medical marijuana economy

The Economic Benefits of Legalizing Weed

Although the Presidential election drew most of the attention in November of 2020, there were several other important decisions made at the polls as well: notably, several states held votes to determine the future of the legal cannabis industry in one form or another. Taking a leaf out of Colorado or Washington’s book, four states—New Jersey, South Dakota, Montana, and Arizona—decided to make marijuana consumption for recreational purposes legal. Mississippi also voted to allow medical marijuana.

All told, more and more states are moving to legalize marijuana (whether for medicinal or recreational use, or both), and the impact has already been tremendous. The legal changes have spawned a burgeoning industry of legal cannabis companies, including those which aim to research and develop cannabis-based medical products, those which are working to distribute and grow marijuana, and many others. All told, more than half of U.S. states have medical marijuana laws on the books, and fifteen states have legalized certain quantities of marijuana for recreational use as well.    

The economic benefits of legalizing weed have already been apparent as the first states have moved to change their legal positions. Overall, legal marijuana could mean a big push for state economies and big bucks for both the state and the federal governments.   Below, we’ll explore some of the key economic benefits of legal marijuana.

Key Takeaways

  • There has been a growing popular movement in the United States to legalize marijuana for medicinal and recreational uses, with several states adopting such measures already.
  • One motivation for legalization is the economic benefits that can come from the regulated commercial availability of marijuana.
  • Increased tax revenues, job growth, and investment opportunities all are powerful incentives to push for legalization.

Impact on Tax Revenue

Better than expected sales of marijuana in Colorado and Washington over the past several years have resulted in buoyant tax revenues. In 2019, Colorado collected more than $302 million in taxes and fees on medical and recreational marijuana. Sales in the state totaled over $1.7 billion.     Sales in the U.S were $12.2 billion, in 2019, and is projected to increase to $31.1 billion by 2024, according to a report from Arcview Market Research and BDS Analytics.   Local research supports this view as well; a report from the Colorado State University-Pueblo’s Institute of Cannabis Research recently found that the legal cannabis industry has contributed more than $80.8 million to the local economy in 2017, primarily through taxes and other fees.   Should marijuana become legal on a federal level, the benefits to the economy could be exceptional: a report from cannabis analytics company New Frontier suggests that federally legal pot could generate an additional $105.6 billion in aggregate federal tax revenue by 2025.  

That is the carrot that dangled before many states. In December 2019, it was reported that since January 2018, California’s cannabis sales had generated 411.3 million in excise tax, $98.9 million in cultivation tax, and $335.1 million in sales tax.   The Massachusetts Cannabis Control Commission reported in November 2019 that in the first year of opening marijuana retailers, $393.7 million was generated in gross sales.   (See also: What Will Jeff Sessions Mean for the Marijuana Industry?)

Income and Jobs

Setting up marijuana nurseries and dispensaries would be the first step for the states that voted in favor of medical marijuana. These would not only create jobs but also set the ball rolling for economic activity in the pot industry in these areas. In the case of states like California and Nevada where such infrastructure already exists, the economic impact has become more quantifiable as the sector has matured.

A RCG Economics and Marijuana Policy Group study on Nevada says that legalizing recreational marijuana in the state could support over 41,000 jobs till 2024 and generate over $1.7 billion in labor income.   The ICF study estimates at least 81,000 additional direct, indirect and induced jobs in California as a result of legalized marijuana sales. It also projects an increase in total labor income by at least $3.5 billion.  

New Frontier’s report predicting the impact of federally legal marijuana suggests that nationwide legalization could generate 1 million jobs by 2025.   These jobs would likely come from the quickly growing industry which would spring up across the nation. Workers would be needed to farm, process, distribute, and sell marijuana-based products. Further, there would be ample opportunities for secondary industries which were related to legal cannabis although not directly involved in its production and distribution. These might include software developers, financing services, construction companies, and many others.

Investment Opportunities

Legal marijuana presents the possibility of tremendous benefits to economies on a local and a national scale. It also could help to secure the investment portfolios of investors across the country and further afield as well. While marijuana remains illegal on the federal level, it is difficult for investors to capitalize on the growth of the industry. The number of marijuana-related companies trading on public stock exchanges is miniscule, and while investors do have the option of working with over-the-counter exchanges, many of the most successful businesses in the early legal cannabis space have been based in Canada or other countries.

Should marijuana become legal on the national level, marijuana companies would be free to list their stocks on all U.S. exchanges, thereby enhancing liquidity and opening up access to many more investors. Should the growth rates for the cannabis space continue as they have in recent years, it’s likely that investors would express a keen interest in the industry.

Saved Money

When considering the economic benefits of legal marijuana, it’s important to think of the money that might be saved as well as revenue that could be generated through such a process. Currently, federal marijuana enforcement costs several billion dollars per year. A 2013 report by the American Civil Liberties Union found that the costs at that time were approximately $3.6 billion per year.   The more states that legalize cannabis, the lower the cost of enforcement would likely be; if marijuana were to be legalized on a national level, these costs would likely drop considerably. If marijuana were removed from the list of controlled substances, far fewer court cases involving the substance would go to trial, resulting in fewer incarcerations, and, in turn, more money saved.

