7 States That Would Earn the Most Money by Legalizing Marijuana

Yasuyoshi Chiba/AFP/Getty Images

Yasuyoshi Chiba/AFP/Getty Images

Some of us are still processing this whole marijuana legalization deal. For many people, it’s kind of hard to believe legalization is actually really happening — it’s no longer simply a topic of discussion marijuana smokers debate over, it’s right here and right now. Imagine going back in time and telling yourself 10 or 15 years ago that in 2015, recreational pot would be legal in four states — and even Washington D.C. It’s kind of surreal, and definitely a sign of progress.

The numbers have been coming in from both Washington and Colorado for more than a year now, and the numbers don’t lie — legalization is a hit, and a boon to state coffers. While there have most certainly been some bumps in the road, the markets are starting to take on a life of their own, and even spawn off individual industries. There are even ways to find the cheapest pot store nearest to your house.

As time goes on, legalization may just become the new norm. Although there are certainly downsides, recreational legalization has taken those millions of dollars out of the pockets of black-market drug dealers and placed it into the legal economy. Here are the states that can financially benefit the most from legalizing pot. These numbers are based on a NerdWallet report released in September of 2014, and marijuana use data from the Substance Abuse and Mental Health Services Administration (SAMHSA), among other resources.

**The NerdWallet report determined each state’s tax rate by adding a 15% excise tax to state and local tax figures compiled by the Tax Foundation. The report found each state’s market size by determining what portion of the $14 billion total marijuana market each state would theoretically encompass. This is based on how many marijuana users (expressed as a percentage) are in that particular state. Numbers are rounded.

7. Michigan

Spencer Platt/Getty Images

Spencer Platt/Getty Images

A potential $122.1 million windfall must sound like music the ears of Michigan legislators, although it will take some real work to get there. That’s how much NerdWallet says Michigan would benefit, in tax revenues, from legalizing marijuana. A few of Michigan’s neighboring states are in a similar boat, so it will be interesting to see if one state actually pushes through with it. After one state legalizes, the domino-effect may take hold.

  • Population ages 25 and older: 6.62 million
  • Percent of population 25 and older who have used marijuana in the past month: 6.61%
  • Number of marijuana users: 437,649
  • State’s portion of the marijuana market: 4.15%
  • Marijuana market size: $581.27 million
  • Tax rate (state and local sales taxes combined) plus excise tax of 15%: 21%
  • Potential annual revenue from sales and excise taxes: $122.1 million
  • Illicit drug use percentage (among persons ages 12 and older): 8.68% to 9.35%
  • Current marijuana legislation: medical legal

6. Ohio

Source: Thinkstock

Source: Thinkstock

It’s hard to think that Ohio will jump on the legalization bandwagon anytime soon, but it is one of the states that would benefit the most. In fact, NerdWallet’s calculations put the potential revenues at up to $123 million. For a state that has been hit hard by the economic issues facing the country, that’s a considerable amount of money that could easily be put to use by state leaders.

  • Population ages 25 and older: 7.8 million
  • Percent of population 25 and older who have used marijuana in the past month: 5.39%
  • Number of marijuana users: 418,842
  • State’s portion of the marijuana market: 3.97%
  • Marijuana market size: $556.3 million
  • Tax rate (state and local sales taxes combined) plus excise tax of 15%: 22.11%
  • Illicit drug use percentage: 7.39% to 8.67%
  • Current marijuana legislation: illegal

5. Illinois

Chicago downtown

Source: iStock

Potential revenue from sales and excise taxes for Illinois clocks in at $126.1 million. Situated in America’s heartland, Illinois could be a major coup for the legalization movement if the chips fall in the right way. Chicago voters may be all for it, but Illinois still lies in a part of the country that often votes steadfastly conservative, and winning voters over could prove challenging.

