The Economics of Recreational Marijuana Legalization

The money that could be made from the legalization and taxation of marijuana in Canada is staggering. Weed is a cash cow that requires absolutely no marketing effort – it practically sells itself.

But just how much money could be made if Trudeau’s plan to legalize marijuana for recreational use starting spring of 2017 becomes a reality?

Back in April of 2014, University of Western Ontario professor Mike Moffatt spoke to CBC’s The Lang & O’Leary Exchange, arguing that marijuana legalization could help Canada’s economy on both side of the ledger, generating a healthy amount of tax revenue while saving the country billions of dollar in law enforcement costs. At that time, legalized recreational marijuana in the state of Colorado (one of four states that has had legalized pot use since January, 2014) was generating $2 million in taxes per month, which works out to roughly $0.40 per resident. If we were to extrapolate this number for Canada’s 30 million residents (conservatively), that would equate to approximately $12 million in tax revenue every month, money that could be put towards funding education and other social services nationwide.

In addition, it is estimated that Canada spends approximately $2 billion every year in police resources for arresting a prosecuting minor marijuana-related offences. An additional savings that could also be better spent elsewhere.

Colorado, one of the four U.S. states that currently has legalized marijuana for recreational use for anyone over the age of 21, presents an excellent case study.

For the fiscal year starting June 30, 2014 to June of last year, the state made approximately $70 million in tax revenue during that time, nearly twice the amount tax revenue brought in from alcohol, at approximately $42 million, according to statistics published by state legislatures and published in Time Magazine. Marijuana in Colorado is currently taxed at Colorado’s data indicated that the 10% for retail sales and 15% excise tax for large wholesale, and the revenue brought in from these taxes nearly doubled initial projections. In 2014, 71.3 million visitors spent $18.6bn in Colorado on marijuana, both record highs, until figures for 2015 are released.

Jason Quintal | April 29, 2016

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