CANNABIS POTENTIAL AS A LEGAL REVENUE SOURCE
Written by: Larissa Gomes
The Cannabis industry may be a trending topic, sparking every manner of debate and challenge, however, one thing is becoming much more clear -it is booming and it is here to stay. Undoubtedly a dynamic and positive economic force in the U.S., future projections suggest it is only going to create more growth. From job creation, to a potential legal revenue source that generates necessary programs in State economies, it is even poised to surpass the manufacturing industry in the near future, in terms of expansion. Statistics on the growth within the Cannabis market only mirror the perspective that its positive effects are irrefutable.
According to New Frontier Data (whose projections are based on research from the Marijuana Policy Group), the legal Cannabis market will be worth an estimated $24 billion by 2025, that is at a 16% annual growth rate, from 2016’s $6.6 billion market worth. The medical market is projected to grow annually by 12%, and adult recreational use sales to grow by 21% annually (based on States currently legalized for medical and recreational initiatives). This translates into a quarter of a million jobs created by the projection date of the year 2025. With those exceptional numbers, it is difficult to deny that the Cannabis industry will be a major engine for economic growth of the U.S.
26 states and the District of Columbia (with 3 other States soon to join) have laws that largely legalize marijuana. The most extensive laws however, are implemented by 7 states and the District of Columbia, which legalize recreational use as well. Those states are: Alaska, California, Nevada, Colorado, Oregon and Washington with Massachusetts and Maine having their recreational use laws only having taken effect recently. *
In those states in which recreational Cannabis use is legal, there is an interest in how much is generated in tax revenue and exactly where or how the majority of this money is being distributed. For instance, Washington state is expected to pull in $154.6 million in tax revenue (according to Bloomberg). The state of Oregon, in the month of February alone, has claimed a whopping $3.48 million in tax revenue. It is important to note that in Oregon, this money is also being used to help aid the communities with funding for education, mental health and drug programs as well as job creation, it’s not all about filling the pockets of the government and its growers.
In California, proposition 64 will start issuing sales licenses by January 1st– 2018 and with this state being fully legal for recreational use, the tax revenue is projecting an annual revenue of $1.4 billion, which would be truly transformative for the Cannabis industry. California is already leading the way with a 15% excise tax, and here is a breakdown of where this 1 billion tax revenue would land:
$554 million for youth drug education
$185 million for environmental restoration
$185 million for marijuana safety programs
$52 million for administrative start up costs
$25 million for community grants, research and dui protocols**
In the state of Colorado, the ‘Marijuana Tax Cash Fund’, which boasts 105 million in tax revenue, will move toward creating housing programs, mental health programs in jails and health programs in middle schools.***
Research still needs to be done in order to assess all the potential benefits and risks of marijuana as well as intensive quality control, to make sure it is properly tested for contaminants and potency. Since it is still illegal on the federal level, this research is blocked, so it is important that some of the tax revenue spill back into this arena. Prop 64 in California will use $2 million toward just this, ever year. Another $3 million per year will go directly to launching standard protocol in the murky territory of DUI’s and THC levels found in the body.
Some of the other challenges include the fact that most banks and credit cards won’t accept the business of dispensaries, allowing for the advent of payment app systems specifically for cash markets. Another digital solution to the major issue of regulation is the use of a QR code to track and trace licensed growers crops. These codes will have the ability to identify the strain, the degree of THC and exactly how the marijuana was grown.
From new job opportunities, plentiful supplies of new revenue, and a decrease in the costs of policing a once prohibited product, the positive effect on the economy is irrefutable. Despite the challenges ahead, legalization of marijuana brings a remarkable opportunity for the government, with a focus on the importance of proper distribution, retail and regulation the cannabis market is poised to grow exponentially. The shift in public consciousness regarding the de-stigmatization of cannabis has been underway for some time already, and it is fair to say, it has already entered the mainstream.