Estimates of Tax Revenue From Marijuana Legalization in Three States Vary Widely

Estimates vary widely about how much tax might be collected from marijuana sales if recreational use of the drug is approved by voters in Colorado, Oregon and Washington this November, the Associated Press reports.

Both supporters and opponents of the legalization measures admit they are not sure how much tax would be collected.

Supporters say legalizing marijuana could provide a windfall for the states, between new tax revenues and lower criminal justice costs. State government officials counter that legalizing the drug would lead to expensive legal battles, and new bureaucracies that would be needed for regulation.

In Colorado, state analysts estimate tax revenue from marijuana sales could range from $5 million to $22 million annually. One economist whose study was funded by a pro-legalization group puts the estimate at $60 million by 2017.

Washington state analysts estimate legal marijuana could bring in almost $2 billion in tax revenue over five years. The legalization campaign promises to use more than half of the revenue to fund substance abuse prevention, research, education and health care.

Oregon’s legalization measure would send 90 percent of the tax revenue to the state’s general fund. While state analysts have not provided an estimate of potential revenue, they say criminal justice savings could range between $1.4 million and $2.4 million per year.

One reason it is so difficult to estimate potential tax revenue is that no one knows how many people are currently buying marijuana illegally, and how demand would change if the drug were legalized.

A major unknown is whether the federal government would allow marijuana markets to be created, in defiance of federal law. Earlier this month, nine former administrators of the U.S. Drug Enforcement Administration (DEA) wrote a letter to Attorney General Eric Holder, urging him to oppose the three state measures. The former DEA officials said if the measures are passed, they will pose a direct conflict with federal law.

2 Responses to Estimates of Tax Revenue From Marijuana Legalization in Three States Vary Widely

  1. David Turner | September 20, 2012 at 4:01 pm

    And how much taxes at all levels is collected on alcohol, on cigarettes. Lots. So legalize marijuana and add that to the collection tray.

    And add it also to the far higher costs in health-related issues resulting.

  2. Joe Miller | September 24, 2012 at 8:20 pm

    Taxes smaxes. Since when did placing the responsibility for the production and distribution of wildly popular intoxicants into the hands of criminal predators via the black market through prohibitionist policies make sense?

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