The US could be making billions from collecting business tax revenues, sales tax revenues, and payroll taxes, instead of spending billions enforcing prohibition laws.
The federal legalization of cannabis sales and use could help reduce America’s staggering debt while also creating millions of jobs, according to a new report by cannabis data analysis firm New Frontier Data.
In their new report, Cannabis in the US Economy: Jobs, Growth and Tax Revenue, 2019 Edition, New Frontier’s analysts predict that a flat 15 percent federal sales tax on all legal weed sales could bring in $73.7 billion by 2025. This would be an entirely new source of revenue for the US Treasury, which is currently prohibited from collecting taxes on illegal drugs.
Federal legalization would also allow cannabis companies to break ground in the 39 states that currently prohibit adult-use, kickstarting an employment boom that would create millions of new jobs. The report notes that the cannabis industry generated around 82,000 jobs this year, and predicts that if full legalization occurred in every state, over 1.46 million new jobs would be created. By 2025, analysts predict that number could grow to 1.63 million jobs as the industry matures.
The increase in jobs would also bring another source of tax income to the federal government: payroll taxes. Full legalization would allow the financial industry to serve the cannabis industry without fear of reprisal, and millions of new weed industry employees would be placed on official payrolls. By 2025, the report predicts that payroll taxes on new weed employees could reach $9.5 billion.
Nationwide legalization would also allow the US Treasury to collect business tax revenues from weed businesses for the first time ever. Currently, the US government only collects income taxes from all state-legal weed operations, somewhere in the ballpark of $4.7 billion in 2017. But the combination of business tax revenues, payroll taxes, and sales tax revenues could increase federal tax revenues by $128.8 billion, the report forecasts. A federal adult-use law would also allow cannabis companies to trade on the US stock market, which could be a boon for the country’s financial industry.
“With so much speculation about economic slowdown, the potential for federally legal cannabis to create up to a million new jobs and close to $130 billion in tax revenue is likely going to be of interest to regulators and presidential candidates in 2020,” said New Frontier Data CEO Giadha Aguirre de Carcer in a statement reported by BusinessWire. “Cannabis is already being considered as an investment option for forward-looking portfolio and fund managers as a possible hedge against economic downturn impacting more traditional investments.”
Even if the federal government does continue to prohibit cannabis, analysts still believe that the US legal weed industry will top $41 billion in total sales by 2025. But without federal legalization, the US Treasury will not be able to take a cut of these profits, and will instead be spending billions of dollars to keep the war on cannabis in full effect.