Legalized marijuana also stands to benefit medical consumers of cannabis-based products. As marijuana becomes legal in more and more parts of the country, it’s likely that the price will drop overall as a result of commoditization. This may not immediately seem like good news for overall tax revenue or for marijuana companies looking to maximize profits. However, individuals utilizing marijuana-based products for medical treatment would stand to benefit considerably from lower prices for these items.

Bottom Line

There is ample pushback against the idea of legalizing marijuana across the country. Critics cite the potential for confusion among law enforcement officers aiming to keep up with shifting regulations, a concern about increased homelessness or youth use of the drug, the potential for decreased property values, and much more. Some are opposed to changing the regulatory status of marijuana simply because it means a change to the status quo. All of these reasons combine to decrease the likelihood that marijuana will become legal at a national level any time soon. However, as more and more states move to individually decriminalize pot use in various ways, and as the economic benefits of a legal marijuana industry take effect, there are also many compelling reasons to consider nationwide legalization.

As more states vote in favor of legalizing weed, here's a look at the economic benefits to state economies.

Hanyang DIS


The Economic Impact of Medical Marijuana

Many more states in the United States and western countries began to regulate the usage of marijuana for medical purposes. The major idea of legalizing medical marijuana stemmed from the impossibility of distinguishing the patients from using marijuana as a medical purpose or committing a crime. Legalization of medical marijuana definitely brings economic impact on society, whether positive or negative. Despite different political views, beneficial economic impact of medical marijuana legalization is expected.

The state of California first took a move on legalizing medical marijuana in 1996. Since then, other states followed in action. In case of Florida, predictions about the magnitude of the economic growth due to medical marijuana legalization are close to $1.6 billion by 2020 (New Frontier Press, 2016). A 2015 study conducted by Golzar estimated the budgetary implications of legalizing marijuana in the state of Florida. Through the study, the combined “annual savings and increase in tax revenue that would come from legalization would total $145.7 million in the short run and $285.5 million annually in the long run” (Golzar, 2015).

The economic impact of medical marijuana usages comes from different factors including: increases revenues without tax, increases job creation, and decreases in government spending. Every states which legalized medical marijuana enjoyed higher tax revenue after the law enactment.

Arizona $406.7 million Minnesota $9.6 million
Connecticut $50 million Montana $31.8 million
Delaware $7.1 million New Hampshire $7.2 million
Florida $17.4 million New Jersey $37 million
Hawaii $17.2 million New Mexico $54.2 million
Illinois $91.1 million New York $40.9 million
Michigan $633 million Rhode Island $60.2 million

Many states have experienced increase in government revenue due to medical marijuana legalization. Disregard of other factors, only the tax revenue could bring positive economical impact for the society from legalization.

Job creation is another major factor of economic impact that cannabis industry could bring to the society. According to the Bureau of Labor Statistics, the U.S. is expected to experience job decreases in manufacturing industry, utilities, and government jobs by 814,000, 47,000, and 383,000 respectively. One of the industries that would have increase in the number of jobs is healthcare, where cannabis industry is seated. The legal cannabis market was worth an estimated $7.2 billion in 2016 and is projected to grow at a compound annual rate of 17%. “Medical marijuana sales are projected to grow from $4.7 billion in 2016 to $13.3 billion in 2020” (

In the United States, state and local expenditures attributable to drugs prohibition are as follows. Among all drugs expenditure, which accounts for 29.37% of all criminal justice costs, marijuana comes as the second largest with 6.04% followed by heroine/cocaine with 12.78%. By legalizing only for medical marijuana, tax revenue is expected to surpass the expenditure caused by marijuana prohibition.

South Korea has been known as the place free of drugs. However, the recent data shows that the number of drug users are increasing. After the celebrity scandal with drug abuse, the police announced that it has captured 3,994 drug abusers within three month period from February 25 th to May 24 th in 2019. Comparing from the past year, the number of convicts has increased by 144.3%, indicating the fact of potential increase in the number of drug users. Among the convicts, approximately 66% accounted for possession, while others were convicted as higher degree of crime such as distribution and consumption.

Although South Korea has passed the law legalizing cannabis for medical purpose only, it is hard to project the conspicuous economic benefit as a society. In 2018, Korea Customs Service interpreted 80 instances of people trying to bring in medical marijuana products at the nation’s airports and seaports.

Despite the fact that South Korea is still a country with rejecting the norm of drug usages within the society, the first step has been taken in East Asia regulating cannabis for medical purposes. Higher knowledge about cannabis regarding health issues and benefits is required to turn the society more acceptable with medical marijuana and increase the industry.

Hanyang DIS DIVISION OF INTERNATIONAL STUDIES The Economic Impact of Medical Marijuana Many more states in the United States and western countries began to regulate the usage of marijuana