Beyond the debates surrounding individual freedoms and public health lies a less discussed but equally significant aspect of marijuana legalization: the addiction of state governments to the tax revenue it generates.

Forget the ethical aspects of legalizing weed. As Watergate’s “Deep Throat” advised in a parking garage: “Follow the money.”

As cannabis sales soar, state coffers are reaping the rewards. Let’s look at this phenomenon as it stands so far in 2024 and how it’s likely to pan out in future years.

Since Colorado and Washington became the first states to legalize recreational marijuana in 2012, a wave of legalization has swept the country. Currently, 24 states and Washington, D.C. have legalized recreational cannabis, while 38 states and DC have approved its medicinal use. One of the most compelling arguments in favor of legalization has been the economic benefits, particularly the tax revenue generated from cannabis sales.

In states where marijuana is legal, tax revenues have surpassed initial projections, often by wide margins.

The tax revenue potential from cannabis is huge. States collected a total of more than $3 billion in marijuana tax revenues last year. Analysts project that nationwide legalization could generate $8.5 billion annually for all states.

Take a look at the following chart, which shows the potential tax revenue that states are on track to generate under existing laws (compiled with the most recently available data):

Lawmakers and leaders at the state level have eagerly embraced the influx of revenue from cannabis taxes, allocating funds to a diverse array of initiatives and programs. Education has been a primary beneficiary, with many states directing marijuana tax revenue towards schools, scholarships, and other educational initiatives.

In Colorado, a significant portion of cannabis tax revenue has been earmarked for public school construction, infrastructure improvements, and youth drug prevention programs.

Additionally, states have allocated funds towards crime prevention and law enforcement efforts. By investing in community policing and drug treatment courts, states aim to mitigate the negative societal impacts associated with the War on Drugs. Addiction treatment and mental health services have received increased funding, reflecting the need to address substance abuse issues proactively.

Infrastructure development also has been a key area of investment. From road repairs to public transportation, cannabis tax revenue has been leveraged to fund critical infrastructure upgrades that benefit communities statewide.

In Oregon, where recreational cannabis was legalized in 2014, a portion of marijuana tax revenue has been allocated to support local governments and infrastructure projects in minority communities disproportionately affected by past drug policies.

The increasing dependence of state governments on marijuana tax revenue has had a profound impact on the trajectory of cannabis legalization nationwide. As more states witness the financial benefits of legalization, momentum for legal normalization has continued to build, with additional states considering similar measures. The allure of substantial tax revenue has proven to be a persuasive argument for lawmakers and voters alike.

The success stories of states such as Colorado and California serve as powerful examples for other states grappling with budgetary challenges. As state governments face increasing fiscal pressures, the prospect of generating significant revenue from cannabis sales becomes increasingly attractive.

Policymakers are more inclined to explore legalization as a viable solution to revenue shortfalls and budgetary constraints. Instead of raising taxes to meet budgetary needs, elected officials can instead tax weed. It’s an alluring win-win option for politicians.

Recognition at the federal level…

Members of Congress also have taken note of the growing dependence of states on marijuana tax revenue. While federal cannabis legalization remains a contentious issue, there is a growing acknowledgment of the economic benefits that legalization can bring.

In recent years, several bills have been introduced in Congress aimed at reforming federal cannabis laws, including proposals to legalize cannabis at the national level and allow states to regulate its production and sale.

Additionally, discussions surrounding federal taxation of cannabis have gained traction, with some advocating for a federal tax structure that mirrors the approach taken by states. By taxing cannabis at the federal level, proponents argue, the government could generate substantial revenue while also providing regulatory oversight and addressing public health concerns.

The addiction of state governments to marijuana tax revenue represents a paradigm shift in the national conversation on cannabis legalization. What was once a controversial and divisive issue has evolved into a pragmatic solution to fiscal challenges facing states across the country.

Crypto’s new bull market has started…

I regularly write about the opportunities in cannabis. But today, I want to emphasize the big profits that await you in crypto.

If you think crypto is too dangerous an investment, think again.

Read This Story: Cannabis and Crypto: The “Disruptive Duo”

Consider this fact: the “blue chip” of crypto, Bitcoin (BTC), gained 156% in 2023. BTC and the broader crypto realm have engaged in a roaring bull market this year.

Every portfolio should have some sort of exposure to crypto. But you need to be informed, to make the right choices. Start receiving our FREE e-letter, Crypto Investing Daily. Click here now!

John Persinos is the editorial director of Investing Daily.

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