500% tax is isn't 4x revenue. Either the consumer pays the tax, so its 4x the product cost, or the vendor pays it, and prices the tax into the sale price, so the tax us 83% of revenue.
Take an example: water costs 2cents/gallon. a 500% tax would make water 10cents a gallon. That would be enough to promote agressive conservation, but not prohibitively expensive.
Soda costs <$1/quart at grocery, less at wholesale. But if you buy it at a restaurant, you pay >$1/pint, for 500% markup. Yet it's not prohibitve, because the baseline is sooooo cheap.
Municipal water costs in the US average around .0015 cents a gallon. Flushing your toilets with .0075 cents per gallon would not be prohibitive, growing crops with .0075 cents per gallon water would be. However, far more water goes to growing crops than flushing toilets.
PS: There are actually huge swings in water costs in different areas, which does impact water use significantly.
growing crops with .0075 cents per gallon water would be
Only because everybody else is growing with 0.0015 cents a gallon. If everybody was growing with 0.0075 cents per gallon, food would be more expensive, but we wouldn't suddenly be unable to feed ourselves.
All things being equal if water averaged .0075 cents per gallon it's because there was less of it. So, we would still use some of it to grow crops, but we would not be growing as much food.
PS: We are used to abundance, but there really are hard limits out there.
I don't know how much you pay for water in your house, but I know how much I pay. 5x increase would be very substantive expense for me, coming very close to "prohibitively expensive".
The point is that once there is no legislation to stop it, someone on minimum wage would be able to buy as much weed as he's able to use without making a noticeable dent on his incomes.
A lot of the world, including the country I live in, believes that products that are harmful to the society should be taxed to discourage their use. Harmful products typically include things like alcohol, tobacco, sugary drinks and candy. If marijuana would be legalized, it would certainly fall in that category. (It's important to note that a lot of the people supporting legalization don't think that marijuana is good, it's just that legalization would be immensely less bad than the present situation.)
As such, as I see it, the question of how much tax should marijuana have on it depends mostly on how much it can be taxed while still killing the business of the black market sellers.
And what is 500% tax? You pay 4x your revenue for the right to grow marijuana? It's not a tax then, it's prohibitive fine.