Marijuana Legalization & Taxes: Federal Revenue Impact

The Big Q: What would a mature, legal Marijuana market yield in federal, state and local taxes?

The Big A: About $28-B per annum, according to the Tax Foundation.

The information is in its new study, Marijuana Legalization and Taxes: Federal Revenue Impact.

Below are some of the major findings, as follows:

  1. Marijuana tax collections in Colorado and Washington have exceeded initial estimates.
  2. A mature Cannabis industry could generate up to $28-B in tax revenues for federal, state and local governments, including $7-B in federal revenue: $5.5-B from business taxes and $1.5-B from income and payroll taxes.
  3. A federal tax of $23.00 lb of product, similar to the federal tax on Tobacco, could generate $500-M per year. Alternatively, a 10% sales surtax could generate $5.3-B per year, with higher tax rates collecting proportionately more.
  4. The reduction of societal risk in being engaged in the Marijuana trade, as well as the inclusion of taxes, will combine to reduce profits (and tax collections) somewhat from an initial level after national legalization.
  5. Society pays all the costs regardless of legality, but tax revenues help offset those costs.

According to the Colorado Department of Revenue, taxes on Cannabis yielded $13-M in March, up 31% from the same month last year. For the state’s fiscal year, tax revenue reached $125-M through March, up 54% from the same period the year before.

So, if one moderate-sized state in terms of population and GDP (gross domestic product) can yield $200-M, the Tax Foundation forecast is not out of line.

Marijuana is here to stay.


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