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Benefits on Economic by Legalizing Marijuana

Oct 23



Although the Presidential election was the most talked-about news story of November 2020, there were important other decisions taken at the polls. In addition, elections were held across several states to determine the future of cannabis legalization. The four states of New Jersey, South Dakota, and Montana have voted to allow marijuana for recreational usage, following Washington's model. Mississippi also voted to allow Missouri medical marijuana.


All in all, there are a lot of states that have legalized marijuana for recreational or medicinal purposes. The impact has been huge. Legal cannabis companies have increased to include companies that conduct research and develop medical cannabis products as well as those who cultivate and sell cannabis. More than half the U.S. states have laws regarding medical marijuana, and 16 states have approved marijuana for recreational consumption.


The first states to allow marijuana for legalization have stated their intentions in a clear manner and the benefits to economics are clear. Legalizing marijuana can have a major impact on state economies as well as significant revenue for the federal government. In this article, we will look at the key economic benefits.

Effect on Tax Revenue

The higher than anticipated growth in marijuana sales in Colorado and Washington over the past several years have led to a surge in tax revenues. The state raked in more than $302 million in tax as well as fees for medical and recreational marijuana. Sales in the state totaled over $1.7 billion.78 Revenues of the U.S were $12.2 billion in the year 2019 and predicted to rise to $31.1 billion in 2024, as per an analysis by Arcview Market Research and BDS Analytics.9 Local studies support this notion too; a report from Colorado State University's Institute of Cannabis Research recently discovered that the legal cannabis industry was responsible for more than $80.8 million to local economies in the year 2017 principally through taxes and fees.10 Should marijuana become legal on a federal level, the benefits to the economy could be significant According to a report from the New Frontier, a cannabis analytics firm New Frontier suggests that federally legal pot could generate an additional $105.6 billion in total federal tax revenues by 2025.


This is the incentive that has been that is tossed out to states in a variety of ways. It was reported that California's cannabis sales have generated 411.3 million in excise tax, $98.9million in cultivation tax, $335.1million in sales tax12, according to the Massachusetts Cannabis Control Commission.13

Income and Jobs

Establishing marijuana nurseries and dispensaries would be the first step for the states that voted in favor of medical marijuana. They will not only create employment opportunities but also help set the wheels in motion for the business activity in the pot industry in these areas. For states such as California and Nevada with infrastructure that already is in place, the economic benefit has been more quantifiable since the industry has developed.


An RCG Economics and Marijuana Policy Group study on Nevada states that legalizing recreational marijuana within the state will create more than 41,000 jobs by 2024. This will generate an estimated $1.7 billion in labor income.14 The ICF study estimates that there will be at least 81,000 more direct, indirect, and induced employment opportunities in California in the wake of the legalization of marijuana sales. It also projects an increase in total employment earnings by about $3.5 billion.15


New Frontier's research on the potential impact of federally legal marijuana indicates that nationwide legalization could result in 1 million new jobs in 2025.11 These jobs would likely come from the quickly growing industry that will be booming across the nation. Workers will be required to farm, process distribute, and market cannabis-related products. There would also be many secondary industries associated with legal marijuana, even if they are not directly involved with its production or distribution. Software developers, financial services, construction companies, and many more industries might be included.

Investment Opportunities

Legal marijuana presents the possibility of huge benefits for economies on a local and a national scale. It could also help protect the portfolios of investment investors from across the nation and further afield as well. While marijuana remains illegal on the federal level, it's difficult for investors to capitalize on the rapid growth of the industry. The number of marijuana-related firms trading on exchanges of public stocks is minuscule, and while investors do have the option of working with over-the-counter exchanges, a majority of the most successful businesses in the first few years of legalization space were based in Canada or other countries.


If marijuana becomes legal on a national scale, then marijuana companies will be allowed to trade their shares on every U.S. Exchange. This could increase liquidity and opens up more investors to them. If the rate of growth for the cannabis space continues as they have in recent years it is likely that investors will take a keen interest in the business.

You save money

In assessing the economic benefits of legalization it is crucial to consider the amount of money that might be saved and also the revenue that could be generated by such a procedure. At present, federal marijuana enforcement costs a few billion dollars each year. A report in 2013 by the American Civil Liberties Union found that the cost at that at the time was around $3.6 billion each year.16 The more states have legalized cannabis, the lower the costs of enforcement would likely be. However, if marijuana were to be legalized on a global scale it is likely that these costs will be reduced significantly. If marijuana was taken off the list of controlled substances, far fewer court cases involving the substance would be brought to trial, leading to lesser incarcerations, which, consequently, more money saved.


Legalizing marijuana can also help patients who use cannabis-based products. Since marijuana will be legal in more and more regions of the United States is likely that the cost will decrease overall as a result of the commoditization process. It may not appear as good news for tax revenues or for marijuana companies seeking to maximize their profits. People who use marijuana-based products to treat their ailments will benefit greatly from the lower cost.


  • The United States has seen a growing interest in legalizing marijuana for medicinal and recreational purposes. Numerous states have implemented such laws.

  • Legalization could be motivated by potential income-generating benefits of legalized marijuana sales.

  • Tax revenues that are higher as well as job growth and investment opportunities are strong incentives to promote legalization.

Bottom line

There's a lot of opposition against the idea of legalizing marijuana across the country. The critics have cited the confusion that exists among law enforcement officials trying to keep up with the changing laws, concerns regarding youth using marijuana and homelessness and the potential that property values will decline. Many are opposed to altering the legal status of marijuana simply because it implies an alteration to the status existing. All of these factors combine to reduce the chances that marijuana will be legalized at a national level in the near future. There are numerous reasons to allow marijuana legalization across the country, such as the increasing number of states with decriminalized marijuana in a variety of ways, as well as the economic benefits.

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