Marijuana Money is a Game Changer for Stubborn Politicians
Marijuana legalization is slowly proving to be a potent financial drug — one to which even stubborn politicians are having trouble “just saying no.” Thanks to wheelbarrows of tax revenue in a handful of states, the side effects of legal marijuana are changing long-held political views.
Colorado Governor John Hickenlooper made his feelings well-known when his state voted to legalize recreational marijuana in 2012. He once said, “If I had a magic wand that I could have waved and reversed the decision of the voters … the day after the election, I would have waved my wand.” He’s also on record saying legalizing marijuana was “reckless” and that “Colorado is known for many great things, but marijuana should not be one of them.” However, the marijuana experiment results are blowing in and they look encouraging, softening Hickenlooper’s views.
During a panel discussion at the Milken Institute Global Conference, Hickenlooper said, “If I had the magic wand now, I don’t know if I would wave it. It’s beginning to look like it [legal marijuana] might work,” according to the Los Angeles Times. In an interview with Katie Couric, he describes his marijuana views as “cautiously optimistic” and “not as negative as I was.” In fact, he calls legal marijuana one of the biggest experiments of the 21st century — rightly so.
The stakes for marijuana and state budgets have never been higher. Gallup finds the majority of Americans believe marijuana should be made legal, with support hovering at its highest level in Gallup’s 46 years of polling. Meanwhile, states with legalized marijuana are raking in millions of dollars, which could lead to billions of dollars on a national scale.
Show me the marijuana taxes
A recent report from New Frontier and Arcview notes Oregon’s first month of legal recreational marijuana produced $3.5 million worth of tax revenue. Washington’s first year of legal sales generated $70 million in tax revenues. Colorado bagged $135 million in 2015 from cannabis taxes and fees, and will likely exceed $140 million in 2016. It’s a green rush that’s only getting started when you consider America’s marijuana consumption and the possibility that one day recreational marijuana could be legalized across the entire nation.
America consumes around 26 million pounds of marijuana per year. According to the Tax Foundation, a mature marijuana industry could generate up to $28 billion in tax revenue for federal, state, and local governments, including $7 billion in federal revenue: $5.5 billion from business taxes, and $1.5 billion from income and payroll taxes. Between $5 billion and $18 billion would be raised by states each year if every state legalized and taxed marijuana. The Foundation went on to explain other income options:
Federal and state governments have several options for taxes on a legal marijuana industry. A federal excise tax on marijuana similar to that of cigarettes, approximately $23 per pound of product, would raise approximately $500 million in additional revenue. A 10 percent sales surtax, similar in nature to those adopted recently by Colorado and other states and proposed in recent legislation by Rep. Earl Blumenauer, would raise approximately $5.3 billion in additional revenue; higher excise tax rates would raise proportionately more.
We still have a long way to go before marijuana is legalized in every state, but progress is being seen. Currently, several states and the District of Columbia have legalized the sale of recreational marijuana by popular vote, with an additional 25 states permitting medical marijuana or decriminalizing marijuana possession. In 2016, other states like California, Arizona, Maine, and Nevada will vote on recreational marijuana legalization. Even the Drug Enforcement Agency may reclassify marijuana’s controversial and outdated Schedule 1 status.
Of course, some people need more convincing than others. Maine Governor Paul LePage recently reminded everyone that he is in opposition to legalized recreational marijuana, which is on the state’s ballot this fall. Apparently, LePage hasn’t been taking notes on Colorado’s implementation. At a town hall meeting, he said, “I can’t figure out how you are going to tax something you grow in your backyard, I just can’t figure that out. I’m watching with great interest, Colorado, and it’s a mess. They’re being sued by all of the surrounding states. It’s an absolute mess because they’re only getting a fraction of the revenues they thought they were going to get.”
In reality, Colorado’s marijuana situation is far from being a mess. The Supreme Court threw out a lawsuit Oklahoma and Nebraska filed against Colorado, which basically claimed the state was undermining federal law and hurting neighboring states. Furthermore, tax revenue has been climbing, and if it breaks $140 million in 2016 as estimated by the Tax Foundation, it would be double the 2014 goal of $70 million.