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The topic of cannabis can be rather taboo in some instances, as countries around the world have differing views on the legalization of marijuana products based on their cultural and religious beliefs. In the United States specifically, it’s been a long contended issue that each state has, for now, been left to decide on how they want to handle. Each year, more and more states (now totaling 18 and the District of Columbia out of 50), have legalized the recreational sale and use of a limited amount of cannabis, but it remains illegal on a federal level.
Cannabis tax revenue generated more than two billion dollars across legalized states in the last year alone and is expected to grow to nearly 12 billion dollars by 2030, exceeding tax revenues collected from the sale of alcohol, according to bond strategists at Barclays. For the states that do tax the sale of cannabis products, there have already been significant benefits that have helped further develop cities and smaller towns, making the streets safer, and increased funding for new municipal projects, local businesses, subsidies for low-income renters, improvements to public school systems, water and sewer line upgrades, and other significant infrastructure projects.
To fully understand how it has impacted states that have had significant time to collect and redistribute those tax dollars, many researchers have closely analyzed Colorado and Washington, two of the first states to legalize cannabis, as a case study of how additional revenues might benefit the public. These data sets and observations have also helped other states weigh the benefits and risks of making their own decisions to legalize cannabis or not.
A fraction of the sale tax in Colorado goes directly to the Department of Education’s State Public School Fund, to renovate existing facilities or build new ones, and the remainder goes to the Marijuana Tax Cash Fund, which also supports education initiatives and includes grants for school professionals. The fund also supports the department of agriculture to focus on further hemp and other crop growth- another way to boost Colorado’s more rural economy. Other parts go towards more physical aspects of urban and suburban life, such as supporting public infrastructure that will enable residents to utilize alternative means of transportation, and financial incentives for opening small businesses which create new jobs, including cannabis-product shops.
Other states, that are new to the cannabis industry, have also seen significant benefits. Maryland, which legalized only approved medical uses has seen much of its manufacturing industry revitalized, refurbishing old factories that had long sat vacant. When Maryland’s canning businesses collapsed, the cannabis industry saw the existing infrastructure as an opportunity to begin growing and manufacturing medical marijuana products, reintroducing the promise of commerce to the surrounding communities.
A study conducted in Illinois on the impacts of property values after the state made recreational cannabis legal showed that home prices actually went up. Because the tax revenues collected partially contributed to making streets safer, the demand for housing in certain areas began to outpace the available supply. The conclusion was that for every one million in additional tax revenue from marijuana sales, home values increased by almost $500. Even just the presence of dispensaries nearby positively correlated with an increase in home values as well. With each new dispensary that a city adds, property values increase by an additional $519. This is likely due to residents viewing dispensaries as premium commercial amenities, and those who partake in cannabis use enjoy having one nearby.
While right now, tax revenue generated by cannabis only represents a small percentage of a state’s budget, this is still a stream of revenue that did not exist even a decade ago. States that have legalized cannabis have seen a more lawful and responsible market that generates billions of dollars each year, with these numbers only expected to grow with hockey-stick-like projections over the next ten to twenty years. The potential for revenue is just now scratching the surface, especially as the stigma around the products and their effects begins to erode slowly. Many policymakers are beginning to imagine budgets even more so supported by future tax streams, where one day perhaps a significant portion of our public infrastructure is funded by this fraction of the picture.
