A new report finds that legalizing and taxing marijuana boosts revenue for state and local governments, but not by much.
The credit rating agency Moody’s Investor Service says in a study released Tuesday that legalizing recreational use of marijuana brings governments more money than it costs to regulate it.
Despite high taxes on the legal sales of the drug, the revenue accounts for a small portion of government budgets. In Colorado, the first state to legalize recreational use, a marijuana tax brings in the equivalent of about 2 percent of the state budget.
In Washington, gross revenue from marijuana legalization equaled 1.2 percent of general fund revenue in the 2015-17 state budget.
Local Angle
Vancouver and Battle Ground benefit just a little from their legal marijuana sales, much like many other marketplaces around the country, according to a new report.
Moody’s Investors Service said on Tuesday that money made from pot sales in Colorado and Washington amount to 2 percent or less of the states’ general fund revenues.
That is a similar scale seen in Clark County, where $77 million worth of marijuana was sold in 2017, amounting to $21 million in excise tax revenues.
After the state collects the taxes and earmarks a portion for local jurisdictions, Vancouver and Battle Ground are poised to make $500,000 and $37,000 in 2018, respectively, according to the Washington Liquor and Cannabis Board. Both those bounties make up less than 1 percent of their respective general funds.
“It’s tiny, tiny,” said Natasha Ramras, chief financial officer for the city of Vancouver. She noted that marijuana sales also add to the city’s broader sales tax revenues, but that dollar figure is hard to calculate.
Battle Ground’s revenues are put in the general fund, much of which is spent on police. Vancouver has used its marijuana revenues to help pay for six new officers.
“They’re still here,” she said. “It funds a portion of their costs and we pick up the balance.”
— Troy Brynelson
Most of the states that have legalized marijuana earmark the revenue for law enforcement, drug treatment and other specific programs, which doesn’t help the states’ financial flexibility.
Likewise, Moody’s described the revenue effect as minimal on local governments in states with legalized pot.
Creating revenue for the state is one argument proponents use for legalization in New Jersey. Gov. Phil Murphy, who supports the effort, is planning on having an additional $60 million in taxes from legalized marijuana in the next fiscal year. That’s less than 1 percent of the state’s annual spending.
Twenty-nine states now allow marijuana for either medicinal or recreational uses, and the business is growing quickly. Moody’s cited data from the market research firm Euromonitor International that projects it will grow from a $5.4 billion business in the U.S. in 2015 to $16 billion by 2020.
Meanwhile, illegal marijuana sales are estimated at $40 billion.
