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Marijuana Is a $794 Million Windfall for the States That Have Legalized Adult Use

Lawmakers loath to raise taxes but eager for new revenue are increasingly open-minded about legal marijuana.

Opinions expressed by Entrepreneur contributors are their own.

There are several good reasons for state lawmakers to embrace legal adult-use marijuana -- criminal justice reform, ending mass incarceration, respect for individual rights -- but for many the most compelling reason is this number: $793.6 million.

Hillary Kladke | Getty Images

That is the estimated 2017 total of taxes and fees raked in by five states where adult-use marijuana is legal, according to a report from the National Cannabis Industry Association. The NCIA, founded in 2010, represents about 1,500 businesses in the marijuana industry across the United States.

Much of the rhetoric advocating legal marijuana revolves around arguments such as cannabis being less dangerous than alcohol or the social justice issues surrounding the implementation of drug laws. Those are strong, valid arguments but when it comes to actually changing minds, it’s wise to remember that money really does change everything.

Related: Education and Employment Is High in Cannabis-Friendly States

A windfall where the law allows it.

The cannabis economy offers ambitious entrepreneurs the chance to flourish in an already competitive environment, but it’s the money governments are bringing in that is really turning heads in many public offices around the country. The NCIA-reported revenue for just five states. The numbers (rounded) from each are:

  • Washington -- $441 million
  • Colorado -- $234 million
  • Oregon -- $68.6 million
  • Alaska -- $6.1 million
  • Nevada -- $43.7 million

That Nevada number is particularly eye-catching because the state only started regulated sales of marijuana in July 2017.

For state governments, there is simply nothing else aside from a gargantuan tax increase that can generate that much additional money this fast. Many observers think the potential for a large and reliable new source of marijuana tax revenue will push more states to legalize, just as New Hampshire's legalization of a state lottery in 1964 prompted most other states to eventually follow suit. There are currenly just six states -- Alabama, Alaska, Hawaii, Mississippi, Nevada, and Utah -- without a state lottery. 

Related: Jimmy Kimmel's 'Dr. Quinn Medicinal Marijuana Woman' Spoof Is Hilarious

Estimates of potential marijuana tax revenue has energized the push for legalization in other states.

This talk heated up especially in Illinois last year, with even the Chicago Tribune weighing in that legalizing marijuana could help solve the state’s intractable budget problems. Voters will get a chance to approve recreational marijuana sales in November. However, it’s just an “advisory” ballot question. State lawmakers would still need to act. But a majority “yes” vote on legal adult-use cannabis would give lawmakers on the fence the political cover they need to move forward on legalization.

Late last year, the Pennsylvania auditor general also advocated legalized marijuana to solve that state’s budget crisis, conservatively estimating $200 million in new revenue.

Legalizing and taxing adult-use recreational marijuana is an increasingly viable option for states. The biggest barrier, as always, is lawmakers and state executives who led these states into a budget crisis in the first place. Voters who remember the promise of those who promoted state lotteries also might be skeptical about what marijuana tax dollars can accomplish.

That said, for embattled state leaders, legalizing adult-use marijuana is a path more and more are willing to take -- or at least seriously consider.

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