What will California's Prop. 19 REALLY do?

I should say at the outset that I have been in favor of Proposition 19 in California (the proposition to legalize marijuana) for the following reasons, in roughly descending order:

1. Tax revenue source
2. Decreased drug-related violence here and in Mexico
3. Freeing up scarce law enforcement resources to focus on other issues with greater negative externalities (domestic violence, drunk-driving, etc.)
4. Decreasing prison overcrowding for non-violent drug-related offenses, such as personal use
5. Relative harm issues, as compared to legal drugs like alcohol and tobacco

But now I must admit that I am beginning to question those premises, at least the first two. The relative-harm argument hasn't changed, of course, but the first two reasons are now, in my view, suspect. Taking the revenue issue first, how exactly will that work? Who will pay taxes on something that is still, after all, a felony? Also, setting "socially-optimal" tax rates is tricky, as the current national debate amply illustrates. Set the rate too high, and you're just creating a black market-- and production and distribution channels for a black market are obviously well-established. Part of the reason we are running federal deficits right now is that, well, revenues are too low, and it is damned hard to predict what tax receipts will be when creating a prospective budget; too many unpredictable, exogenous shocks (9/11, the housing bubble collapsing) can and do occur to invalidate one's predictions.

Predictions for the revenue gain for the state of California are all over the map.  Given the difficulty of setting socially-optimal tax rates, I don't have a lot of confidence in the California legislature (which can hardly pass a budget as it is) in getting it right.  In addition, I have a problem in general with "sin" taxes: what is the social goal here, to disincentivize all use/sinful activity?  In that case, revenues go to zero.  Plus, the definition of "sin" changes over time; gambling used to be illegal, but now 39 states are hooked on gambling revenue from state lotteries.

As for violence, I think that passage of Prop 19 may have a beneficial impact, but that assumes that an enormous domestic supply will immediately spring up to undercut the Mexicans.  For reasons mentioned above, I don't see that happening, at least not as quickly as would be necessary to put the narco-terrorists out of business.

The Governator has been proposing ameasure that may be more viable in the real world: decriminalizing personal 5'x 5' grow rooms.  I think this may be a more workable solution.  The feds wouldn't even come into play this way, it would keep the small-time user out of the prison system, and it would in all probability soften demand for Mexican weed, at least some.

The important thing to remember is that none of the proposed solutions involving legalization will have any measurable impact on overall demand for pot; reports indicate that it is easier for underage kids to get pot than alcohol or cigarettes, and I am 99.9% sure that anyone who wants to find pot now can do so.

I welcome comments and feedback from readers on this issue.  Please, however, let's try to keep this issues-based, avoiding such notions as "absolute freedoms", etc.  The challenge is to find a solution to the problems listed above: drug violence in California and Mexico, mis-allocation of scarce law-enforcement resources, and prison overcrowding.