The Tax that Criminalized Marijuana

At the turn of the 20th century this tax act turned Cannabis from a useful crop to an illegal substance.

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The history of cannabis in America goes all the way back to Jamestown. The country’s first settlement grew the plant for hemp needed to make ropes. Cannabis continued to be grown in the 400 years since, though its purpose shifted over time.

Before 1937, cannabis and its products (marijuana being one) were perfectly legal. In fact, the drug was not yet used recreationally, but was commonly used in medicines in the early days of pharmacy, though not always included on the label. This all changed at the turn of the 20th century.

A medicine bottle labeled "Fluidextract Cannabis Indica"
Bottle of cannabis ethanol extract. (Wikimedia Commons)

Americans began discussing what had previously been viewed as a useful crop as a harmful substance. The association of marijuana used recreationally with the influx of Mexican immigrants during the Mexican Revolution and Great Depression encouraged public sentiment against “marihuana,” as it was spelled back then. A September 28, 1935, article in The Saturday Evening Post raised concerns about marijuana’s dangerous influence in the wake of Prohibition repeal:

There are many states in which the police have no authority whatever to arrest either an addict or a peddler; that must be done by the comparatively small force of Federal men. There are likewise states which have no protection whatever against the rapidly growing sale and use of cannabis sativa, commonly known as marijuana, or hashish, and which grows as a weed in every part of America, particularly in the West.

Pretty Boy Floyd was alleged to have been crazed on marijuana when he aided in what now is known as the Kansas City Massacre. Give a Mexican smuggler enough of it and he will wade the Rio Grande, shooting as he comes, and caring nothing for the fact that he may be outnumbered four to one by border patrolmen. The gangster killer of today rarely takes a shot of cocaine to strengthen his nerves, but smokes a few marijuana cigarettes instead; they have greater effect.

By 1945 this magazine described marijuana as a “menace to the public welfare” in “Sleeping Pills Aren’t Candy” on February 24.

In April of 1937, congressmen Harry Anslinger proposed The Marihuana Tax Act of 1937. This act would require marijuana users, growers, distributors, or anyone planning “to acquire or otherwise obtain any marihuana,” to purchase a tax stamp. The drug had been a staple in medicines at the time and had not been limited by any federal regulations before 1937 (although 29 states had outlawed its use by 1931). The original act states that “Any person subject to the tax imposed by this section shall, upon payment of such tax, register his name or style and his place or places of business with the collector of the district in which such place or places of business are located.” Essentially anyone wishing to purchase a marihuana tax stamp would have to submit all of their personal information for government records.

A tax stamp for marijuana; marked with a green dollar bill face and the words, "Marihuana Tax Act of 1937"
The 1937 marihuana review tax stamp (Department Internal Revenue; Smithsonian National Postal Museum)

The law taxed marijuana at around $1 per ounce, or $17.95 today. The price, in addition to the forced self-reporting of anyone with a connection to the drug, discouraged its sale and use. The law was enacted on August 2, 1937, marking the day when unstamped cannabis became illegal in the United States.

The Tax Act led to the arrest of two men on its very first day, resulting in the first imprisonments due to possession and sale of marijuana. The law dictated that guilty individuals “shall be fined not more than $2,000 or imprisoned not more than five years, or both.” Samuel Caldwell was fined $1,000 and given four years’ hard labor for dealing. His client, Moses Baca, was sentenced to 18 months in prison.

The Marihuana Tax Act of 1937 were ruled unconstitutional in 1969 after the Supreme Court found it in violation of citizens’ Fifth Amendment rights. Requiring all marijuana users to identify themselves, the amount of weed they had, and where they got it from amounted to self-incrimination. The Comprehensive Drug Abuse Prevention and Control Act of 1970 (under which the Controlled Substances Act was passed) was put into action soon afterward, ensuring marijuana remained illegal and ushering in the beginning of the war on drugs.

The modern debate on the evils of marijuana seems to have turned. Today, 29 states have legalized medical marijuana and 11 have legalized weed for recreational use. Each of those states has their own laws and regulations surrounding the drug, including modern taxes.

Modern marijuana taxes to not act as a registry for all drug users but do create profit for states’ governments. The taxes obtained from weed in states that have legalized recreational marijuana rival those states’ taxes on alcohol sales. In Colorado in 2018, where recreational marijuana is legal, an ounce of weed costs $199.89. This price does not include the 2.9 percent sales tax, 10 percent special marijuana tax, or the 1 percent local tax that would add $27.79 to the price (not too far from 1937’s $17.95).  Colorado generated $266,529,637 in revenue from marijuana taxes in 2018 alone.

A bar graph showing how revenue from marijuana taxes and licensing fees increased over time in the U.S. state of Colorado, over the years between 2014 to the beginning of 2019.
In 2018, Colorado generated $266,529,637 in revenue from marijuana taxes. (Colorado Department of Revenue)

The Tax Act of 1935 did not explicitly make weed illegal, but it did give cause to arrest anyone without proper registration. This act began a spiral of legislation that did criminalize the drug (in addition to many others) and resulted in many people’s imprisonment. Taxes on marijuana today are not intended for incrimination, as individual users do not have to self-identify, and the stigma surrounding the drug has lessened in the 82 years since the tax act was passed. While federal legislation still condemns the drug as illegal, today marijuana can be purchased legally in many states — no stamp required.

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