Policymakers in Colorado are imposing a 15 percent wholesale and 10 percent retail tax on marijuana transactions. The impact of the tax rate is unclear, Bloomberg Businessweek reports. Washington state will impose a 25 percent excise tax on the production, processing, and final sale of legal marijuana, on top of the state sales tax of 8.75 percent.

In Colorado, the price of legal commercial-grade marijuana has doubled to $400 per ounce since the beginning of the year, when the law legalizing small amounts of recreational marijuana for adults 21 and over went into effect. That is double the price for medical marijuana at state dispensaries. Black market prices for high-grade marijuana range from $156 to $250 per ounce, the article notes.

The owner of a marijuana retailer in Colorado, Gregory Viditz-Ward, predicts the marijuana black market will surge due to the state’s tax rate.

Beau Kilmer, co-director of the RAND Drug Policy Research Center, suggests that states consider taxing marijuana based on the level of THC, the psychoactive ingredient in marijuana. “Just as some states differentiate among the alcohol levels of beer, wine, and spirits, you could set a tax based on the amount of THC,” he says.

State tax revenues from marijuana could be offset by a decline in alcohol taxes, if people end up drinking less due to marijuana use. If people consume marijuana and alcohol together, tax revenue could increase, but so could traffic accidents and other health costs, Kilmer notes.

Last April, the consultant hired by Washington state to set up and regulate its new marijuana market said the state was overestimating the amount of tax revenue that will be generated by marijuana sales. He predicted the potential tax revenue is likely to be less than half of the $450 million the state estimates as a maximum return.