Benefits of Legal Marijuana Sales in Terms of Taxes and Budget

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It helps disadvantaged communities heal; it helps achieve equity; it is safer and better controlled than street pot; it defangs organised crime; it provides an alternative to addictive opioids… Legalizing marijuana can save hundreds of thousands of lives every year from being destroyed by the War on Drugs; it helps disadvantaged communities heal; it helps achieve equity; it is safer and better controlled than street pot; it defangs organised crime; it provides an alternative to addictive opioids… However, in the age of unbridled capitalism, one point stands out above the rest: it is extremely profitable.

The Marijuana Policy Project collated data from all 19 states that have legalised recreational marijuana, as well as Washington, D.C., in a large-scale analysis. Nine of these states modified their cannabis laws in 2020 or 2021 as a result of the rapidly increasing pace of legalisation across the country, and tax collections have yet to begin in eight of those states.

Cannabis revenue surpasses that of alcohol.

In 2018, alcohol generated less than $7.5 billion in tax income across all 50 states, accounting for 0.2 percent of the $3.3 trillion in total revenue. Despite its widespread appeal and pervasiveness in the United States, alcohol is less profitable than legal cannabis, according to the study.

Legal cannabis provided states an additional $7.9 billion in tax revenue from recreational sales alone in just 11 states and a few years—as cannabis sales began in 2014 in Colorado and Washington for the first time in the United States. This does not include local taxes, medicinal marijuana revenue, cannabis business application and licencing costs, corporate taxes paid to the federal government, or income taxes paid by cannabis workers, all of which contribute to the American economy.

In Washington, state-level alcohol taxes generated $370 million in revenue in 2018. The considerably smaller recreational marijuana sector pulled in $437 million in the same year. Colorado made $243 million from legal marijuana that year, compared to $47 million from alcohol.

Cannabis not only outperforms alcohol, despite the fact that alcohol is the more common psychoactive narcotic, but its popularity is rapidly growing, as evidenced by Colorado and Washington, the two states where it has been sold the longest.

Washington State only made $22 million in cannabis income in its first year of retail sales, whereas Colorado made $46 million. These two states will receive $614 million and $362 million in 2020, respectively.

Despite being the only two states on the ballot in 2014, the revenue discrepancy between Washington and Colorado can be explained in part by Washington’s higher population and a different taxation approach. Initially, legal recreational marijuana was taxed three times, making it impossible to compete with the illegal market, which explains the industry’s slow start until the tax was simplified to a 37 percent retail tax in 2015—cannabis revenue more than doubled in one year after the tax was reformed, going from $159 to $302 million. Colorado, which taxes cannabis twice, once when it’s sold wholesale and then again when it’s sold retail, has seen far slower growth.

No state can compete with the two heavyweights of the competition, California and Illinois, in terms of rapid growth. California has almost quadrupled its cannabis earnings every year, because to a vast population and low tax burden: $397 million in 2018, $638 million in 2019, and more than $1 billion in 2020 alone. Illinois had a similar start, with $174 million in cannabis income in the first year of legal sales, a figure that was nearly met in the first few quarters of 2021, a year on track to obliterate 2020’s pot revenue.

What Is the Purpose of This Fund?

With roughly $2.6 billion in cannabis earnings so far, Washington is the state that has gained the most from legal cannabis. According to the research, “nearly $600 million in proceeds from the cannabis sales tax is channelled towards public health initiatives, including a fund that provides health insurance for low-income families.” A portion of the remaining funds will go toward education, research, and local budgeting, with a focus on helping the state’s low-income residents.

With more than $2 billion in cannabis revenue, California is the second-largest winner in terms of monetary quantities. The majority of the money goes to childcare, environmental projects, public safety, and funding local charitable activities.

Colorado, the third-largest winner, spends the majority of its $1.5 billion marijuana revenue on education. The funds will be used to improve the state’s public school system, provide cannabis scholarships, and establish a marijuana fund for public health, the environment, public safety, and human services.

Oregon is next in line, with a revenue of half a billion dollars. According to the Marijuana Policy Project, “the state sends 40% of the cannabis-related tax revenue it collects to public schools, 15% to law enforcement, and 25% to mental health and treatment programmes.”

Illinois has been a beacon of social justice by reinvesting cannabis revenue into the state’s “Recover, Reinvest, and Renew” programme, which supports a large-scale effort to right the wrongs of the War on Drugs and reinvest in local communities, coming in fifth place with nearly $300 million collected in just one year and one quarter. Illinois set the standard for all future cannabis legalisation efforts that prioritise social justice.

Each state has taken a position that is unique to it—not only do tax systems differ dramatically from one state to the next, but the usage of cannabis money is also unique to each community. Beyond the examples given above, we can point to Arizona’s investment of a third of cannabis revenue in community colleges, Montana’s commitment to public health and veterans’ care, and even New Jersey’s requirement to reinvest 70% of cannabis revenue in economic assistance and services in communities most harmed by Prohibition.

So, what kind of tax income could legalisation and a sensible tax structure bring to Wisconsin? We can compare our state to Colorado, which has a population that is roughly comparable to Wisconsin’s. In 2020, Colorado received $362 million from recreational marijuana taxes. Wisconsin might follow Colorado’s lead and support our budget with a single action, or we could put the money into infrastructure or reinvesting in state-provided services. However, this money will stay out of reach as long as we refuse to repeal Prohibition.

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