American Marijuana Taxes Could Bring In $3 Billion

If every state across America would follow in the footsteps of Colorado and Washington by establishing a taxed and regulated recreational marijuana market, the entire country would generate well over $3 billion of tax revenue every year, according to predictions from the personal finance website NerdWallet.

While many states remain on the fence in regards to using the potential for financial gain as a reason to move ahead with legislation to legalize the leaf, the latest statistics indicate that the economic benefit may be more substantial than what some lawmakers originally anticipated.

California alone would be one of the nation’s top earners, with the state generating more than $519 million per year, followed by New York with an annual take of nearly $250 million. In addition, seven states would fill their tax coffers with more than $100 million per year, while at least 50 percent of the nation’s state governments would earn no less than $20 million a year.

The statistics from NerdWallet are based on each individual state’s current sales tax rate combined with an average 15 percent excise tax on retail cannabis. However, the study is not exactly an accurate portrait of the post-prohibition outlook, as it does not take into account the many variables that are likely to appear with the onset of nationwide legalization. This data is more representative of the collective tax pool if the United States continues the trend of allowing marijuana markets to be established on a statewide basis.

“Marijuana use is illegal in most states, so it’s difficult to get concrete numbers on the amount of marijuana purchased and consumed,” explained lead researcher Divya Raghavan. “To estimate this value, we used data from the Substance Abuse and Mental Health Services Administration detailing the percentage of marijuana smokers ages 25 and over in each state and multiplied that percentage by the state’s population older than 25 to get the number of users in each state. We then took the state’s users as a percentage of total users over 25 in the U.S. and multiplied that by the total marijuana market estimate (sized at $14 billion by Harvard University economist Jeffrey Miron) to determine the market size in each state.”

Although the estimates are impressive, researchers at NerdWallet admit they approached the study with cautious conservatism. Similar studies have concluded that the American marijuana commerce has the potential to reach $10 billion in sales within the next four years – all while weed remains illegal in the eyes of the federal government.

To put these numbers into perspective – the United States alcohol industry generated about $9.5 billion in 2008, according to a statistical release from the Alcohol and Tobacco Tax and Trade Bureau.