Economic impact of cannabis legalization

In this article we will address the issue of the economic impact of cannabis legalization. Especially the financial economic impact in countries where cannabis is legal, such as the United States and Canada.

On the one hand, we must keep in mind that the legalization of marijuana is a complicated issue in many places. In some regions the use of cannabis has been legalized, but only for medicinal use. We must also remember that this only affects products with a high THC content. In the case of CBD, it is legal in Spain and CBD is also legal in Europe.

The economic impact of cannabis legalization

There are also countries where marijuana is legal for recreational use. Elsewhere, they still can’t agree, or there are simply no plans to legalize marijuana use altogether.

In this particular case, we will focus on two global economic powers: Canada and the United States. We will see what is the economic and financial impact on these countries, after the legalization of marijuana for both medicinal and recreational use.

cannabis legalization

Cannabis legalization in Canada

Only two countries in the world have legalized cannabis: Uruguay and Canada are the countries in question. As a result, Canada is the only industrialized nation in the world that has legalized marijuana for recreational use and sale. The Canadian government’s recent action has provoked heated debate on both sides.

However, many analysts claim that the real reason for marijuana legalization in Canada is economic.

Taxation of legal cannabis in Canada

The annual marijuana industry in Canada is estimated to be in the range of $5 billion to $8 billion. Critics of the strategy say it does little for the economy. The annual figure of $5 billion to $8 billion was already part of the Canadian economy. It was not being tracked because it was illegal. However, it will be taken into account now that it is legal.

However, this distinction is not insignificant. The Canadian government will have the power to tax cannabis sales now that it is legal in the country. The Canadian government agreed to impose a tax on marijuana of $1 per gram or 10% of the retail price, whichever is higher.

This means the Canadian government will receive an additional $500 million to $800 million in taxes per year. Nearly 75% of the new revenue generated as a result of the sale would be retained by individual states. As a result, the legalization of cannabis would result in a substantial increase in Canadian government revenues.

online cannabis sales

There will be more online cannabis sales

The future of the cannabis industry in Canada is still unclear. Until now, the operation was illegal. This is why cannabis use still has a stigma attached to it, and frequent cannabis users are seen as drug users.

It will take some time for this to improve. This is why many people assume that cannabis users would choose to buy their product online rather than in a physical store.

This is because in-store sales do not have the same level of confidentiality as online purchases. The effect of cannabis legalization is likely to be felt by Canada’s e-commerce sector, which is expected to experience a significant increase in sales.

cannabis taxes

Impact on government expenditures

Cannabis legalization is a blessing for the government. This is because not only are revenues increasing, but expenses are drastically decreasing as well. The amount of crime in Canada has decreased significantly after the possession and sale of marijuana was decriminalized.

On the streets of Canada, there will be no drug gangs committing drug-related crimes. In terms of law enforcement costs, the lack of these gangs would save the Canadian government a lot of money.

Moreover, as the number of people in prison decreases, so will the cost of operating prisons and, subsequently, the cost of rehabilitating prisoners.

Marijuana Legalization in the United States

The issue of marijuana legalization in the United States has significant ramifications for both prison costs and government revenues.

Impact on prisons

According to some research, the U.S. government spends $9.2 million per day to incarcerate people accused of drug-related crimes. Drug offenses account for 45.4% of inmates in U.S. prisons, according to the federal Bureau of Prisons.

Looking at incarceration rates in the United States, incarceration that is drug-related recorded 1,429,299 new incarcerations in 2018, of which 608,775 were for marijuana possession.

According to estimates, the high rate of incarceration for cannabis possession accounts for a significant part of the cost of incarceration related to drug possession.

The data clearly show that drug incarceration is a significant problem in the United States, and marijuana use accounts for a large part of this problem. Because of the potential savings from reduced incarceration for possession, cannabis legalization is a hot topic for the U.S. government.

legal cannabis sales

Government finances

On the other hand, drug legalization is motivated by the future money that taxes will bring to governments. The legalization of marijuana in Canada resulted in an increase of $186 million Canadian dollars ($140 million U.S. dollars) in tax revenues.

Of course, Canada is not the United States, and the statistics published in Canada will be drastically different in the United States. When considering the potential effects in the United States, it is important to consider the impact at the state level. For example, Colorado legalized marijuana in 2015, generating $135 million in tax revenue.

The tax revenue created by the sale of marijuana for recreational purposes in one of the first states in the United States shows that taxing marijuana can be lucrative for the government.

The increased tax revenue from cannabis sales allows the U.S. to spend the extra money on products that will help the government. People should be particularly interested in the potential for increased tax revenue because it could be used to expand infrastructure or reduce current tax rates.

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