As Kid Cudi once stated, “Struggle is the enemy, but weed is the remedy”. With the American economy, this statement may very well ring true in the next few years. We are struggling to pull ourselves out of a recession and the legalization of marijuana could be just the thing governments can use to push tax revenues through the roof. In trying to discuss this from a strictly economic perspective, bear with me and assume that there is not the moral debate and look at this only in terms of cost.
Economist Stephen T. Easton has conducted a study in Canada revealing just how impactful the legalization would be. The study shows that a tax, much like the one on cigarettes, now could bring in an estimated $2 billion in tax revenue yearly. That’s not even including savings in the cost of law enforcement and prison inmates that are serving time for possession. Furthermore, a Forbes report stated that marijuana prohibition costs US tax payers $41.8 billion each year in taxes and assorted costs.
The interesting implications of legalization result in the drug becoming part of the global economy, and with it the effects of supply and demand on the product. If it were legal to buy, competition would increase, leading to lower costs to consumers. Consumer demand would increase, thus increasing the revenues acquired by governments. Unfortunately, the government could eventually raise taxes too high to where a new black market would emerge.
Regardless of any future scenario, the fact is that the government is currently making a grand total of zero dollars from marijuana while spending vast resources to catch and lock up criminals for marijuana-related cases. Legalization makes pure economic sense to anyone remotely in favor of turning our economy around. By tapping into this growing shadow economy, prison overcrowding and state budget deficits can begin seeing some real momentum in a positive direction. For many economists, the time for legalization is now. With Colorado and Washington already legalizing marijuana, it is only a matter of time before the entire country is on board and ready to take our economy to the level it needs to be on to compete on a global scale.
