Legal Weed Could Create $50+ Billion in Federal Tax Revenue

Government shouldn't need a financial incentive to legalize, but if it helps get lawmakers onboard...


Neal Waters/ZUMA Press/Newscom

There's big money in legal weed, and the federal government's cut could be more than $5 billion a year from sales tax revenue alone.

So says a new study by New Frontier Data, a marijuana market research firm, which assumed a 15 percent retail sales tax. Add payroll tax deductions and business tax revenue from new jobs and enterprises, and the study says new revenue will total more than $138 billion. (That estimate is based on a 35 percent corporate tax rate, and the new tax law lowered the rate to 21 percent. No biggie.)

The study also estimated that if the federal government legalized pot, the marijuana industry could create more than a million new jobs over the next eight years.

Whether or not the numbers are exactly right, the study's broad conclusions are intuitive. It should be obvious that bringing a portion of the drug trade out of the black market will create new legal jobs and new tax revenue. (The study suggests that 25 percent of the pot trade could remain in the black market even with full legalization, although lower taxes could reduce that.)

The economic arguments for legalization are not new, but the mainstream is finally catching on. Vermont is set to become the ninth state to legalize recreational marijuana, and the first to do so via the state legislature.

In 2012, Colorado and Washington became the first states to fully legalize marijuana, via ballot initiatives. At the same time, for the first time since Gallup polled the question in 1969, a majority of Americans—58 percent—favored legalization. Today the number is 64 percent. In 1969, it was just 12 percent. The Trump administration, unfortunately, is moving in the other direction.