Report Finds Legal Cannabis Could Bring Texas $500M In Annual Tax Revenue

Legalizing cannabis in Texas could bring the state more than half a billion dollars in new tax revenue each year, according to a report released last week by a leading cannabis policy and law firm. The economic analysis from Vicente Sederberg LLP also found that legal pot would result in more than $300 million in savings from reduced law enforcement costs annually and could create up to 40,000 jobs.

“A regulated cannabis market would be an economic boon for the Lonestar State,” Shawn Hauser, a partner at Vicente Sederberg who heads the firm’s Austin office, said in a press release. “Hundreds of millions of dollars in new tax revenue and tens of thousands of new jobs would be especially helpful in overcoming the losses stemming from the COVID-19 pandemic. Texas is leaving an enormous amount of money on the table by keeping cannabis illegal.”

According to the report, there are more than 1.5 million adults 21 or older in Texas who use cannabis on a monthly basis, a market that could generate up to $2.7 billion in regulated sales if marijuana is legalized for adult use. If those legal sales were taxed at a rate similar to Colorado’s, more than $1.1 billion in new revenue could be raised every two years. Another $10 million to help offset the regulatory costs of the program could be raised with the implementation of modest business licensing fees.

A legal cannabis industry in Texas would also create hundreds of new businesses and as many as 40,000 new jobs, plus tens of thousands of additional positions in ancillary industries. The tourism industry in Texas would also see a boost. Ending misdemeanor arrests and prosecutions for minor possession offenses could save as much as $311 million each year, the report found.

Big State, Big Stakes

Dwight Clark, a senior policy analyst at Vicente Sederberg who previously worked in the state legislature, said that the stakes were particularly high in Texas because of its large population, the second-largest in the nation.

“There are well over a million adults in the state who regularly consume cannabis, so enforcement costs are substantial, to say the least,” Clark said. “If cannabis were regulated, the revenue from license fees and taxes would easily cover the costs of administering the system and enforcing regulations. Criminal justice resources could then be redirected toward other, more pressing matters. Plus there would be significant revenue left over that could be used to fund other programs and services.”

Earlier this month, Vermont became the eleventh state to regulate sales of cannabis for use by adults. If Texas were added to the list, the size of its legal recreational market would be second only to California’s.

“States across the country are seeing the benefits of legalizing and regulating cannabis,” said Hauser. “It is inspiring lawmakers in prohibition states to reexamine the efficacy and costs of their current policies and take a closer look at the alternatives.”

Despite the economic benefits, legalizing recreational cannabis in Texas will be a hard sell. Although hemp has been legalized in the state, sales of smokable hemp flower were banned earlier this year, while the state’s medical cannabis program only permits CBD extracts low in THC.