The Economic Impact of Marijuana

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Marijuana: Economic Benefits and Potential Impact

Marijuana has been the most commonly used substance in the United States, and apart from the reported side effects, it has several beneficial properties. Many people think that it poses several health threats, but the truth is that its negative impacts on health, as well as its addictiveness, are minor. Legalizing marijuana would have major economic benefits because it would allow for fair and free distribution, and would contribute to drug taxation. Because of the legalization, the burden of incarceration and compliance would be greatly reduced. Despite the high costs that come with the imprisonment and implementation of marijuana, it remains one of the most used illegal drug in America. Because of the high demand for marijuana, legalizing it would lead to a massive positive impact on the American economy (Margaret Goldstein, 2016).

Research on Advantages and Disadvantages

It is important for the country to conduct research on the possible advantages and disadvantages of enforcing such a law in times when the economy is declining and when the state is facing a debt of record proportion. From the different studies that were conducted by various departments and organization in states that have legalized marijuana, different areas were determined to be affected (Margaret Goldstein, 2016). The areas that would experience significant change were employment, taxation rates & demand for cannabis, government revenue, enforcement & incarceration, and rehabilitation programs. All these areas have a possible positive impact on both local and state economy.

Enforcement and Incarceration Cost

The potential cut on prison spending through the legalization of marijuana would boost the local and state economy. In the United States, it is estimated that approximately four people are imprisoned because of possession and sale of cannabis. Latino and African-American communities' incarcerations are much higher because of the racial imbalance in the integrity of the system where they are more likely to be profiled because of their color. They also lack good defense when in court (Ephraim Smith, 2014). Because of these reasons, there is an overrepresentation of these communities in jails all over the country. If the number of people facing imprisonment because of drug-related offenses was to be cut down, there would be a boost to the economy. Poverty is also a factor that contributes to the split in communities because of drug wars (Bruce Barcott, 2015). High imprisonment rates carry with it a heavy load on government leading to the taxpayers taking all the expenses. Each year billions of dollars are used by taxpayers because of costs incurred in courts, and the fees keep increasing rapidly as the incarceration rates rise. In a report that was done, it was discovered that the expenditure of national offenders' justice on enforcement of marijuana was estimated to be $16.4 billion (Goldstein Margaret, 2016).


There will be a small rapid impact on the local economy level through indirectly related industries because of the marijuana being legalized. On acceptance of this crop, there will be a demand for farmers, cultivation, frameworks, fertilizer firms, and manufacturers of agricultural products who will eventually be beneficiaries. The increase of cultivation of marijuana also promises to provide an alternative energy industry. If more extensive planting is done, this could lead to a decline in illegal farming and fertilizer pollution which will be good for the environment (Morgan Kyala, 2010). This will, in turn, result in the money expenses of environmental agencies decreasing. The drug will need transportation after manufacturing and processing. The need for transportation will see transit organizations, rail, and trucking benefiting from its legalization. Organizations, drivers, and manufacturers dealing in this crop will experience this new and vast cannabis economy that will lead to an expansion of operations and reinvestments. Decriminalization of marijuana stands to give benefits to retail, packaging, processing industries as well as testing and certification laboratories. As more manufacturers benefit, it will lead to more job and employment opportunities for high-skilled workers. The common worries on morals will diminish the benefits economic.

Revenues and Taxation

The decriminalization of marijuana will provide a significant advantage as the government will be able to put a tax on the proper distribution and supply of marijuana (Morgan Kyala, 2010). Without taxation, the market price of marijuana is estimated to be extremely low. The introduction of a tax on cannabis would increase revenue for the government as well as offer an alternative to harmful and addictive drugs and alcohol (Morgan Kyala, 2010). After analysis of the supply of marijuana, there is a probability of it retailing at the same price as other medicinal herbs as the cost of production is similar. There are different types of marijuana, and so their original prices will vary. As the demand for legal marijuana increases it will have a distribution system and only stores with special permits of operation will be allowed to sell it (Ephraim E Smith, 2014). Just as state and local regulators identify regions for business and who sells alcohol, it will also be the same for marijuana. The market size of the pot is not of concern as the revenue that will be generated will be significant (Bruce Barcott, 2015). There are some ways in which cannabis can be taxed, and the government should analyze and choose the best method to generate real revenue. Taxation of cultivators is a possible way although it can pose a challenge as small-scale farmers can grow marijuana. Regulation of the consumers by insisting for licensing for consumers, buyers, and growers of cannabis is another method of taxation. The government will gain revenue by imposing charges on the licenses. The most suitable taxation method would be imposed on manufacturers and wholesalers who are licensed the same as the federal tax on cigarettes (Morgan Kyala, 2014). Compared to other methods this will be easier to execute as it is only a few groups being taxed. The tax will be added by the distributor and markup done at the same time that will increase price leading to competition.


Marijuana stands to be an aid to the local and state economy just like other intoxicants. This is supported when the costs that the government incurs during enforcement and imprisonment of marijuana-related crimes are analyzed. It would be more beneficial for the government if it would allow those arrested for marijuana-related offenses to be set free to be part of the economy development so as to save funds. The burden of always creating employment by the government will ease up as the legalization of marijuana will create more job opportunities. Job opportunities will be higher since more industries that will deal with supply, processing, testing, and purification will be established. Legalization of marijuana will benefit the government significantly from the taxes and revenues that will be generated from marijuana sale. Just as other intoxicants have age limits, an age limit for marijuana should be put in place to prevent kids from purchasing and using it. Marijuana is a potential booming cash crop if it is to be legalized.


Barcott, B. (2015). Weed the People: The Future of Legal Marijuana in America. Des Moines: Time Home Entertainment.

E, E. S. (2014). How legalizing pot could save America's economy. America: The week Publishers.

Goldstein, M. J. (2016). Legalizing Marijuana: Promises and Pitfalls of the economic status. Minneapolis, USA: A Division of Learner Publishing Book.

Morgan, K. (2010). Legalizing Marijuana on Taxation Basis. United States of America: Juvenile Nonfiction in the USA.

Morgan, K. (2010). Legalizing Marijuana: Could legalizing marijuana save the Economy. USA: ABDO Publishing Company.

November 17, 2022

Health Government


Addiction Economy

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Marijuana Drugs Taxation

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