The Benefits of Cannabis Legalization

by | Feb 8, 2022 | Cannabis

Reading Time: 5 minutes

The United States has witnessed a sudden surge in new cannabis-friendly legislature, with many states decriminalizing its use and distribution and Congress introducing new bills like the Drug Policy Reform Act and SAFE Banking Act. Although most of the changes are still in their infancy and have yet to be evaluated long-term, many individuals are wondering what a new cannabis-friendly government means for themselves and the country as a whole.

Despite every change coming with its own set of drawbacks, much of what we’ve seen so far with the new legislature has been largely positive and points towards a promising future. The various laws in place have not only promoted advances in public health and safety, but also provided substantial benefits for state economies.

Although many of these changes currently only exist on a state-level, these benefits are likely to persist through the entire country as the federal government continues to ease up on its strict regulations surrounding the cannabis industry.

Harm reduction

By shifting funding from criminalizing drug users to treating them, some states have seen significant progress in harm reduction and reducing the number of drug-related arrests. Oregon, in particular, has seen major results through Measure 110, the Drug Decriminalization and Addiction Treatment Initiative. The initiative decriminalizes low-level drug possession and increases funding for harm reduction, substance use disorder treatment, and other related services.

According to the Drug Policy Alliance, Oregon has experienced 60% fewer total drug arrests in the 10 months following Measures 110’s introduction, compared with the same period the previous year. This means a reduction in nearly 5,500 arrests since the change in legislature.

As part of Measure 110’s new policies, a portion of cannabis tax revenue is to be put into a special fund dedicated to the expansion of services for individuals suffering from addiction. In those first 10 months, Measure 110 provided a whopping 16,000 people with access to new services, 60% of which were for harm reduction. Prior to the new legislature, Oregon had some of the worst access to substance use disorder treatment within the country.

Through the measure, the Drug Policy Alliance and Health Justice Recovery Alliance has secured a total of $302 million in funding for harm reduction, treatment, housing, and recovery services over the next two years. $31.4 million has already been distributed, with the remaining $270 million expected to be awarded to various community organizations.

Increased tax revenue

The cannabis industry, both legal and underground, is huge. According to the Tax Foundation, the nation’s leading independent tax policy research nonprofit, the illegal U.S. marijuana industry costs taxpayers $28 billion annually in lost tax revenues.

Furthermore, in its market study, Cannabis In the U.S. Economy: Jobs, Growth and Tax Revenue, 2018 Edition, New Frontier Data predicts that the full legalization of cannabis on a federal level could generate a cumulative $105.6 billion in federal tax revenue and 1 million new jobs by 2025.

Although the above numbers are largely speculative, real-world examples demonstrate they may not be far from the truth. According to California’s Legislative Analyst’s Office, California had generated $652 million in cannabis excise tax and $165 million in cultivation tax (plus whatever was accrued from general sales tax) during 2020-2021. In a market study by ICF, it is estimated that the legalization of marijuana will produce at least 81,000 additional direct, indirect, and induced jobs in California, as well as increase total labor income by at least $3.5 billion.

Other states are experiencing similar results as well, with Illinois generating $317 million, Washington $559.5 million, and Colorado $423 million in cannabis tax revenue during the 2021 fiscal year.

Reducing costs

Not only does the legalization of cannabis bring in bonus tax revenue for the economy, it also drastically reduces government expenditures attributed to enforcing cannabis-prohibition laws. In the research report “A Tale of Two Countries: Racially Targeted Arrests in the Era of Marijuana Reform,” the ACLU claims there were almost 700,000 marijuana arrests in 2018, accounting for more than 43% of all drug arrests. In 2019, more people were arrested for marijuana than for all violent crimes combined.

For each marijuana-related offense, taxpayers are responsible for shouldering the costs related to the arrest, court processing, and if necessary, imprisonment of the offender. On average, it costs taxpayers around $35,000 to house an inmate for just one year.

In a paper supported by 300 economists (including three Nobel Laureates), Harvard economist Jeffrey Miron argues the government could save $7.7 billion a year in law-enforcement expenditures by ending marijuana prohibition. These claims are supported by the ACLU, who found in its report “The War on Marijuana in Black and White,” that ending the enforcement of marijuana possession laws could reduce government spending by $3.6 billion.

Looking to the future

With the overwhelming amount of evidence supporting the end of cannabis prohibition, it’s inevitable that the market is only going to continue to grow as more and more states (and eventually, the federal government) lessen their laws restricting the use and sale of marijuana. To learn more about what’s in store for the future of cannabis, check out our blog post, “Ecommerce and the Future of the Cannabis Industry.”

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