Within the U.S., the marijuana industry has come an incredibly long way in just over two decades. According to a Gallup Poll from 1995, the year before California became the first state to legalize medical cannabis for compassionate-use patients, just 25% of respondents favored legalizing pot. Mind you, this was also during a time when the Drug Abuse Resistance Education (DARE) program was still a mainstay in public schools.
However, just 23 years later, there are now 29 states that have broadly sweeping medical marijuana laws, and nine states that have OK'd adult-use cannabis. Gallup's October 2017 survey also found that an all-time-high 64% of respondents favor legalizing marijuana. In fact, five national polls conducted over the trailing year have all shown overwhelming support for legalizing weed (with a range of 59% to 64% for approval).
Why isn't cannabis legal in the U.S.?
So, if the public is in favor of legalizing pot, why isn't marijuana legal at the federal level?
To begin with, Republicans aren't exactly angling for reform. Though there are few categories of people who are opposed, or mixed, in their view of cannabis, Republicans and senior citizens tend to be the most opposed to the expansion of weed. Considering that the GOP is firmly in control of Congress at the moment, there's virtually no incentive for them to take up reform -- especially with a busy docket.
Along those same lines, cannabis isn't a political game-changer -- at least not yet. A survey conducted by Quinnipiac University in April found that 82% of respondents could still vote for a candidate even if that candidate didn't share their view on legalizing cannabis. In other words, politicians don't yet have to worry about being voted out of office for having a negative view on cannabis.
There's also a steady stream of concerns regarding legalization, such as what might happen with adolescent access if there were a sudden proliferation of legal weed, or how driving-under-the-influence laws could be impacted. Though there are numerous marijuana breathalyzer prototypes in development, there isn't that line-in-the-sand regulation for driving under the influence with marijuana as there is with alcohol, which poses a challenge.
All of these factors pretty aptly summarize why marijuana remains a Schedule I drug, and therefore wholly illegal.
Five economic reasons to consider legalizing weed
But there are a laundry list of economic reasons why legalization might make sense. If we were to look at marijuana from a purely dollar-based standpoint, here are five compelling reasons why legalizing cannabis is attractive.
1. It would raise a substantial amount of revenue for federal and/or state governments
For starters, legalizing marijuana could put a lot of money into the pockets of individual states and the federal government. Cannabis data analytics firm New Frontier Data released a report in 2017 estimating that the immediate legalization of marijuana at the federal level would lead to $131.8 billion in aggregate federal tax revenue being collected between 2017 and 2025. New Frontier Data came up with this figure based on a 15% retail sales tax, payroll tax deductions, and business tax revenue.
It's worth noting that the corporate tax rate used in these calculations was 35%, which was the peak business tax rate before the tax cuts in December 2017. With a new (and reduced) peak business tax rate of 21%, this tax-revenue estimate has probably fallen a bit. Nonetheless, the point is that the federal government could go from collecting virtually no revenue annually from cannabis (it does currently tax corporate income for marijuana-based businesses), to generating perhaps $10 billion-plus annually.
2. Legalizing cannabis would create a lot of jobs
Legalizing marijuana would also be a major boon to the jobs market. Understandably, it's not as if that's hurting at the moment, with the latest jobs report showing an 18-year-low unemployment rate of just 3.8%. However, New Frontier also estimates that the immediate legalization of cannabis, and its steady growth through 2025, could lead to the cumulative creation of 1.1 million jobs.
Where would these job opportunities come from? We'd obviously see immediate demand from jobs that put workers in direct contact with the cannabis plant: farmers, processors, distributors, and retailers. Basically any business directly involved with the cannabis supply chain.
Yet, we'd also see a considerable uptick in ancillary pot businesses. Think about consulting firms, software developers that cater to the cannabis industry, financing and lending services, and construction firms tasked with building retail outlets and greenhouses. The list could go on, but the main point here is that it would immediately create a lot of new direct and indirect jobs.
3. Investors could benefit from the long-term growth of the legal pot industry
Another reason to consider legalizing marijuana in the U.S. is that it could help put investors on track to retire comfortably. To be clear, marijuana isn't the only fast-growing industry at the moment, and I'm certain it'll encounter its own set of growth hiccups, as any other industry does over time. The point is that as long as cannabis remains illegal at the federal level, investors have little ability to take advantage of its enormous growth potential, unless of course they're willing to cross their fingers and buy a penny stock on an over-the-counter exchange.
If cannabis were legal, marijuana stocks would be free to list on reputable U.S. exchanges, which would improve their liquidity and beef up reporting standards. More important, it would give investors the opportunity to take advantage of what could be double-digit growth rates for many years to come.
4. Billions of dollars saved in law-enforcement costs
Legalizing marijuana wouldn't be just about the amount of dollars working their way into the system. It would also entail saving some of the dollars that might otherwise be flowing out of the system. In 2013, a report from the American Civil Liberties Union found that federal marijuana enforcement costs approximately $3.6 billion a year. If cannabis were made legal, these costs would drop dramatically.
Additionally, removing marijuana from the controlled-substances list would reduce the number of court cases that go to trial. Fewer court cases mean fewer incarcerations, and therefore a lot of saved money.
5. A long-term reduction in cannabis prices
Last, but not least, legalizing marijuana in the U.S. would likely lead to a commoditization of dried cannabis over the long run, and therefore lower weed prices.
While lower cannabis prices wouldn't exactly be good news for marijuana stocks or the federal government, which is collecting tax revenue based on total sales, it could be stellar news for medical patients. Those folks who are benefiting from access to marijuana, cannabidiol oil, and other cannabis-based products would likely find that their medicines are considerably more affordable if pot is legal.
Are these economic reasons enough to convince lawmakers to consider legalizing marijuana in the United States? Only time will give us that answer.