This week’s issue of the Catalyst brings another article exploring the implications of a new marijuana marketplace.. Last week’s article discussed how the states of Washington and Colorado are implementing these new, legal markets into their respective economies. This article will follow up by examining recent investigations into the impacts that a legal marijuana marketplace will have on our communities, both economically and socially.
With a popular market that will soon be open to anyone over the age of 21, there is likely to be a boom in revenue from recreational marijuana sales in each state where it is legal. According to a Colorado State University study by an economist at Colorado Future Centers, it is anticipated that 665,000 Coloradans will purchase and smoke legal weed once it comes to market in 2014. The study also estimates the total market value of recreational marijuana to be $605 million, generating $130 million in revenue from the excise and sales taxes – a substantial amount of revenue for a state to collect from a newly implemented marketplace.
Interestingly enough, this amount of predicted tax revenue will not be enough to fulfill an important part of Amendment 64. The analysis from this study shows that the revenue from the 15 percent excise tax will be around $21 million, only half of the expected $40 million of excise tax revenue that would be going towards construction of Colorado schools. Not only that, but the report also concludes that the $130 million in tax revenue expected in 2014 might not even be enough to cover the expenses of legalizing recreational marijuana. Additional costs are anticipated to arise from implementing a new regulatory system, public health and safety initiatives, and human services responsibilities.
While it may be that the excise tax fails to raise $40 million for Colorado school construction, the additional costs associated with implementing a marijuana marketplace might not be as high as some studies suggest. In the Journal of Policy Analysis and Management, economists Mark Anderson of Montana State University and Daniel Rees of the University of Colorado see public health benefits that can result from marijuana legalization. Both of these economists view marijuana and alcohol to be substitutes, and not complements, and “suggest that, as marijuana becomes more available, young adults in Colorado and Washington will respond by drinking less, not more.” Rees is the author of another study that found that enacting medical marijuana laws is associated with a 13 percent drop in traffic fatalities, pointing out that marijuana legalization could curb the monetary and emotional cost incurred by drinking and driving.
Both of these economists also explore the impact that a legal marijuana market will have on teenage pot smoking. Based on evidence from the Youth Risk Behavior Survey from 1993 through 2011, they see “ little evidence between legalizing medical marijuana and the use of marijuana among high school students.” Focusing solely on the state of California after medical dispensaries began popping up, they find “little evidence that marijuana use among Los Angeles high school students increased in the mid-2000s.” In reality, this rate decreased from 2007 to 2009, and then increased from 2009 to 2011, an interesting flux that was mirrored in other large U.S. cities that do not have medical dispensaries (Boston, Chicago, and Dallas). From what Rees and Anderson state in this journal, there are no serious negative implications that marijuana legalization will have on the public health of society.
Now, what can be taken away from these investigative studies is that there is a lot of speculation and guesswork surrounding the impact that a marijuana marketplace will have on society. While there is diminishing reason to worry that marijuana use will increase among teenagers and adults in general, the revenue each state will receive from this new market is unknown. However, it is hard to fathom that they will not reap major benefits from what is shaping up to be one of fastest growing industries in the nation. In fact, this new marijuana marketplace is on its way to outpacing the expansion of the global smartphone market.
According to the second edition of the State of Legal Marijuana Markets, in a report edited by Steve Berg, former managing director of Wells Fargo Bank, cannabis is the fastest growing industry in the nation and it is becoming evident that there are no other markets growing as quickly. The report estimates that $1.43 billion of legal marijuana will be sold in 2013, and that figure is expected to grow by 64 percent, to $2.34 billion next year. That is much faster growth than the 46 percent expansion of the smartphone market that occurred in 2012-2013. Washington issued a fiscal impact statement on Initiative 502 estimating the state will generate $1.9 billion in the next five years due to the legalization of marijuana. Let us not forget about the millions of dollars these states will save in regulating rather than punishing use. The marijuana marketplace is a goldmine waiting to be taken advantage of.
With economic benefits expected to be huge and social benefits believed to be positive, it is only a matter of time before other states begin to jump on the legalization bandwagon. When they do, it will be interesting to see the response of the federal government. Two states legalizing weed is a conflict that can be ignored, but when 10 or 20 states vote to legalize, the federal government will be forced to change their position on a subject they have been adamant about for 40 years. The federal government has been making a profit off of the prohibition of marijuana since it was outlawed in 1937 at the expense of citizens around the world. Next week I will explore the impact that a nationwide marijuana marketplace would have in the U.S. as a whole and the consequences of the industry for the rest of the world.