  • Population ages 25 and older: 8.56 million
  • Percent of population 25 and older who have used marijuana in the past month: 4.79%
  • Number of marijuana users: 409,971
  • State’s portion of the marijuana market: 3.89%
  • Marijuana market size: $544.5 million
  • Tax rate (state and local sales taxes combined) plus excise tax of 15%: 23.16%
  • Illicit drug use percentage: 6.71% to 7.38%
  • Current marijuana legislation: medical legal

4. Texas

Source: Justin Sullivan/Getty Images

Justin Sullivan/Getty Images

Texas will have a hard time ignoring the $166.3 million in potential revenue from marijuana legalization, and there is already some work being done to end prohibition in the state. Like many border states, Texas could benefit largely from a policing standpoint, and also see a decrease in gang and cartel activity as a result of legalization.

  • Population ages 25 and older: 16.4 million
  • Percent of population 25 and older who have used marijuana in the past month: 3.30%
  • Number of marijuana users: 540,883
  • State’s portion of the marijuana market: 5.13%
  • Marijuana market size: $718.4 million
  • Tax rate (state and local sales taxes combined) plus excise tax of 15%: 23.15%
  • Illicit drug use percentage: 4.08% to 6.70%
  • Current marijuana legislation: illegal

3. Florida

Source: iStock

Source: iStock

For Floridians, the potential revenue from sales and excise taxes resulting from marijuana legalization adds up to $183.4 million. Given Florida’s location — and it’s history of trafficking and a need for huge amounts of policing — marijuana legalization may be one of the best things that could happen in the state. Of course, getting a medical marijuana law passed has proven to be fruitless so far, so we’ll have to see.

  • Population ages 25 and older: 13.5 million
  • Percent of population 25 and older who have used marijuana in the past month: 4.73%
  • Number of marijuana users: 638,727
  • State’s portion of the marijuana market: 6.06%
  • Marijuana market size: $848.33 million
  • Tax rate (state and local sales taxes combined) plus excise tax of 15%: 21.62%
  • Illicit drug use percentage: 7.39% to 8.67%
  • Current marijuana legislation: illegal

2. New York

Revelers Celebrate New Year's Eve In New York's Times Square

Andrew Theodorakis/Getty Images

Can you imagine running around a cannabis-friendly version of New York? It may not be that far off, and given that there is potential revenue from sales and excise taxes topping $248.1 million, it’s hard to think New York legislators will ignore the prospect for much longer.

  • Population ages 25 and older: 13.31 million
  • Percent of population 25 and older who have used marijuana in the past month: 5.98%
  • Number of marijuana users: 795,924
  • State’s portion of the marijuana market: 7.55%
  • Marijuana market size: approximately $1 billion
  • Tax rate (state and local sales taxes combined) plus excise tax of 15%: 23.47%
  • Illicit drug use percentage: 8.68% to 9.35%
  • Current marijuana legislation: medical legal

1. California

Source: Thinkstock

Source: Thinkstock

California’s potential revenue from sales and excise taxes is a whopping $519.3 million, making it the biggest economic domino on the field, and a mainstay on the list of the states that are likely to legalize next. 2016 looks to be a big year for California, and with hundreds of millions in potential revenue, there legalization may help patch some holes in the state budget.

  • Population ages 25 and older: 24.78 million
  • Percent of population 25 and older who have used marijuana in the past month: 6.74%
  • Number of marijuana users: 1.67 million
  • State’s portion of the marijuana market: 15.84%
  • Marijuana market size: $2.2 billion
  • Tax rate (state and local sales taxes combined) plus excise tax of 15%: 23.41%
  • Illicit drug use percentage: 8.68% to 9.35%
  • Current marijuana legislation: medical legal


Didn’t see your state? Check out this chart, which indicates states where marijuana is not yet legal for recreational use and projected tax revenues if the substance was made legal in each of the remaining states.

by: Erika Rawes // data from: Nerdwallet.com

by: Erika Rawes // data from: Nerdwallet.com

Again, see the full data set from NerdWallet.

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