Issues in the USA’s Economy
Background
There is no doubt about the fact that the legalization of marijuana would bring money. Year after year, more states have legalized sales of marijuana, and this has significantly impacted their economy through the generation of billions of dollars per year. Most of this money usually stays local. Generally, there are several economic benefits as well as disadvantages from legalizing Cannabis. Some of the economic benefits include: generation of enormous tax revenue, the creation of hundreds of thousands of job opportunities across the nation, saved money, and provided investment opportunities. On the other hand, the economic disadvantages of legalizing marijuana include a tremendous reduction in marijuana prices, thus a decline in federal tax revenue and minimal or no value in retail commerce.
Advantages of legalization of marijuana
Impact on Tax Revenue
Over the past several years, sales of Marijuana in Washington and Colorado have generated a lot of tax revenue. Colorado made over 300 million dollars in fees and taxes on recreational and medical marijuana in 2019. More than 1.7 billion dollars was collected from sales in the state. According to BDS Analytics, United States generated 12.2 billion dollars from sales of marijuana in 2019, and in 2024, the sales shall probably increase up to $31.1 billion. Additionally, in 2018, sales of Marijuana in California generated over $335 million in sales tax, $98.9 million in cultivation tax, and over $411 million in excise tax (Evans, 2013).
Income and Jobs
Production of marijuana in dispensaries and nurseries is possible, for instance, in Nevada and California. This production results in the creation of jobs. The production has had a significant impact on the economy of the states mentioned above. A 2016 research Carried out by RCG Economics and Marijuana policy group suggested that recreational marijuana legalization support more than 41000 job opportunities until 2024 and result to generation of more than $1.7 billion in labor income. Similarly, the ICF study suggests that legalizing marijuana sales in California would create more than 81000 induced, indirect, and direct jobs. According to the New Frontier report, legalizing marijuana would generate more than 1 million jobs by 2025 (Evans, 2013).
Investment Opportunity
The legalization of marijuana could offer investment opportunities to investors within and out of the country. Currently, it is difficult for investors to maximize investment in the industry because marijuana is still illegal at the federal level (Glauser, 2012).
Saved money
Several billion dollars per annual have been incurred in federal marijuana enforcement costs. American Civil Liberties Union report in 2013 stated that the expenses in that year were nearly $3.6 billion annually. Therefore, legalizing marijuana would lead to a decline in enforcement costs (Evans, 2013).
Disadvantages of legalization of marijuana
A certain research report has stated that there is a steady reduction in prices of marijuana, which can consequently lead to bankruptcy in individual marijuana firms, as well as crippling the states’ ability to collect the amount of tax revenue they gathered in the beginning. According to another report, Colorado spends $4.5 to fight issues in public health and safety for every dollar it earns from legal marijuana. These two issues are a huge economic setback for legalizing Marijuana (Glauser, 2012).
Washington post-analysis have reported that there is a tremendous drop in the price rates of wholesale marijuana in the states that have legalized marijuana. In the past four years, there is a 70% drop in the marijuana price in Colorado. Similarly, marijuana sells for as low as $100 per pound in Oregon. Although this drop is convenient for the customers, it may be very devastating for the economy. Therefore, the legal states generate large amounts of dollars in tax collection, but the take is minimal. The report affirmed that tax rates of marijuana are set as a percentage of price; therefore, a drop in the amount of marijuana would mean that there would be a decrease in revenue per sale (Glauser, 2012).
Some experts predicted that legalizing marijuana would reduce its price by 50%. Others also said that in the end, weed would become so cheap that it would have minimal or no value in retail commerce. According to the Centennial Institute report, Colorado is losing enormous amounts of money while trying to keep up with its legal weed market. The report also indicates that Colorado spends millions of dollars every year to cater for motor vehicle accidents, hospitalization, and other similar situations (Glauser, 2012).
Solution
In summary, there is no doubt that marijuana business would cost some money to operate; the positive economic side of legalizing weed tends to outweigh the negative side hugely. The creation of the marijuana industry has resulted in the generation of enormous tax revenue, the nature of hundreds of thousands of job opportunities across the nation, saved money, and provided investment opportunities. The trade of marijuana has the responsibility of supporting the federal government to take the weed industry to the next significant level. A strategic move could lead to the creation of more than 1 million new job opportunities as well as generating over $131 billion in federal tax revenue.
References
Evans, D. G. (2013). The economic impacts of marijuana legalization. The Journal of Global Drug Policy and Practice, 7(4), 2-40.
Glauser, D. (2012). The economic effects of legalizing marijuana. Seniors Honours Thesis In Partial Fulfillment of the Requirements of the Honors Bachelor of Science in Economics, University of Utah.