$3,098,866,907 – that’s a lot of bread. In fact, that figure is more than twice as much as the entire 2013 budget for the Small Business Administration, according to NerdWallet. That $3 billion figure came from a study conducted by the aforementioned personal finance site; $3 billion represents the amount of revenue the United States would see from taxes every year if marijuana were legalized throughout the country.
Due to the illegality of marijuana at the federal level, concrete numbers for the study were hard to come by, according to Divya Raghavan from NerdWallet. The study used data from numerous sources. For instance, to determine the amount of marijuana smokers in each state over the age of 25, NerdWallet consulted with the Substance Abuse and Mental Health Services Administration.
NerdWallet also took data from a paper published in 2010 by Harvard economist Jeffrey Miron that estimated the overall market size of illegal drugs, as well as the costs of enforcing their prohibition. Miron estimates the size of the marijuana market in the United States to be about $14 billion. For tax information, NerdWallet used sales tax data compiled from the Tax Foundation about each individual state. Lastly, NerdWallet assumed a 15-percent excise tax would be imposed on marijuana nationwide, based off of the Colorado excise tax for the drug.
Raghavan says the NerdWallet study is a conservative analysis. For instance, the study did not account for excise tax variations or fluctuations in law enforcement spending. Furthermore, medical marijuana sales and potential market changes are not considered. Essentially, NerdWallet’s $3 billion estimate for yearly marijuana tax revenue in the United States is for retail alone, and based off a $14 billion market that won’t change in scope if marijuana suddenly became legal.
Under the NerdWallet model, California alone would bring in $519 million in tax revenue, which the authors say would nearly cover the cost of the state’s parks and recreation department. Moreover, seven other states would make over $100 million, and 25 states would make at least $20 million in marijuana taxes, as Matt Ferner observed in the study for The Huffington Post.
Some other facts from the study about market size estimate that California has a marijuana market over $2.2 billion – nearly 16 percent of the total U.S. market. The two states that have legalized marijuana, Colorado and Washington, have $349 million and $500 million-sized markets, representing 2.5 percent and 8.1 percent of the national market respectively. Florida, a state currently without legal marijuana, but having a medical marijuana initiative on its ballot this November, has 6 percent of the nation’s marijuana market, representing about $848 million annually.
When it comes to money and marijuana, there is more to the picture than just tax revenue. NerdWallet didn’t take law enforcement savings into account like Jeffrey Miron did in his paper. Miron says more than $8 billion in law enforcement budgets would be saved from legalizing marijuana. However, not everyone agrees that marijuana should lead to lower law enforcement costs. For instance, The Denver Post reported that the Colorado Association of Chiefs of Police has asked the state for more money to train officers to recognize stoned drivers and to buy “oral fluid testing equipment.”
Miron’s estimate of the tax revenue that states would see from legalized marijuana was also higher than NerdWallet’s, even though NerdWallet used Miron’s figure to determine the market size of the drug. Miron said in 2010 that tax revenue in the U.S. from legalized marijuana would equal $6.4 billion a year, but his model was based on marijuana being taxed similar to alcohol and tobacco.
Rarely, however, are taxes and freedom ever spoken of together. The argument that marijuana should be legal because it can be taxed causes the inner-Ron Swanson in Americans to bristle. Pro-cannabis activists should not argue that “if marijuana becomes legal, the government can take more of the people’s money.”
Marijuana legalization, whether it is medical or recreational, is about choice and liberty. It is about choosing not to use prescribed drugs with dangerous side effects to manage pain. It is about growing one’s own plant, and using it for recreation, rather than alcohol or tobacco, two substances endorsed by the government that are responsible for more carnage than marijuana.
Pharmaceuticals, alcohol and tobacco have tight governmental controls to ensure their makers and the tax collectors alike get their due. Legalizing marijuana merely based on taxes would be to cede marijuana to a different type of governmental control.
