Proponents of legal marijuana apparently know a thing or two about addiction. Because regardless of how habit-forming pot may be as a drug, it is becoming clear that its hold on government is powerful. And it is only likely to grow.
An analysis from the Tax Foundation, released May 12, says that by keeping marijuana illegal, the federal government and most states are foregoing $28 billion in tax revenue per year. At a time when budgets are tight and taxation out of favor, that is unlikely to go unnoticed. Pot may or may not be addictive, but money certainly is.
The Tax Foundation is an independent think tank established in 1937. Its mission is to “lead the tax reform debate toward smarter, simpler policy” that embodies simplicity, transparency, neutrality and stability.
What it found looking at marijuana is that by further legalizing marijuana, states could gain $20.5 billion in excise, sales, income and payroll taxes. And, by taxing pot in the same way tobacco is taxed, the federal government could pick up another $8 billion or so.
That is hardly enough to pay off the national debt, but it is real money nonetheless – more than enough to attract political attention. What is more, it would come largely at no cost.
As the Tax Foundation points out, marijuana is still illegal in most states and at the federal level, but that has not kept people from using and abusing it. The National Survey on Drug Use and Health says that 35 million Americans used marijuana in 2014, with 4.2 million of them meeting criteria for substance abuse or dependence.
In other words, whatever health or societal costs may be associated with using pot are already being borne. Legalizing and taxing marijuana, says the Tax Foundation, would not appreciably add to those, only to revenue.
It could also save money. Catching, prosecuting and imprisoning people for using or trafficking in marijuana costs the country billions of dollars every year.
The Tax Foundation’s analysis reflects the experiences of Colorado and other jurisdictions that have legalized marijuana. While it has several different taxes, Colorado’s total effective tax rate on marijuana is 29 percent. Oregon and Washington are at 25 percent and 37 percent, respectively. (An oddity is the District of Columbia, where voters elected to legalize marijuana in 2014, but Congress forbade them to tax it.)
Colorado will actually be lowering its marijuana tax rate next year in the hope that doing so will boost legal sale’s effect on the black market. It can do that, in part, because the tax has so far worked so well.
As part of the effort to pass legalization, Colorado voters were told they could expect the state to take in $70 million in marijuana tax revenue, with $40 million dedicated to school construction. The first year of legalization, 2014, failed to live up to that, bringing in only $56 million. Since then, however, sales have taken off. Calendar 2015 saw $113 million in tax revenue from marijuana sales, and 2016 is on track to top $140 million.
Not only does revenue like that mean that re-criminalizing marijuana is unlikely to gain favor, it strongly suggests that other states may want to follow Colorado’s example. Millions of dollars from what many voters will see as other people will be hard to resist.
