The Economic Benefits of Legalizing Weed

Although the Presidential election drew most of the attention in November of 2016, there were several other important decisions made at the polls as well: notably, several states held votes to determine the future of the legal cannabis industry in one form or another. Taking a leaf out of Colorado or Washington’s book, four states—California, Nevada, Massachusetts and Maine—decided to make marijuana consumption for recreational purposes legal. Florida, Arkansas and North Dakota voted to allow medical marijuana while Arizona defeated that move. All told, more and more states are moving to legalize marijuana (whether for medicinal or recreational use, or both), and the impact has already been tremendous. The legal changes have spawned a burgeoning industry of legal cannabis companies, including those which aim to research and develop cannabis-based medical products, those which are working to distribute and grow marijuana, and many others. All told, more than half of U.S. states have medical marijuana laws on the books, and nine states have legalized certain quantities of marijuana for recreational use as well.

The economic benefits of legalizing weed have already been apparent as the first states have moved to change their legal positions. Overall, legal marijuana could mean a big push for state economies and big bucks for both the state and the federal governments. Below, we’ll explore some of the key economic benefits of legal marijuana.

Impact on Tax Revenue:

Better than expected sales of marijuana in Colorado and Washington over the past several years have resulted in buoyant tax revenues. In 2015, Colorado collected more than $135 million in taxes and fees on medical and recreational marijuana. Sales in the state totaled over $996 million. Sales in North America grew 30%, to $6.7 billion, in 2016, and is projected to increase to $20.1 billion by 2021, according to Arcview Market Research. Local research supports this view as well; a report from the Colorado State University-Pueblo’s Institute of Cannabis Research recently found that the legal cannabis industry has contributed more than $58 million to the local economy, primarily through taxes and other fees. Should marijuana become legal on a federal level, the benefits to the economy could be exceptional: a report from cannabis analytics company New Frontier suggests that federally legal pot could generate an additional $131.8 billion in aggregate federal tax revenue by 2025.

That is the carrot that dangled before many states. California, which is much larger in size and population than Colorado, could exceed $15 billion in sales revenue and $3 billion in tax revenue, according to an April 2016 study by ICF International. A special senate committee in Massachusetts estimated tax revenues from marijuana sales in the range of $50-60 million. (See also: What Will Jeff Sessions Mean for the Marijuana Industry?)