Legalizing Marijuana Is Controversial, But the Economic Impact Speaks For Itself: Here's What We Mean

As a firm Generous Wealth Management believes in the economic and social benefits of the Cannabis & CBD/Hemp industry. Hence why we decided to create a partnership with Dope CFO Certified Advisor to support those in the industry. Data from the Pew Research Center shows the amount of Americans who approve of the legalization of marijuana has steadily increased over the years.¹ This shift became more apparent in the months surrounding the 2020 election period, as every state voting for marijuana legalization approved the ballot. And, though marijuana legalization brings economic benefits to states that begin regulating the drug, there is still much controversy surrounding the subject. Let’s examine some of the opinions and economic impacts to better understand the conversation. 

The Opinions on Marijuana Legalization

According to that same Pew Research Center study, the majority of Americans believe marijuana should be legal for recreational use, while 32 percent feel it should be used for medicinal purposes only and eight percent believe it should not be legal at all.¹ Many of those opposing legalization cite car accidents and additional drug use as reasons, while many of those for legalization cite medical benefits and reduced law enforcement concerns.¹ 

The Potential Economic Impacts of Marijuana Legalization

As the first state to legalize medical and recreational marijuana, Colorado provides an example of the economic impact of legalization. Data from the Federal Reserve Bank of Kansas City shows that legalization improved employment by 5.4 percent over four years, totaling 0.7 percent of total employment and contributed to about two percent of the state’s total tax revenue.² Upon legalization, for recreational or medical purposes, marijuana legalization can impact a state’s economy in other ways.

Impact #1: Job Opportunities

With a new, regulated market, many jobs become available. This is not limited to jobs in the marijuana industry, but can also include secondary or tertiary industries. Companies that produce farming equipment, transportation, medical products and inspection equipment are just a few examples. 

Impact #2: Increased Tax Revenue

As shown above, with regulation comes taxes. Many states determine marijuana taxes based on local factors. But what is consistent is that many states distribute tax revenue to education programs, healthcare, public safety and state savings, according to information from the Tax Policy Center.³ Many states may distribute revenue this way to offset the negative effects of marijuana legalization.

Impact #3: Boost State Economies

Marijuana Business Daily projects marijuana sales to reach $19.4 billion to $23.5 billion between recreational and medical use.⁴ This increase in sales has an impact on local economies, which results in increased tax dollars towards the previously mentioned tax programs. 

Impact #4: Improved Police Procedures

Supporters of marijuana legalization state that the police would be free to pursue more serious crimes, rather than marijuana possession crimes. And, though the NJCRS does show an improvement in crime trends in marijuana-legal states, the study states that it is difficult to determine whether legalization was the primary cause.⁵ However, a reduction in crime rates could improve police procedures and reduce the cost of jailing and court procedures. 

Impact #5: Growing Investment Opportunities

New markets create new investment opportunities. Just as marijuana legalization generates jobs, taxes and GDP, so too does it improve the opportunities of investors in these industries.

Impact #6: Reduced Medical Marijuana Costs

According to the Harvard Medical School, CBD is shown to be beneficial for many medical conditions and is considered safer and less addictive than opiates.⁶ The legalization of recreational marijuana would increase the total amount of available product, reducing the cost of medical marijuana and its byproducts.

Marijuana legalization remains controversial. And whether you are for it, against it or somewhere in between, the fact remains that there are some economic benefits to consider. However, marijuana legalization could result in serious public health and safety concerns. Comparing this damage to potential economic benefits is necessary as the trend in state legalization continues.