the fiscal impact of marijuana legalization

March 21, 2020 2:37 PM

This is a nerdy question about a non-nerdy topic. Back in the 20th century, we used to say

"Hey, man, they should legalize pot and tax it so that we can reduce the budget deficit/end our dependence on imported oil/(insert issue of the week here)." Now that that day has come (in a few jurisdictions, at least), I'm wondering if the financial impact has been as positive as we predicted. Has the legalization of marijuana been a net budgetary positive? Have there been any offsets from increases in possible negative phenomena that might be associated with marijuana use, like impaired driving, increased hospital use, etc? Thanks in advance.

posted by the hot hot side of randy to Law & Government (7 answers total)

Best answer: Canada legalized in October 2018. Statistics Canada has a Cannabis Stats Hub that will point you towards justice, economic, and other stats.

The most recent release on government revenues from cannabis sales in Canada seems to be:

Government revenues from the sale of cannabis, fourth quarter of 2018 and first quarter of 2019 (this is from March 2019, I'd imagine we'll see one updated to March 2020 shortly).
posted by mandolin conspiracy at 3:20 PM on March 21, 2020 [1 favorite]

Best answer: Here is an article about legalization in Massachusetts from 2019: Recreational marijuana sales in Massachusetts generated $400M in sales in first year. Summary: In its first year of recreational cannabis sales, the state generated $61 million in total taxes on nearly $400 million in marijuana sales.

An additional report Evaluating the Impact of Cannabis Legalization in Massachusetts: State of the Data (2019) covers other impacts in Massachusetts as well, including impaired driving, healthcare, ownership and employment, and energy usage.
posted by skye.dancer at 3:29 PM on March 21, 2020 [1 favorite]

The thing is, it's not new money. It's discretionary spending. People are spending $ on herb instead of beer or going to dinner or whatever. So this new sector has growth, but it's coming out of other sectors. So overall it seems the economy shrugs.
posted by Patapsco Mike at 4:18 PM on March 21, 2020

The real savings comes from not locking up people of color for possession of pot.
posted by rockindata at 4:49 PM on March 21, 2020 [12 favorites]

> People are spending $ on herb instead of beer or going to dinner or whatever.


I don't think that's an automatic assumption. Certainly not without a source.

As a data point I'm not spending any less on alcohol because weed is readily available. And in fact my weed spending is down for the same amount of consumption because I'm not paying black market prices. So I have more access and choice in weed, AND more discretionary income.
posted by humboldt32 at 6:10 PM on March 21, 2020 [4 favorites]

Best answer: This one might be germane to your interests as well (since it's discussing impact on GDP):

Incorporating the cannabis market in the national economic accounts, fourth quarter 2018

It was released in March 2019. So there's still another full year of economic data that's accrued since then that needs to be digested to get a picture of where we're at in terms of GDP impact.
posted by mandolin conspiracy at 8:04 PM on March 21, 2020

Some shifts in spending may be short-term changes: Hotels benefit from marijuana legalization, study finds (Phys.org, March 10, 2020)

Legalization of recreational marijuana may lead to increased hotel revenues, according to a Penn State researcher, who found that after legalizing marijuana, the City of Denver, Colorado, saw roughly $130 million in new hotel revenues.
...
The positive effects lasted only about a year, primarily as a result of increases in prices. After a year, revenue rates returned to normal.

"We found that Denver hotels were able to charge and receive higher prices for hotel rooms following recreational marijuana legalization, and also found increased visitation to the Denver area with growth in occupied hotel rooms of 9% in 2014, higher than any other year we studied, resulting in positive economic impact," said O'Neill.

O'Neill also found that the positive effects were more pronounced in tourist-oriented, lower-priced hotels than in higher-priced hotels catering to commercial travelers. Additionally, the positive effects were unrelated to the distance between hotels and recreational marijuana dispensaries.

Here's a collection of 2018-era stats from Colorado's law enforcement efforts, with decreases in DUI cases by 15% from 2014 to 2017, while the total number of suspensions, expulsions, and law enforcement referrals for any reason has remained consistent post-legalization.

But more concretely, there's the direct and indirect benefits of the legal industry: The marijuana industry created more than 18,000 new jobs in Colorado last year (Washington Post, Oct. 27, 2016)

In 2015, the legal marijuana industry in Colorado created more than 18,000 new full-time jobs and generated $2.4 billion in economic activity, according to a first-of-its-kind analysis of the economics of legal cannabis in the state.

The study, conducted by the economic consulting firm Marijuana Policy Group, is based on two years of sales numbers from the state of Colorado. It measured both the direct effects of legalization -- including close to $1 billion in retail sales in 2015 -- and the industry's spillover effects on the Colorado economy.

These indirect impacts of marijuana legalization came from increased demand on local goods and services: growers rent warehouse space and purchase sophisticating lighting and irrigation equipment, for instance. Marijuana retailers similarly rely on other companies, like contractors, lawyers and book-keeping services, to conduct their own businesses.

But these articles don't look at the negative costs of current criminalization, as mentioned by rockindata: Here’s how much Virginia taxpayers are spending to jail marijuana users (Washington Post, Oct. 31, 2017)

... on one day in July 2017, there were 127 individuals in jail on a marijuana charge alone, costing Virginia taxpayers more than $10,000 a day.
...
Among the 127 inmates jailed in Virginia on marijuana charges on July 20, more than three-quarters of them — 96 — were still awaiting their day in court. The remaining 31 marijuana inmates had been charged and convicted. The average per-inmate cost to taxpayers to jail an inmate in Virginia was $79.28 per day.

Thousands of Virginians are convicted of marijuana possession offenses each year, and the number is growing: In fiscal 2008, there were 6,533 convictions for first-time marijuana possession in Virginia. The preliminary numbers for fiscal 2017 show more than 10,000 such convictions.

Those convictions, regardless of whether they result in jail time, can be devastating, according to the report. They can result in loss of a job or a security clearance, suspension of federal student aid, difficulty obtaining housing, and issues with professional licensing and child custody disputes.

There's also the financial cost to consider. “A first time marijuana offender represented by court-appointed counsel can expect to pay approximately $400 to $800 in costs and fees,” according to the report. Failure to pay those fees can result in additional fines and snowballing legal debt.

The burden of marijuana enforcement in Virginia falls disproportionately on young black men, according to the report. African Americans make up about 20 percent of the population in Virginia but account for 45.5 percent of marijuana possession arrests. Nationally, blacks and whites use marijuana at similar rates.

In short, legalizing marijuana would dampen racist policing impacts, which would change lives.
posted by filthy light thief at 8:32 PM on March 21, 2020 [1 favorite]