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If voters in Washington State approve I-502, an initiative to legalize, tax and regulate marijuana, it could generate over half a billion dollars in new revenue a year for the government. That’s the conclusion of a new partial fiscal note from the state’s Office of Financial Management. (hat tip to Dominic Holden at the Slog)
The analysis assumes that if marijuana is legalized in the state, roughly 85.1 to 93.6 million grams of marijuana would be sold a year in the state. The legal production and retail sale of marijuana would generate significant amounts of revenue for the government through both a new excise tax placed on cannabis and current sales and business taxes.
Depending on levels of consumption the excise tax placed on marijuana is projected to generate roughly $434 million to $463 million in the first full fiscal year after the law is implemented. About half a million would be collected from new licensing fees. The bulk of this new revenue from the excise tax would go towards funding programs helping individuals obtain health care.
In addition to the excise tax, passage of I-502 would generate roughly $10 million from the business & occupation tax. It would also generate between $120 to $133 million from state and local retail sales taxes.
In total this partial estimate projects that the legalization of marijuana would bring in around $560 to $600 million in new tax revenue for the government. This would be a substantial financial infusion to the cash strapped state. For comparison the entire annual budget for Washington state is roughly $35 billion.
These are only preliminarily, partial estimates by the state. There are many unknown variables that could affect how much tax revenue I-502 will generate if approved.
14 Comments
Is Washington State in debt or facing a budget short fall and if so how much?
Are we making the argument legalize pot and tax it or don’t tax it and then you have to raise taxes on everyone else?
Does the study factor in how many people from other states would drive to buy pot in Washington if it were legal and how many people would not drive to Canada for pot thus keeping the cash in Washington’s economy?
Much of the current cost of pot is based on it being illegal how much would that cost go down if pot growers did not have to worry about arrest?
We will KNOW that this will happen if the federal gov’t comes in and says that they want to tax this also.
Washington’s budget will get another boost from legalization: spending on police, courts, and corrections should decline. Police in this country arrest more than 800,000 people a year for marijuana-related offenses, the vast majority of them for simple possession.
I think the Feds will cut our SS and Medicare again before that happens.
Can we get numbers for that savings:)
Think of the jobs it will create! Growers, pickers, farm implement sales, more IRS to collect the taxes, more Feds to bust the state!
At the high end 1/8 of an ounce is $45-55 in legal markets. Wholesale is about $200-230 an ounce for a quality product in legal markets. The best thing in legal markets is the diversity of the product which can be utilized to treat different medical conditions. And offer people a choice to control, alleviate and even heal themselves of chronic pain, etc. Just as in a wonderful romance; over half the magic is in the mystery. Too, both also have healing powers not always quantifiable but certainly obvious to even the most objective and callous observer.
A half-billion!
That could help pay for part of the Christine Gregoire Alaskan Way Viaduct Tunnel Replacement Boondoggle.
It saves even more when you factor in: no money spent for expensive court trials, jail time, appeals, housing MJ convicts, probation, etc. Probably bumps up to a Billion once all the factors are considered.
Where are there legal markets for weed? As far as I know California or the Netherlands is as close as it gets. And in both a fully open commercial grow will send you to prison. If Washington passed this bill and congress passed a bill repealing the federal prohibition the wholesale per gram cost would have to be well under a dollar.
The biggest benefit of legalization is ending the costs of prohibition. Since a great deal of those costs are priced into weed, legalization would drastically lower the price, which is good! (right now in California wholesale is somewhere around 3 and 6 a gram) but this does mean that the tax revenues are not going to be 25 percent of anything approaching current level of prices. The state is estimating that producers are going to sell weed at 3 a gram, and then after a bunch of state-mandated and useless mediators, consumers are going to spend 16 a gram in the store. Seems unlikely to me. Because of arbitrage, ‘gray’ market prices will be much lower than 16. After the novelty of legality wears off I’m pretty sure many if not most will take advantage of that. I think the writers of the initiative have put themselves on the wrong side of the laffer curve.
There’s an estimated $2Billion short-fall in WA State budget, and, of course, services to the neediest are on the chopping block.
There is a refusal to consider reversing, or even looking at, the million$ in tax breaks given to individuals and businesses.
There is no income tax, just reliance on the Revenue Act of 1935, which stipulates for property and sales taxes.
There’s also a Business and Occupation (B&O) tax.