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WARNING!!! Legalizing pot will make income inequality a lot worse

Anyone who favors more states legalizing pot, or a federal law making it legal nationwide, needs to be aware of and prepared for some of the very predictable adverse results. Notably, that it will exacerbate income inequality.

For the record, I am in favor of legalizing marijuana. And not because I support marijuana use (I don't) but because I believe in more personal liberty.

Legalizing marijuana will have a number of ill effects: Marijuana addiction will go up. Marijuana-related DUI incidents will spike, as they already have in Colorado.



A man smokes a marijuana cigarette during the Colorado 420 Rally at Civic Center Park in Denver, Colo.
Helen H. Richardson | The Denver Post | Getty Images
A man smokes a marijuana cigarette during the Colorado 420 Rally at Civic Center Park in Denver, Colo.

To be clear, none of the problems are serious enough to warrant keeping marijuana illegal. But the one we need to talk about is income inequality. Here is how legalization will widen the chasm between rich and poor:

1. States will choose the winners. Licenses to sell cannabis in any form are not exactly easy to come by — and the states decide who gets them and how many will be awarded in total. When the government controls the sole legal path to entry into any industry, those who are deemed worthy of government approval get a major economic and political advantage over many, many others. Eventually, the financial gains allow those businesses to influence the regulation and often cut off potential newcomers to that industry. It's all a key part of what we call "regulatory capture" — you see it in everything from liquor licensing to the issuance of taxicab medallions.

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In other words, state control of industry almost by definition concentrates wealth in the hands of a lot fewer people than the total number of people with the ability and desire to get into that industry.

Result? More inequality.

2. More pot smoking means more unemployment. A lot of experts believed that when Colorado legalized pot, a big number of casual users from out of state would be the biggest source of revenue for the marijuana businesses. But the opposite has turned out to be the case.

Colorado's pot market is dominated by a small number of state residents who are very heavy users. The Colorado State Department of Revenue just reported that the top 20 percent of marijuana users are using more than two-thirds of the cannabis supply.

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The same study shows that only 9 percent of Colorado residents are using marijuana at all, so we're talking about fewer than 2 percent of the state's population consuming more than 66 percent of Colorado's pot.

Now THAT's inequality!

And it's also likely to be economic bad news for those 2-percenters. A study published this year by The National Survey on Drug Use and Health showed that people with drug addictions are at least twice as likely to be unemployed than those who aren't.

Unless the majority of the people who do succumb to marijuana abuse and addiction are already in the 1 percent, their economic descent will only add to economic inequality in the states that legalize pot.

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Former Congressman and recovering addict Patrick Kennedy wrote earlier this week about the hundreds of letters he's received from middle class families who lost just about everything as they were forced to dig deep to pay for marijuana addiction treatments for their children and other family members.

Demand for admission to Colorado's existing drug addiction has soared since pot was legalized, prompting some of the leading centers to begin major new expansion programs.

Again, that's their choice and they've had fair warning. And the same is true about alcohol addiction, which has been a job killer for centuries.

But everyone needs to be prepared for this likely outcome: Some new millionaires will be created and some new wealth will be distributed. But lots of that wealth will also be concentrated at the top, and there will also be a new cause of financial destruction for middle and lower classes.

Will marijuana legalization destroy our society? Of course not. But like any new enterprise, it will reward the harder working and lucky among us much more than it will spread the wealth. And that's this conservative's best argument for it.

Commentary by Jake Novak, supervising producer of "Street Signs." Follow him on Twitter @jakejakeny.