The Economics of Legalizing Cannabis

The war on cannabis has been taking place for decades. And this war is not easy. It involves a lot of cost and effort to keep a check on the activities from the black market and the people who are illicitly involved in that market.

When the presidential elections took place, many states favored the legalization of cannabis. California, Nevada, Massachusetts and Maine even supported that cannabis should be permitted for recreational purposes, on top of a medical cannabis industry in place. Other states like North Dakota, Florida and Arkansas permitted the use of medical marijuana, while Arizona didn’t allow it at all.

If we take a deeper look, then we can see that legalizing the herb can actually help to earn huge amount of profits. In a study, it was seen that 0.5 grams of cannabis was sold for about $8.5 on the black market, whereas its actual cost was hardly $1.7. So, the manufacturers of the herb made huge profits, especially because it was illegal. Had it been legal, a lot of entrepreneurs would have come in, and due to the increasing competition, the cost would significantly decrease.

Consumption of Cannabis:

Approximately 94 million people in America have tried cannabis at one time or another, which accounts for nearly 40% of the population of the U.S. Not a small number by any means. It has also been revealed that about 25 million people in America are presently cannabis users. Their annual consumption accounts for nearly 31 million pounds.

According to a report, Americans spend more than $1 billion on cannabis consumption. Despite this, it has been revealed that many people are charged or put behind bars due to cannabis possession. Thus, the legalization of cannabis has brought in some great results so far.

Impact on Tax Revenue:

After legalization, sales of cannabis in states like Colorado and Washington went up tremendously which lead to a high collection of taxes. Early on, about $135 million in taxes and medical/recreational cannabis sales were accumulated in Colorado. Sales figures shot up to $996 million just a few years later. There was a tremendous increase in the sales of cannabis in North America- about 30%. As per Arcview Market Research, it is also forecasted that it may go up to $20.1 billion by the year 2021.

Per a study by the ICF International, it was found that in California alone, profit from cannabis sales could reach up to $15 billion, and tax revenue could touch $3 billion.

Employment Opportunities:

Legalization, and the widespread cultivation and use of active ingredients of medical cannabis also means more employment opportunities. It means an increasing number of dispensaries and nurseries. These dispensaries and cannabis industries will require more employees, as well as increasing sales, which would thereby lead to a revolution in the economic industry. In already-developed areas, where the infrastructure and other facilities are in place, the economic impact will be deeper.

According to studies by RCG Economics and Marijuana Policy Group, the legalization of cannabis for recreational purposes could create about 41,000 jobs in 2024, and could help to produce a labor income of about $1.7 billion. Additionally, a report by ICF states that it could affect about 81,000 jobs directly or indirectly. It could thereby mean that it could elevate the labor income by $3.5 billion.

The economic impacts of cannabis legalization are significant. And while there are several estimates out there about where it’s all headed, we won’t know the full scope of this budding industry until the dust has settled.