Could Marijuana Tax Revenues Fuel Legalization?

NEW YORK, Sept. 21, 2016 /PRNewswire/ -- Could tax revenue from the sale of recreational marijuana be enough to push the legalization of marijuana in more states?  24/7 Wall St., a financial news and opinion website, has identified the potential tax revenue from the sale of marijuana in every state.  

24/7 Wall St. used estimates based on sales per capita in Colorado and Washington from the The Tax Foundation.  Colorado and Washington — the first two states to legalize marijuana — began sales in 2014.  After a slow start, tax revenues now exceed expectations in both states.  While the legal structure supporting marijuana sales would be quite different in each U.S. region, other states can begin to better understand the financial impact legalization would have on their states. The Tax Foundation used sales per capita in these two states and the assumption of a 25% effective tax rate to determine the potential tax revenue from marijuana sales in each state. Total state tax revenues are from the U.S. Census Bureau. Marijuana usage figures were obtained from the Substance Abuse and Mental Health Services Administration. The likelihood of legalization is based on two previous analyses from 24/7 Wall St.

Click here to see the potential tax revenue from recreational marijuana in each state.

Increasing tax revenues is not the only financial benefit of legalization. States also save from spending less on enforcing marijuana laws. However, this saved money is at least partially repurposed to regulating the new market.

Marijuana legalization is still hotly debated nationwide, with many states likely to legalize soon while others are doubtful.  Based on two previous analyses, 24/7 Wall St. identified the next 14 states to legalize marijuana and the 11 states least likely to legalize marijuana. If all of the 14 states legalize, the combined annual additional revenue is expected to be $3.1 billion. The 11 states least likely to legalize would miss out on an estimated $1.2 billion annually.

"While tax revenue from marijuana sales exceeded expectations in both Colorado and Washington, the revenue increase remains small relative to the overall state tax revenue," said Douglas A. McIntyre, Editor-In-Chief and CEO of 24/7 Wall St.  "This could support arguments of both those who claim the financial incentives are enough to push for legalization, and those who claim they are not worth the potential risks."

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SOURCE 24/7 Wall St., LLC