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Would Legalizing Marijuana Help the Economy?


As recreational cannabis continues to win the hearts of Americans across numerous states, more people are asking themselves: would legalizing marijuana help the economy? As cannabis entrepreneurs and enthusiasts ourselves, we inevitably believe in the positive effects of marijuana legalization on the economy. But we’re not alone in our thoughts. Many historians, for example, argue that ending alcohol prohibition helped the U.S. get out of the Great Depression. So who’s to say that marijuana wouldn’t have the same influence over the economy in the present day?

However, this is not a discussion to take lightly. Although there are many benefits, governments and legislators would need to be attentive to regulate cannabis in a business-friendly way. With this in mind, let’s take a look at the possibilities of the legalization of marijuana and the effects it could have on the economy, so you can reach your own conclusions.

Cannabis regulation can bring increased tax revenue

The initial effects of marijuana legalization on the economy

As soon as a state or country legalizes recreational or medicinal use of cannabis, regulatory agencies and businesses have a massive amount of work to do. So, the immediate effects may look slightly chaotic at first glance. However, as soon as the new legislations are in place, local economies will start seeing positive results.

Effect #1: More Job Opportunities

As innovative cannabis businesses open, the number of job opportunities also rises. At the beginning of 2020, Leafly found that cannabis businesses were supporting over 240,000 jobs in the United States. This billionaire industry is growing at an impressive 15% scale every year. Cannabis jobs can range from farmworkers and trimmers to all sorts of corporate and executive positions.

Legalization efforts are not only responsible for creating jobs at cannabis farms or dispensaries either. All types of marijuana businesses can open selling products such as edibles, drinks, topicals, vaporizers, and all sorts of marijuana paraphernalia. If these businesses grow into large corporations they need HR representatives, salespeople, accountants, marketing agencies, legal advisors, and a plethora of positions.

Marijuana legalization can generate thousands of new jobs.

Effect #2: New Markets

Existing businesses can also benefit from marijuana legalization, creating products to supply the new demand. For example, a farming supply manufacturer can create a new line of products specially made for growing marijuana, a legal consulting firm can advise cannabis-related clients to comply with regulations, or a clothing manufacturer can experiment with cannabis-themed clothing lines or industrial hemp as a raw material.

Auxiliary businesses are also needed in the marijuana supply chain and can benefit immensely from the legalization, even in non-related fields. Here are some examples of industries and corporations that can benefit: packaging, equipment, construction, security, investment, logistics, and all types of professional services. Real estate is another sector that can experience substantial growth as a result of cannabis legalization. As the demand for rural locations that are suitable for commercial growing increases, so will sales.

Mid and Long-Term Marijuana Legalization Effects on The Economy

Most states are still in the process of understanding the marijuana legalization effects on the economy. However, the prospect is promising, and the economic benefits usually outnumber the social problems pointed out by prohibition advocates. Many businesses criticize legislations that over-regulate marijuana because this can hinder access to it and strengthen the illegal market as a consequence. That said, legislators must facilitate licensing processes.

Effect #3: More Tax Revenue

Tax revenue from cannabis is a challenging subject, mostly because it has long-term effects. If a state or country creates marijuana taxes that are too high, it can strengthen illegal markets or cartels. If legal marijuana is too hard to get or too expensive, consumers may return to their unlicensed dealers. So lawmakers must find the perfect balance between reasonable tax revenue rates for both the state and local businesses.

Governments around the globe may struggle to meet tax revenue expectations in the initial periods of legalization. Canada had approximately 23 million dollars in federal cannabis tax revenue from April 2019 to March 2020. This fraction represents only the federal portion, as provinces keep 75% of the cannabis taxes. For 2020, the government expected cannabis taxes to bring at least $100 million, but the estimates point to around $66 million.

Lawmakers must find a balance for reasonable tax revenue.

However, the states of Colorado and California provide much more reason for optimism. In 2020, Colorado collected over $355 million in tax revenue from medicinal and recreational cannabis. These numbers corresponded to the period between January and November. Compared to 2019, that’s a 17% increase. California had even bigger numbers: over $306 million in cannabis tax revenue in Q3 of 2020 alone. That’s 80% more than Q3 of 2019. As other states approve marijuana laws, these numbers can only grow.

Effect #4: Saved Money in Law Enforcement

Marijuana law enforcement is a costly business for governments. In the U.S., the war on cannabis costs billions of dollars and puts millions of people into the criminal justice system. Although an increasing number of states are creating regulations and marijuana legislation, it is still illegal at the federal level.

Many human rights associations point out that the arrests on cannabis-related felonies are extremely racially biased. Additionally, less incarceration also means decreased expenses on the criminal justice system. Marijuana legalization’s effects on the economy would undoubtedly include saving taxpayers money from the war against cannabis. Instead of spending money trying to defeat cannabis, the government, and as a result, the economy on the whole, would prosper.

Final Thoughts

Would legalizing marijuana help the economy? Yes, without a shadow of a doubt, the positive effects of marijuana legalization on the economy are plenty. Although some countries or states take longer than expected to collect the expected tax revenue, the labor market, and the criminal justice system’s benefits are numerous. As stigmatization decreases, voters are more and more inclined to support legalization and decriminalization initiatives.

Are you interested in all things marijuana? Bookmark our Cannabis News Blog. Homegrown Nursery, a top-quality cannabis nursery in California, is responsible for writing and curating this content.

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