Read Tucille’s article here.