Marijuanahas over time grown by absolute restrictions from the time it wasfirst permitted by the Proposal 215 in California State in the year1996. Presently, about 23 states have legalized the drug for medicaluse. Besides, since the year 2012, Washington, Alaska, Colorado, andOregon have permitted the sale of the drug for recreational purposes.While it is evident that America does not always agree on mostthings, it can certainly do so on marijuana, commonly known as pot. Aconsiderable number of states are presently finished with the ban andare prepared to decriminalize or legalize the consumption ofmarijuana for health and/or recreational purposes. These states havebeen supported by publications as well as people drawn from differentpolitical spectrum and organizations such as the NORML (NationalOrganization for the Reform of Marijuana Laws). Putting aside thenumerous reasons that have been outlined for legalizing marijuana,such as ending the moral panic over drugs, decreasing the crimerates, confronting the racist marijuana policy, as well asterminating the drug-related pollution, the money bit presents aclear case that needs to be examined. Therefore, this paper shallpresent a discussion on the effects of legalization marijuana on theeconomy and businesses.

Statisticsfrom Colorado and Washington

Ascrutiny of a recently published tax data from the state revenuedepartment by the Washington Post revealed that as of the year 2014,the legal marijuana industry in Colorado was worth $700 milliondollars. The analysis showed that in the year 2014, Colorado sellersmade about $386 million from the sales of medical marijuana as wellas $313 million for the recreational use. The two market sectionswere reported to have produced $63 million in tax income as well asan extra $13 million received in fees as well as licenses.1In the year 2015, the marijuana sales in Colorado totaled $996million, which was up 42% from the previous $699 million in 2014. Outof the $996 million, it was reported that $587.8 million was from thesale of frivolous marijuana. It is imperative to point out that twoyears before, the sales of recreational marijuana would have beenzero. The year 2015 also saw Colorado net $135 million in licensingand taxes from marijuana sales. The tax foundation reported that thetax collection of marijuana in Washington and Colorado surpassedtheir initial approximations. From the Tax Foundation data, the stateof Colorado projected $70 million from marijuana tax income annuallyand following an initial sluggish beginning its collections areexpected to surpass $140 million in the year 2016. The sales inWashington are reported to be averaging above $2 million per day withthe revenue projected to reach $270 million annually.2

Effectson the economy

Legalizingmarijuana on both federal as well as state levels would provideeconomic benefits to the U.S in terms of billions. Marijuanalegalization will offer top-down economic enhancements in statecoffers as well as local communities among others. Other than thefunds, it will also save the state as well as regional governments’substantial sums that are currently being wasted in law enforcement.

Themost noticeable effect of legalizing marijuana on the economy lies inthe tax revenues collected. The average transactions in marijuana areestimated at $ 113 billion per year translated into a loss of almost$45 billion in taxes.3The tax foundation reports that an established marijuana trade hasthe potential to generate over $28 billion in tax incomes for thefederal, state, as well as local administrations counting $7 billionin federal incomes. Besides, a federal tax totaling $23 for everypound of a product, the same as that of tobacco has the potential togenerate $500 million annually. On the other hand, a 10% salessurcharge may produce $5.3 billion annually with the advanced taxrates gathering consistently more.4The inability to monitor as well as regulate the sale of marijuanamakes the tax authorities to miss federal, state, as well asmunicipal taxes that could in turn fund a number of programs orinitiatives including drug addicts help programs. Based on theenormous volume of marijuana that is currently trafficked in theU.S., the economic gains following its legalization will be immense.Whereas some people have argued that marijuana legalization will leadto a decrease in prices of the commodity, the projected increase inconsumption will offset this change. Therefore, with marijuanalegalization, individuals who option to use it as well as consume thebyproducts such as tincture of cannabis will be assured of regulatedsafe products.

Marijuanalegalization implies taking the drug out of the black market into thepublic limelight thereby offering the government an option to save onits spending. The war on drugs in the U.S is estimated to cost thegovernment over $1 trillion dollars on initiatives of direct lawenforcement, such as investigating the traffickers, growers, anddealers. While this cost included a range of Schedule 1 drugs, suchas heroin, meth, and cocaine, marijuana legalization will definitelyreduce this spending. In line with cutting on the governmentexpenditure, legalization of the drug will allow for dramaticreduction of prison spending. Statistics indicate that one in fourindividuals is locked up in prison because of non-violent drugfelonies comprising possession, sale, as well as recidivism relatedto marijuana. It is also vital to indicate that the marijuana-relatedarrests constitute a huge percentage of the law enforcement actionsthat involve drugs with majority reported as being of the black andLatino origin.5Marijuana legalization will mean decreasing the number of menimprisoned for drug-associated felonies indirectly benefiting thestate through a reduction in prison expenditure.

