While raising revenues has always been a major concern for governments, the U.S. may already have a feasible solution in marijuana. Numerous proponents of marijuana legalization claim that in addition to the recognized health benefits entailed, marijuana legalization will also open up a significant stream of new revenue that can contribute to the national budget. This sentiment is shared by Carl Davis from the Institute on Taxation and Economic Policy and Cato Institute researchers, among others.
A senior analyst at the institute, Davis admitted that although there were some uncertainties with regard to the size of the market and how legalization would affect supply and demand, he ascertained that the revenues generated by such a move would be significant. A study conducted by the Cato Institute in 2010 seems to bear this out, with results showing a potential $8.7 billion generated in federal and state taxes every year.
The researchers arrived at this figure assuming that marijuana would be subject to similar taxes as those currently levied on alcohol and tobacco. The study was also conducted with the assumption that marijuana growers and sellers would be required to pay income and sales taxes.
Generating revenue from the sale of marijuana isn’t the only way that legalization will add to the national coffers. A significant portion of the annual law enforcement budget is spent on going after marijuana users. Still more is spent by the federal and local courts in trying these cases, and there are costs entailed in keeping offenders in prison as well. With the legalization of marijuana, all these expenses will be cut drastically, if not totally eliminated. This will result in significant costs savings for all the organizations involved.
At present, two states serve as the vanguards for marijuana legalization: Washington D.C. and Colorado. Both states have already decriminalized recreational marijuana use, and are generally considered test cases for how marijuana legalization will affect the rest of the country. As it is, financial analysts in Washington estimate that the recent marijuana legalization will earn the state over $1.9 billion over the next five years.
At present, Washington D.C. and eighteen states have already legalized medical marijuana use. Ten other states are also currently studying the possibility of legalizing the use of marijuana for medical purposes.
Although research shows that the most Americans favor the legalization of marijuana to varying degrees, there is still considerable resistance from many sectors. Some of the more vocal opponents of marijuana legalization claim that the revenue generated from legal cultivation and sale would not justify the supposed ill-effects on society that would result.
Critics of marijuana legalization argue that with the increased availability of marijuana, the country risks an increase in violent crime and abuse of more dangerous drugs, and a general decline of the social fabric. Unlike the verifiable claims of revenue generation however, these claims have yet to be substantiated. In fact, studies show a lower incidence of heavy drug use and crime in the Netherlands, which has legalized the recreational use of marijuana, compared to countries where marijuana use remains restricted.