Legalizing Cannabis Could Generate $28 Billion in Tax Revenue

If cannabis is legalized throughout the entire country, the industry could make up to $28 billion for federal, state and local governments, according to the non-partisan Tax Foundation. Mores specifically, the cannabis market would generate about $7 billion for the federal government if a $23 per pound tax was put on the industry. This is like the tax that has already been put on tobacco. Legal cannabis in both Colorado and Washington have already generated more money than anyone had originally thought.

Colorado believed that it would make around $70 million from cannabis taxes annually. Newer estimations indicate that Colorado could generate as much as $140 million this year. In Washington, numbers are even more impressive; cannabis sales are bringing in more than $2 million daily with revenue set to reach $270 million annually.

“If all states legalized and taxed marijuana, states could collectively expect to raise between $5 billion and $18 billion per year,” the report indicates.

“At the state level, assuming no black market, state taxes on marijuana similar to Washington and Colorado could increase state’s tax revenues by $13 billion nationally, with an additional $5 billion from normal sales taxes. If high tax rates or other factors perpetuate the black market, tax collections would be less,” Gavin Ekins and Joseph Henchman, the authors of the report, add.

At the end of the report, the authors add that in the long-run, tax revenue will drop from $28 billion to just over $22 billion if all states have a twenty-five percent sales tax and the federal government taxes marijuana the same way that it taxes cigarettes.

“The change in tax revenues is largely from a reduction in business profits as production increases and profit margins fall. In addition, as the price of marijuana falls due to increased production, sales tax revenues should also decrease somewhat,” the authors concluded.