Effectson the businesses

Apartfrom directly pumping money into the economy, marijuana legalizationwill also create an undulate effect through a number of relatedindustries thereby affecting many businesses. A report by theMarijuana Business Daily approximations indicate that the U.S. pot(cannabis) trade will inject up to $44 billion per year into theeconomy of the country by the year 2020 if the current legalization,as well as business trends, continue. The projections in this reportreflect the progression of marijuana towards the conventional as itsurfaces from the glooms to convert into a reputable, legitimatetrade that is giving rise to tallies of jobs, nurturing uniquebusiness openings, as well as creating a huge undulate effectcrossways the U.S.6

Followingthe legalization of the drug, the cannabis crop requires cultivationand thus, farmers, fertilizer companies, farm workers, as well asadditional producers of the agricultural products will all benefit.Furthermore, an extensive adoption of the indoor growing of the cropwill see the sales of suppliers specific to the cultivation methodused swell. Owing to the reason that the indoor growing requires amassive consumption of power, the marijuana cultivation boom willstimulate the substitute energy industry following a push byconsumers for the ethical and organically produced marijuana.

Theother effect of marijuana legalization on businesses will involve thetransport of the drug. Transit firms, rail, as well as tracking, willbenefit given that the drug has to be moved from one location to theother for processing and sales. The manufacturers of the handlingequipment, drivers, and parent firms will benefit from the expansivenovel marijuana economy. For the processing, retail, as well aspackaging businesses, operations will not be as usual given that theywill be required to offer their services to the marijuana producers.In the U.S. system, where the drug has been legalized in some statesbut regulated, there is the need to pick samples routinely fortesting and certification. An important sector of the economy thatcould benefit from marijuana legalization and in turn lead to severalnew business opportunities is tourism. For instance, Amsterdam isknown for a broad range of activities including the liberalizedmarijuana policy that permits visitors to sample a collection ofmarijuana products from the cafes and coffeehouses within the city. 7


Inconclusion, this paper presented a discussion on the effects oflegalizing marijuana on the economy and businesses. The discussiondetermined that a number of states have already legalized marijuanaand the economic benefits are immense. The effect of this hasincluded increased revenue and reduction of expenditure in somesections of the economy. The legalization has also affectedbusinesses by creating new opportunities as well as jobs thateventually benefit the economy. Therefore, marijuana legalizationremains a pressing issue that most states need to consider foreconomic benefits.


Ekins,Gavin, and Joseph Henchman. “MarijuanaLegalization and Taxes: Federal Revenue Impact.”TaxFoundation(March2016) November 13, 2016).

FederalBureau of Prisons,“Offenses,” 13 November 2016).

Ghitis,Frida. “Amsterdamfor Tourists: What`s Legal?,” CNN,17July 2013.

Ingraham,Christopher. “Colorado’sLegal Weed Market: $700 Million in Sales Last Year, $1 Billion by2016,”TheWashington Post,12 February 2015.

MarijuanaBusiness Daily staff, “Chartof the Week: U.S. Marijuana Industry’s Economic Impact Could Hit$44B by 2020,”MarijuanaBusiness Daily,14 March 2016.

1 Christopher Ingraham, “Colorado’s Legal Weed Market: $700 Million in Sales Last Year, $1 Billion by 2016,” The Washington Post, 12 February 2015.

2 Gavin Ekins and Joseph Henchman. “Marijuana Legalization and Taxes: Federal Revenue Impact.” Tax Foundation (March 2016) (accessed November 13, 2016).

3 Gavin Ekins and Joseph Henchman, Tax Foundation

4 Gavin Ekins and Joseph Henchman, Tax Foundation

5 Federal Bureau of Prisons, “Offenses,” (accessed 13 November 2016).

6 Marijuana Business Daily Staff, “Chart of the Week: U.S. Marijuana Industry’s Economic Impact Could Hit $44B by 2020,” Marijuana Business Daily, 14 March 2016. 7 Frida Ghitis, “Amsterdam for Tourists: What`s Legal?,” CNN, 17 July 2013.