Economic Benefits of Legalizing Marijuana in California

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moneyMarijuana is now recreationally legal in several states, and medical laws exist throughout many more states in the country. The fact is, legalizing cannabis is great for any local economy; and now, with Colorado and Washington rec sales operational for a couple of years, we have data to prove it.



So how can legalizing cannabis help California, in particular?

First off, lets look at the numbers we already have from Colorado and Washington.

In the first year of legal recreational sales in Colorado, the state pulled in over $44 million in tax revenue and business fees from recreational cannabis sales. Those numbers are already significantly higher in 2015. Most of this revenue is set to help fund education, infrastructure, and other necessities that often lack proper funding.

Washington actually beat Colorado in tax revenue for their first year of rec sales. Washington pulled in $65 million from rec sales alone between June 2014 and July 2015. More than 23,000 pounds of marijuana was sold in this year alone. While already promising, these numbers have also been significantly higher so far in the second year of sales.

As if rolling in extra tax revenue for schools and other necessities isn’t enough for State’s to go rec, there are plenty of other, less apparent benefits to legalization.

First off, it’s estimated that the US Government would save over $13.7 billion annually by simply not having to enforce their ridiculous drug-war era laws. The cost of prohibition extends far beyond the human lives of those wrongfully incarcerated. Government (both federal and local) spends insane amounts of money capturing, prosecuting, incarcerating, and monitoring citizens for non-violent possession charges. Legalizing (or at least, decriminalizing) cannabis would significantly reduce the necessity of these ridiculous processes. Ultimately eliminating these policies would be a huge benefit to our society, both economically and morally speaking.

In fact, if you factor in the lost tax revenue from NOT having a legal marijuana infrastructure in place in the US, it’s estimated that our country loses up to $41.8 Billion per year on prohibition.

For California in particular, it’s estimated that the annual marijuana harvest (most of which supplements the black market) is worth over $14 billion per year. Note that almost none of these $14 billion in sales are generating tax revenue for the state, as the product is not sold out of regulated or taxed dispensaries. According to TIME Magazine, cannabis is California’s most valuable cash crop. Why are we not taxing this? More broadly speaking, it’s estimated that the black market for cannabis makes for a $36 billion per-year industry. Imagine all that cash taxed at a cool 15%. The US could fix its education system with that kind of money.

Let’s take a look at Oakland for a more specific example of how this is already working for California. In 2011, the city of Oakland received over $1 Million in tax revenue from marijuana dispensaries. That may seem like a relatively small number, but that amounts for over 3% of the city’s total tax revenue. Considering that the majority of dispensaries in California don’t even pay taxes, this number would increase drastically given a well-regulated recreational market. Recreational sales taxes are generally much higher than medical taxes, so this factor would also greatly increase revenue generated.

As you can see, the economic benefits of legal cannabis are staggering. But perhaps even more important are the social and moral implications. It would be nice to live in a society that didn’t spend billions incarcerating citizens based on bad drug policies, and even nicer to live in a society that spent that money on education and other public necessities. Hopefully the tide of cannabis legalization will continue to rise; we will all be better off because of it.