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DraftPaperUpdates.docxRunning head: LEGALIZATION OF MARIJUANA 1
LEGALIZATION OF MARIJUANA 2
Legalization of Marijuana in the United States at the National Level
Sara Pearson
Embry Riddle
26 September 2019
In the United States, there is the development of economic policies that shape macroeconomic decision making. Over the years of prohibition, the issue of marijuana legalization is now gaining traction. It is not only becoming a social issue but also an economic issue as it impacts mental health and has economic advantages and disadvantages. Currently, not all states in the USA have legalized marijuana for medical and recreational use, but the debate is happening to legalize marijuana nationwide. Legalization of marijuana in the U.S. impacts the economy in employment, tax revenue, increased income, and investment opportunities hence a key factor to address when discussing macroeconomics factors. The paper has different sections with a literature review providing the background and summary of various economic circumstance as well as facts. Later, there is an economic analysis with graphical analysis and explanation. Besides, the paper offers statistical support on the topic. The paper will also give a summary of the discussion.
In the United States, growing, transportation and use of marijuana are illegal under the federal government. Notably, the federal government classifies marijuana as Schedule I substance that has a high risk of abuse and less medical value. Therefore, it notable that the federal government does not recognize the advantages associated with marijuana, either in recreation or medical value. The state government has taken different regulatory approaches to increase access, growing, and use of marijuana in their jurisdiction. The proposers of marijuana decriminalization and legalization suggest that there are several macroeconomic benefits associated with the sale, use and growing of marijuana for medical as well as recreational use as discussed in this part of literature review.
The issue of unemployment is a significant factor when discussing macroeconomic factors in a country. Arguably, setting up marijuana dispensaries and nurseries national wide will create new jobs. In places like California and Nevada where the business is already mature, residence boast of new employment opportunity created. RCG Economics and Marijuana policy group suggest that legalizing marijuana in the state of Nevada supports approximately 41000 jobs by 2024. The ICF study estimates about 81,000 new jobs (induced, direct as well as indirect) in California as a result of legalization. If state legalization creates such significant employment, it is a representation of a bigger picture of a potential employment opportunity in marijuana legalization at the national level. The view concurs with New Frontier’s report that predicts an additional 1.1 million jobs, a positive impact of marijuana legalization nationwide, by 2025 (Robison, 2019).
As a result of the recreational marijuana industry, entrepreneurs seek occupational licenses to operate in the industry. Licensing affords the government the tax remits from the business. As new licenses issuance occurs, it changes the business from the black market to a more controlled and operated growing, transportation, and use of marijuana (Boehnke et al., 2019). Legalization affords the needed authenticity in participating in the business. Jobs in the legalized marijuana industry fall in different categories. First, the owner who makes both operational as well as managerial decision plays a vital role. He/she is the entrepreneur who employs others working in the business. Second, there is the support staff who works in the nurseries and dispensaries. It includes transporter moving the legalized pot from production to retailers. Lastly, there are those dealers who offer door-to-door services and other minor distribution services. From a national perspective, legalization will bring more people into the job market as individuals try to take advantage of new opportunities.
In North America, there was a sale of $6.7 billion in the year 2016, and there is a projected increase to an estimated $20.1 billion by 2021 based on Arcview Market Research (Cavazos-Rehg et al., 2018). A cannabis analytics firm named New Frontier indicates that there is high potential tax revenue in legal marijuana. Based on their projection, if there is the legalization of marijuana on a federal level, an additional aggregate of $131.8 billion is likely to be generated by 2025 (Robison, 2019). The projection comes from an evaluation of the high population perceived to use illegal marijuana from the black market.
The higher the sales expected from legal marijuana, the higher the potential tax revenue that the federal government will collect. Investigation shows that the reason many states are legalizing and decriminalizing marijuana is based on tax revenues expected and effects it brings (Kesler, 2019). The population using marijuana is gradually increasing, and so is the potential tax revenue.
The aspect of increased income afforded by the legalization of marijuana nationwide comes in two perspectives. First, increased income comes from labor income. The federal government will collect taxes from individuals employed in the industry. As discussed above, legalization increases individuals needed to ensure the business grows and product move smoothly within the supply chain. All employees and owner of the business earn a salary and wage, which the government taxes to earn labor income. There is a projected $1.7 billion and $305 billion in labor income in Nevada and California by 2024. If just two states can afford such big income is a short span, the question economists and proposers of marijuana decriminalization and legalization ask is the extent of labor income that the federal government will earn from federal-level legalization.
The other aspect of increased income is money saved, which the government can reinvest in other national projects. Given that the government incurs extra expenditure in enforcing marijuana control, legalization on a national level means a reduction in such expenditure. When marijuana get removed from controlled substances, the federal government will spend less money in court trials, police enforcement and incarceration among issues leading to an increase federal in government spending. In turn, money saved would be reinvested in other macroeconomic projects. Noteworthy, as a result of commoditization, the price will drop. It will help in maximizing the medical value associated with marijuana, lowering government expenditure in medical supplies saving government expenditure in national health care.
Currently, very few investors are willing to invest in recreational and medical marijuana growing, transportation, and sales. Investors fear backlash from the authority who may perceive the business as illegal and having no backup from federal law (Caulkins & Kilborn, 2019). At the same time, marijuana business may not extend to states without legalization affecting the ease of doing business. The possibility of legalizing marijuana will help in securing investment portfolios from authorities. Similarly, it will assist in capitalizing on the growth of use in the industry.
