Marijuana legalization could inject over $130 billion into US tax coffers by 2025 - if the Trump administration stays hands-off

Thomson Reuters

Cannabis will create almost $132 billion in federal tax revenue by 2025 - if the federal government legalizes it.

• A report from New Frontier Data estimates the cannabis industry could generate $131.8 billion in federal tax revenue and add 1.1 million jobs by 2025 if it's legalized for adult use in all 50 states.
• If the US were to legalize cannabis federally today, it would add 782,000 jobs to the economy, according to the study.
• The country could be leaving billions in tax revenue on the table if it keeps the status quo patchwork of state laws , rather than coherent federal regulations.

Marijuana legalization could create $132 billion in federal tax revenue and inject over a million jobs into the US labor market by 2025 if it becomes legal nationwide, a new study says.

The study, from cannabis industry analytics firm New Frontier Data, seeks to estimate the total economic impact of the nascent industry. Cannabis is legal in eight states, including California, which legalized recreational sales on January 1. Vermont is likely to join that list once Gov. Phil Scott signs a bill legalizing the possession of up to one ounce of marijuana into law.

The study assumes the tax revenue, which will add $131.8 billion cumulatively to the US Treasury by 2025, will come from a 15% retail tax, payroll tax deductions, and a 35% business tax. Sales tax alone on cannabis would add $51.7 billion to US coffers between 2017 and 2025.

While commercial cannabis markets are up-and-running in eight states, the federal government can't collect any taxes on the industry since cannabis is considered an illegal, Schedule I drug. That means cannabis would be an entirely new revenue source for the US government.

"If cannabis businesses were legalized tomorrow and taxed as normal businesses with a standard 35 percent tax rate, cannabis businesses would infuse the U.S. economy with an additional $12.6 billion this year," New Frontier's CEO, Giadha Aguirre De Carcer said in a statement.

Thomson Reuters

A tax windfall?

New Frontier's estimates rely on a theoretical model where cannabis is legalized in all 50 states, and Congress creates a structure for the federal government to collect taxes on the industry. The difference between that model and the current patchwork of state laws is $76.8 billion in revenue.

In other words, the federal government will leave over $75 billion on the table, if it doesn't legalize the drug, according to New Frontier. That echoes a report from ArcView Market Research, which predicts the entire legal cannabis market to reach $24.5 billion in sales - representing a 21% growth rate - by 2021.

If legalized in all 50 states, cannabis would immediately add 782,000 jobs to the US economy. That number would increase to 1.1 million by 2025. To put that number in perspective, the Bureau of Labor Statistics projects the total US labor force to increase by 10.5 million people in the next decade.

But Attorney General Jeff Sessions, a noted cannabis opponent, rescinded Obama-era rules directing the Justice Department to keep its hands off of state-legal cannabis businesses earlier this month, which may put the industry's future in jeopardy. A growing chorus of lawmakers on both sides of the aisle blasted Sessions' move, though the cannabis industry was unperturbed.

Public opinion seems to be on the cannabis industry's side. Some 58% of voters said in a Quinnipiac poll on Thursday that marijuana should be legal, and 70% of voters oppose enforcing federal laws in states that have made marijuana legal.