Benefits and Costs of Legalization
Marijuana has created new industries and has been a huge economic success in states like Colorado. Through 2016, the state reported that legalized marijuana was responsible for creating more than 18,000 full-time jobs and adding nearly $2.5 billion to the Colorado economy. Cannabis is generating wealth in Colorado, more so than any other industry. According to the Marijuana Policy Group’s 2016 report, every dollar spent generates as much as $2.40 in economic activity. Because Colorado has a well-established industry, it is a good benchmark for other states to use when considering legalization.
Marijuana is legal in nearly 30 states, and other states are grappling with whether to legalize marijuana for medical use,recreational use, or both. States earn real money when they regulate and tax cannabis for recreational use. Arizona is one of those states in which medical marijuana has been legal since 2010, but recreational use did not pass in 2016.
How do states like Arizona generate revenue?
One of the main ways is the special tax on marijuana sales. For example, Arizona proposes a 15 percent tax that would generate over $100 million in 2019 and 2020. In addition to the special tax, there are standard sales taxes as well as licensing fees for new cannabis businesses. All of those revenues go directly to state and local governments. Naturally, the sale of recreational marijuana is an even bigger revenue generator. Arizona, for instance, projects a $1.8 billion boost to their economy. States are all implementing their taxes differently, ranging from just under 4 percent to over 15 percent. Some states are rolling the sales tax into the special tax, while others are charging a separate sales tax on top of the special tax.
Many states specifically earmark the marijuana proceeds for use on certain projects, such as infrastructure, schools or community centers. Arizona plans to gift the public school system with an expected $86 million infusion of cash. Maine has just legalized recreational use; sales begin in February 2018, and the state is expecting similar revenue to Arizona. Maine ranks near the bottom of all 50 states regarding total economic output, so the cannabis industry is expected to provide a much-needed economic boost.
The Growing Marijuana Industry
The cannabis industry is the fastest-growing industry in America, according to a 2017 report by New Frontier, a data analysis firm, who says the industry is growing faster than solar, big data, and electric vehicles. Nationwide, the industry was a $7 billion industry in 2016 and is poised to reach $20 million by 2020. All kinds of jobs are being created—retail shops and retailers, and production of edibles, oils and other infused products—really, there are jobs from botanist to budtender. When the peripheral jobs like hydroponics suppliers, tech providers, and consultants and security firms are added in, the industry has created thousands of jobs.
In states that can support farming, there is potential for a billion dollar business from the crop alone. Washington State experienced $1.27 billion in crop sales. For Washington, the addition of the cannabis crop was huge. It is now the second most valuable crop, ahead of potatoes and wheat, and second only to the crop Washington is best known for—apples.
The economic benefits are largely localized to the state and do not extend outward as new economies most often do. Why? Because marijuana is still illegal under federal law, states cannot attain the economic benefits that could come from the interstate trade and shipment of marijuana. New opportunities and job creation could be more far-reaching if the cultivation, sale, and shipment of marijuana was legal under federal law. For example, cannabis businesses still cannot gain access to the traditional financial services that most businesses use. The federal government doesn’t even acknowledge the jobs created by the cannabis industry, because the feds don’t classify these jobs according to the North American Industry Classification System (NAICS), which is their standard for employment census data. In the absence of official federal calculations, other groups have tallied these jobs. NORML reports that the cannabis industry has created approximately 123,000 full-time jobs so far. Certainly, there are thousands more part-time jobs as well.
Reporting of Marijuana Revenues
The money generated by the industry is widely reported, but what are the costs to state and local governments? In Nevada, the Secretary of State’s office estimated about $1 billion per year and around 40,000 new jobs would be added to the economy in the first seven years alone. But there is a cost to it as well, in setting up oversight staffing and computer systems to regulate the recreational industry.
Oregon estimates that it spends about $4 million annually to oversee the new cannabis legalization market. Much of that cost involves the creation and operation of the new regulatory infrastructure, but also includes costs like agricultural oversight, police training and medical marijuana product testing. States say the revenues offset these expenses.
Often, the “cost” of legal recreational marijuana is cast in terms of the social cost. In Colorado, for example, there has been a higher incidence of impaired driving, emergency room visits, accidental exposures in children under age 5, and even criminal activity. Underage usage (ages 12-17) has also increased, as have students being expelled from school for marijuana use. Cannabis-related traffic fatalities increased 92 percent from 2010 to 2014, and rose 32 percent in the 2013-2014 year when recreational use became legal. More high school students say they drive after smoking marijuana than they do after drinking. Groups like the Smart Alternatives to Marijuana organization say that cannabis addiction has doubled in the last 10 years and that many strains have become much more potent with much higher levels of THC, leading to bigger problems. Currently, marijuana is the number one reason why young people are entering drug treatment facilities. Advocates of marijuana legalization argue that if marijuana-impaired driving is ‘up,’ that is only because drinking and driving is ‘down,’ and that if the need for treatment for marijuana treatment is ‘up,’ that is only because people can now seek treatment openly and because the use of other, harder drugs is ‘down.’ Nonetheless, as opponents of legalization point out, these potential social costs merit close consideration.
Employers also worry about on-the-job impairment and the costs they will incur in the workplace. Employees who test positive for marijuana in routine drug testing have significantly more industrial accidents and absenteeism. While legalization certainly creates a compelling economic case, opponents of legalization say the true costs can never outweigh the benefits. The issue is that most states have only begun to collect this type of impact data, so time will tell what the full benefits and costs—financial and social—really are.
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