According to recent reports, legal cannabis sales are expected to hit $24 billion by 2025. That number could climb higher as more states consider legalization. In January 2020, Illinois will become the 11th state to legalize cannabis for recreational use. New York, New Jersey, and Ohio also seemed poised to legalize within the next few years. 33 states and Washington, D.C., allow medical use, and another 15 states have decriminalized the use of marijuana.
After decades of gridlock, it seems cannabis is ready to take a victory lap. A recent Pew Research Center poll shows that 62% of Americans support marijuana legalization, with some polls putting that number closer to 70%. The movement of legal cannabis cuts across party lines. Former GOP House Speaker John Boehner, for instance, once an opponent of legalization, now heads up the National Cannabis Roundtable, a lobbying group that aims to push for federal legalization by focusing their efforts on cannabis’s positive effects on tax revenue and job growth.
Tax Revenue from Cannabis Legalization
Some lawmakers are likely drawn to the legalization of cannabis because of what appears to be a windfall to state budgets for public projects. In Colorado, for example, the first $40 million received from the excise tax on retail cannabis in fiscal year 2017–2018 was used for public school construction, while the remaining $27.8 million was transferred to a fund for public schools. In Washington state, cannabis sales surpassed $1 billion in 2017, and the state collected $314.8 million in excise tax revenue. The revenue was primarily used to secure health insurance for many low-income Washington residents.
A recent report from the Institution on Taxation and Economic Policy shows that 2018 state and local tax revenue on retail cannabis sales surpassed $1 billion for the first time. This marked a 57% increase over 2017. This jump in revenue was driven by legal retail sales in California and partly by rapid growth in cannabis tax revenues in five other states reporting revenue data: Alaska, Colorado, Nevada, Oregon, and Washington State. States with legal cannabis expect that tax revenue from alcohol will soon be rivaled by cannabis sales.
Jobs from Cannabis Legalization
It’s not just taxes that have politicians excited. According to industry insiders, cannabis manufacturers and distributors saw massive job creation in 2018, with 64,389 new positions added to the rolls. That brings to 211,000 the number of jobs directly related to the industry, part of a total of 296,000 in all related areas combined. This represents a 44% gain in the workforce for 2018 on top of a 21% increase the previous year. Creating jobs in a growing industry offers lawmakers the ability to benefit from sales tax revenue and taxes generated from the cannabis industry’s growing employment needs.
More people making money means more people have money to spend, which should drive up sales tax revenue not just in the cannabis industry but for all industries. Politicians love increased revenue, of course, either for pet projects or to shore up holes in the budget. Oregon is home to over 500 licensed dispensaries, and California comes in second with 261. If you’d like to know more about opening a cannabis dispensary, Northwest can help.