Another possible investment opportunity afforded by legalization is the growth of marijuana companies that merge and develop more over-the-counter shops to sell marijuana. Federal legalization will boost space and consumer perception about the use of recreational marijuana. At the moment, there is a negative influence that the federal government instills in people creating fear of its (pot) use. Legalization will ensure that people overlook the fear and increase overall sales, thereby leading to new companies around the nation.
Legalization will also bring fair competition for funds to the marijuana-associated company. Currently, companies dealing with marijuana cannot be listed on any U.S. stock and security exchange. It limits access to liquidity and investors involved in the business. Listing in stock and security exchange help investors get capital while others invest their earning breaking the deficit in capital needs. Similarly, it ensures the growth of the business by bringing in even foreign investors into the country. Besides, it will improve export to other countries in need of medical marijuana as a bilateral agreement will occur hence initiating a balance of payments.
The most significant element necessary for economic analysis is an understanding which state legalizes which use of marijuana. In the figure below, approximately 30 states legalize the use of medical marijuana, while 9 supports it for recreational purposes. There are four states that make any use of marijuana illegal, while 16 states use CBD or cannabidiol derived from hemp and marijuana.
Figure 1 Marijuana by States
The public opinion is a vital factor when undertaking any macroeconomic decision as it affects their employability and tax bracket where an economy develops and earns. In the United States, there has been growing acceptability of legalization of marijuana (Denham, 2019). The stigma associated with the use of marijuana has been decreasing hence informing the influence and marijuana policies and law. As seen in the line graph below, public influence accepting legalization started increasing from the 1990s and is gradually increasing.
Graph 2 Public Opinion
The growing population and influence about marijuana legalization are likely to increase the market. As seen in the bar graph below, the current sale may add up to $13.88 billion, but there is an increase in projection. Increase in the market indicates some facts that the employment income and opportunities, tax revenue, and investment will increase. Both recreational and medical marijuana is gaining traction in use.
Bar Graph Growth in Sales
Marijuana legalization benefit can only be based on states benefits. Colorado was among the first state to legalize recreational marijuana in 2012 (National Conference of State Legislatures, 2019). Based on the first-month sale in Colorado, $14 million and $32.5 million for recreational and medical sales were registered (Federal Reserve Bank of Kansas City, 2018). The CNN News suggested that legalized marijuana registered $9 billion in sales only in 2017. CNN News also estimates that the will be a rise of sale earning the country approximately $21 billion in 2021 (Smith, 2018). The income associated with the legalization of marijuana will increase if federal level legalization occurs.
The BDS Analytics supports the view of increase employment levels. According to BDS Analytic by 2017, the industry employed 121000 people. In their projection, if marijuana growing continues, by 2021, there will be 292000 staff in the business (Smith, 2018). There is a potential opening of more dispensaries and retail stores for distribution of legal pot.
The investment opportunities provided by legalization is gradually growing. Whenever state legalizes marijuana, more people increase investment endeavors into the industry. Even states which have legalized marijuana are reinvesting the tax revenue to other government projects. Chevalier (2018) indicates that the Colorado Department of Revenue collected from marijuana sale got distributed to Marijuana Cash Fund Program that finances the construction of public schools.
Summarily, legalization of marijuana in the United States on a national level is an act that brings economic benefits. At the moment, not all states have legalized it. At the national level, the federal government list marijuana as Schedule I drug and remain illegal. As discussed above, legalization at the national level offers four advantages. First, the business offers employment opportunities to individuals who will cultivate, transport, and sell marijuana. Second, there will be tax revenue earn after every sale besides the third factor of increased labor income to individuals. Lastly, legalization will save money and increase levels of investment in the country. Federal level legalization caters for macroeconomic policies like taxation, unemployment, and national expenditure. Though there are social challenges associated with legalization, the macroeconomic benefits are great calling for legalization to tap into the unexploited space.
References
Boehnke, K. F., Gangopadhyay, S., Clauw, D. J., & Haffajee, R. L. (2019). Qualifying conditions of medical cannabis license holders in the United States. Health Affairs, 38(2), 295-302.
Caulkins, J. P., & Kilborn, M. L. (2019). Cannabis legalization, regulation, & control: a review of key challenges for local, state, and provincial officials. The American journal of drug and alcohol abuse, 1-9.
Cavazos-Rehg, P. A., Krauss, M. J., Sowles, S. J., Murphy, G. M., & Bierut, L. J. (2018). Exposure to and content of marijuana product reviews. Prevention Science, 19(2), 127-137.
Chevalier, Z. (2018). Recreational Marijuana: A Business boon for States? Retrieved from https://www.usnews.com/news/best-states/articles/2018-08-01/the-legalization-of-recreational-marijuana-an-economic-opportunity-for-states
Denham, B. E. (2019). Attitudes toward legalization of marijuana in the United States, 1986-2016: Changes in determinants of public opinion. International Journal of Drug Policy, 71, 78-90.
Federal Reserve Bank of Kansas City. (2018). The Economic Effects of the Marijuana Industry in Colorado. Retrieved from https://www.kansascityfed.org/publications/research/rme/articles/2018/rme-1q-2018
Kesler, K. (2019). Marijuana Issues for Voters: Studying Issues US States Have Had with Legalizing Marijuana. WRIT: GSW Journal of First-Year Writing, 2(2), 8.
National Conference of State Legislatures. (2019). Marijuana Overview. Retrieved from http://www.ncsl.org/research/civil-and-criminal-justice/marijuana-overview.aspx
Robison, A. L. (2019). The Economic Effects of National Marijuana Legalization (Doctoral dissertation, University of Mississippi).
Smith, A. (2018). CNN News: The U.S. legal marijuana industry is booming. Retrieved from https://money.cnn.com/2018/01/31/news/marijuana-state-of-the-union/index.html
