Business

Study: Legalizing Weed Could Net $28 Billion In Tax Revenue

If marijuana is legalized nationwide, it could generate up to $28 billion for federal, state and local governments.

That’s according to the non-partisan Tax Foundation, which estimates a mature marijuana market could raise $7 billion for the federal government if a $23 per pound tax was applied — a similar tax level to the one put on tobacco.

Legal marijuana markets in Colorado and Washington have already raised more revenue than initially estimated.

Colorado assumed it would raise $70 million from marijuana taxes per year. Updated projections show the state could rake in as much as $140 million in 2016. In Washington, marijuana sales are averaging over $2 million a day with revenue set to reach $270 million per year. (RELATED: Colorado Marijuana Sales Soar To $1 Billion In Just One Year)

“If all states legalized and taxed marijuana, states could collectively expect to raise between $5 billion and $18 billion per year,” says the report. The Tax Foundation puts the size of the national marijuana market at 0.28 percent of GDP or $45 billion per year.

“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,” say the report’s authors Gavin Ekins and Joseph Henchman.

In the long-run, the report concludes tax revenue will fall from over $28 billion to a little over $22 billion if all states introduce a 25 percent sales surtax and the federal government charges an excise tax on the same level as 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 explained.

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