Legalization of Marijuana and How it Benefits the Economy
The history of marijuana legalization is a long and extensive one. In 1937, the Marihuana Tax Act was passed, prohibiting cannabis at a federal level. This was the start of a long road to 2012 when Colorado and Washington became the first two states to legalize recreational marijuana. In 1970, the Controlled Substance Act was passed which prohibited cannabis, medical and recreational because it was deemed a Schedule 1 drug. Schedule 1 drugs are “drugs with no currently accepted medical use and a high potential for abuse.” 20 years after the Controlled Substance Act was passed, an even stricter law was passed called the Solomon–Lautenberg amendment which stated that if you were caught using cannabis recreationally, your license would be suspended for 6 months. This was enacted in 1990, the middle of the War on Drugs movement, so it makes sense stricter laws were being passed as the years went on. The War on Drugs movement was a time in America when extremely strict laws against drugs were being passed, targeting a lot of lower class neighborhoods. During these years, states were leaning towards moving forward with decriminalizing medical marijuana more than anything.
Technically, the first state to make major moves to legalization was Hawaii. It was the first state in 2000 to be able to legalize medical marijuana through the state legislature. After that, multiple other states, including Colorado followed suit. It wasn’t until 2012 that Colorado and Washington became the first two states in the U.S. to legalize recreational marijuana usage. However, what was beneficial about legalizing marijuana? Why did these two states get right on legalizing cannabis as fast as they could and make waves in America during the process?
The question is, how has this impacted Colorado’s economy? Does the state make more tax revenue through the tax that is placed on all marijuana sales? Should other states who haven’t followed Colorado’s example do the same? If so, what would be beneficial about following in the legalization footsteps?
Specifically in Boulder County, how do those tax and sales revenue numbers compare to the other counties in Colorado? The following visuals came from scraping clean two datasets, one providing the numbers for tax revenue and the other providing marijuana sales. The tax revenue numbers come from what the state makes back from each sale since there is a 2.9% tax on marijuana sales and a 15% tax on retail marijuana which is something to keep in mind while looking over the data below.
Above is a line plot showing how since 2014, the numbers for Medical Marijuana sales have drastically changed. These are also the top 10 counties that have the highest amount of sales. Boulder was in third place from 2014 to 2019 in highest medical marijuana sales until Jefferson County took over and remains there. These counties are the highest based on population density and how many people are buying. Jefferson County is a county that houses the Denver suburbs so it would make sense that they take over for Boulder since Boulder is a smaller town and has a dense population in a smaller area. While the visual helps to aid in finding the answer to how Boulder County sales differ from other counties’ medical marijuana, it does answer the question. An interesting pattern to point out is how the sales seemed to have peaked around 2020, right when the pandemic hit. The sales numbers for medical marijuana ever since 2020 have gone down exponentially. Could this be because of quarantine? There was not much to do and so it must have opened the doors for people who weren’t smokers to try it or for average smokers to do it more often. The amount of sales in the state of Colorado during Quarantine alone, which reached up to 36 million dollars in sales, would be extremely beneficial for any economy if millions of dollars were flowing in and out. This will be expanded upon in great detail later.
Above is a bar chart going into Boulder County’s Recreational Marijuana sales. This shows the retail tax revenue and how much the state made from the sales of marijuana. This chart shows that, in 2021, there was a peak in sales of recreational marijuana. Boulder County alone had tax revenue of approximately 1.6 million dollars at the height of marijuana sales. That kind of money is almost unheard of for one city that has a population of 100,000 people. This kind of tax revenue money should mean that there is a much better flow of government revenue and can go towards causes like making the city sparkling clean or improving the schools.
Something to also consider is that Colorado, especially Boulder County, is a popular tourist spot that is associated with marijuana. Most likely, Boulder gets a lot of tourists who might even be traveling for the sole purpose of obtaining marijuana products when they get to Boulder. Tourists, when they come into town, want to see the Rocky Mountains and maybe get a pack of edibles to try out since it’s not legal in their state or a couple of parents are moving their child into college and want to have some fun while they are here in Boulder. It’s a big factor in this revenue, most likely, and it’s not to be discounted. For a future project, it would be interesting to see if there could be a survey at a popular marijuana dispensary. They could survey throughout a popular holiday traveling weekend and be able to have customers answer if they are a resident of Colorado or are from out of town. That could give insightful data into whether non-residents are contributing more to Colorado’s tax revenue than Colorado residents.
This chart shows in detail what is shown in the line chart from earlier. This goes into tax revenue the state makes back from the marijuana tax. What’s most interesting is how similar the tax revenue is to the other graph that shows retail tax revenue. They are almost the same numbers. It seems that it doesn’t matter if you legalize medical or recreational, they will make the same amount of revenue. While this is a chart that discusses Boulder County, it’s clear this kind of revenue is incredible for the entire state. It just comes down to whether the state wants to make double what they are making from medical marijuana since that is the most common type of cannabis that has been legalized. 38 out of the 50 states have legalized medical marijuana in the United States. However, is it more economically beneficial to legalize recreational marijuana as well?
The graphs above compare and contrast the sales of retail and medical marijuana. Focusing on the scatterplots, the rise in the sales of both happened simultaneously. So while there is a huge difference between retail and medical marijuana for the buyer since you need specific credentials to purchase medical marijuana, there isn’t in regards to sales numbers. They both make the same amount of revenue, as mentioned before specifically in Boulder County. The scatterplot shows that compared side to side, the numbers are essentially the same in sales. Especially because it’s color-coded by year. It shows that both kinds of sales had a similar peak at the same time. Once again, it seems to not matter to the seller which one is being sold because they make the same amount of revenue.
One last thing to note is how legalization isn’t just good for tax revenue. It also keeps the citizens of that state safer because buying it on the street is extremely dangerous. The cannabis could be laced, there could be scams happening, dealers might have to fight over territory to sell their drugs, could be arrested for being in possession or selling, etc. Before legalization, marijuana dealing was a risky business to be in and was extremely dangerous. It’s a much better option to have it regulated and safe to sell and consume. So legalization in more states would not just be good for the tax flow, but for the residents of the state to feel like they live in a safe environment and want to contribute to society to help with upkeep.
With all of that being said, this next quote sums up and even expands on everything that has been discussed.
“According to the Colorado Department of Revenue, in 2022 the state collected more than $313 million in combined revenue from the excise and sales taxes on recreational marijuana, and collected nearly $71 million in retail marijuana excise taxes alone”
As the evidence speaks for itself, the solution to the question of whether other states should follow suit in legalizing marijuana through state legislation is clear. The data overwhelmingly suggests that, for states facing financial challenges, marijuana legalization garners a lot of tax revenue for the state. The success in Colorado serves as a compelling case study, urging policymakers in other states in America to consider the potential benefits of embracing marijuana legalization.
