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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/NewscomNeal Waters/ZUMA Press/NewscomThere'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.

Photo Credit: Neal Waters/ZUMA Press/Newscom

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  • Longtobefree||

    This seems to assume that there would be a new federal sales tax.
    I doubt that, but there is no indication in the alleged benefits of the new federal bureaucracy costs. Nothing about the federal regulators for farm controls, quality control, and all the other 'benefits' imposed on other crops. No accounting for the number of current pot industry participants who would be out of work. (I can see it now; yep, I have years of pot experience, here's my rap sheet.)
    Isn't it enough to just say it benefits individual freedom, and let it go at that?

  • Hugh Akston||

    Isn't it enough to just say it benefits individual freedom, and let it go at that?

    Of course it is. Why try to persuade people who aren't libertarians?

  • working poor||

    "Isn't it enough to just say it benefits individual freedom, and let it go at that?"

    No because taxation is not freedom.

  • working poor||

    "Isn't it enough to just say it benefits individual freedom, and let it go at that?"

    No because taxation is not freedom.

  • working poor||

    "Isn't it enough to just say it benefits individual freedom, and let it go at that?"

    No because taxation is not freedom.

  • MiloMinderbinder||

    Let me get this right, Trump's tax cut is bad, but raising new revenue with a marijuana tax is good?

    Reason sure has gone down hill since Lanny Friedlander left.

  • Hugh Akston||

    Where did this article say anything about the Trump tax cut?

  • Ed||

    Neither of these things were said in the article you're commenting on, fyi

  • Bronson, Missouri||

    It's exactly enough to build the wall!

  • BestUsedCarSales||

    I feel like it shouldn't really bother me either way. But I really dislike these types of arguments. These are so far from the point of drug legalization that I almost don't consider them relevant.

  • Number 2||

    So the federal government will make all this money based on a 15% excise tax on pot. That, of course, is on top of any excise taxes the states impose. Here in New Jersey, the state's leading legislative proponent of legal weed has drafted a bill calling for a 25% excise tax. Others here are calling for excise taxes to be imposed at each step of the production, distribution and retail chain.

    It increasingly appears at the real motivation behind pot legalization is not ending the war on drugs, not respecting individual liberty, and not addressing the disparity in incarceration rates between whites and nonwhites, but instead the belief that financially strapped states can make boatloads of money taxing stoners to death. The end result will be that the black market in pot will continue to exist.

  • BestUsedCarSales||

    It increasingly appears at the real motivation behind pot legalization is not ending the war on drugs, not respecting individual liberty, and not addressing the disparity in incarceration rates between whites and nonwhites, but instead the belief that financially strapped states can make boatloads of money taxing stoners to death.

    Agreed. And this is not the argument that should be made. It's insulting to all involved. If you can find a person who's true issue with the drug war is the lack of revenue generated than I will show you a complete asshole.

    This is first, foremost, and entirely about the right of individuals to choose what they do with their own body. This is why I hate the argument about revenue. That might be a possible effect of legalization, but I will never ever believe to be a reason for legalization. Just as I don't care about legalization leading to more potent strains of marijuana or something. It's all besides the point.

  • marshaul||

    "It's all besides the point."

    Nice eggcorn, illiterate.

  • BigT||

    Different people are motivated by different things.

    If someone is in favor of legalization because the plants are pretty, would you care? The benefits of legalization will be many, including reduced police costs and hopefully more focus on real crimes. New jobs will provide new income to tax, and fewer families destroyed by the WoD. Liberty will increase for all.

  • Robert||

    The tax argument figured prominently in getting liquor prohib'n repealed. That was just for a restor'n of the preceding regime wherein, since the founding of the country, liquor taxes had been a major chunk of gov't revenues.

  • PatGo||

    It has been discovered that when you heavily tax weed, an underground market prospers among people who don't want to pay the tax. What have you gained?

  • plusafdotcom||

    ... and the idiots in state legislatures think that a high tax on MJ will bring in lots of money... ignoring or flatly not understanding the Laffer Curve at all!

    High taxes just keep the black market more competitive and move sales to that supply.

    I don't have to explain that to most folks here, but if someone would copy that to Trump and Pence....
    ah, shit... forget it. Neither of them would read, understand or believe. That's already obvious.

  • PatGo||

    And the social cost of legalizing weed will far outstrip the increased revenue, and guess who gets to pay for that. The TAXPAYER, the one who works hard and stays sober. Me. You?

  • Finrod||

    Funny how people like you that make that claim never can come with any figure for the exact amount of 'social cost' that isn't completely ridiculous.

  • plusafdotcom||

    Finrod... it's because they don't Need To! Members of their Cult will believe that blather without a second (or even First Thought).

    And any data that might contradict their blather will be labeled Fake News in a nanosecond. It's the way Cults operate!

    Bigly Sad!

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