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Legalizing Drugs Would Boost US Budgets By $100 Billion, Harvard Researcher Concludes

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Ending the prohibition of marijuana and other currently illegal drugs and instead taxing and regulating their sales would supplement federal and state government budgets to the tune of up to $106.7 billion a year, according to a new analysis from a Harvard University researcher.

“At both the federal and state levels, government budgets would benefit enormously from drug legalization policies,” Jeffrey Miron, director of undergraduate studies in the Department of Economics at Harvard University, wrote in the report published on Monday by the libertarian Cato Institute.

“This report estimates that $47.9 billion is spent annually on drug prohibition enforcement, whereas $58.8 billion could potentially be raised in tax revenue.”

Miron, who also serves as director of economic studies at Cato, published a previous estimate of the economic impact of legalizing cannabis and other drugs in 2010, but actual revenues from states that have since legalized marijuana blew those projections out of the water.

“Washington collected nearly $70 million in marijuana tax revenues during the first year of legalization, almost exactly the estimate in the 2010 report once adjusted for inflation. In fiscal year 2016, however, Washington collected nearly triple that amount, and in fiscal year 2017 tax revenues reached nearly $320 million. Oregon collected only $20.6 million in fiscal year 2016, about half the 2010 estimate, but it collected $70.3 million in fiscal year 2017, well above the 2010 estimate. In Colorado, marijuana tax revenues have risen from $67.6 million in calendar year 2014 to $247.4 million in calendar year 2017. Even adjusting for inflation, those figures far outstrip the 2010 estimates as well as the updated estimates presented in this paper.”

In the new analysis, Miron speculates that the real numbers could be higher because of robust cannabis tourism in legalization state so far, or it could be because marijuana prices haven’t fallen as far as he initially projected would occur under legalization.

“Revenues may continue to increase over time as more stores open or if demand increases as a result of greater cultural acceptance of marijuana,” he wrote. “But revenues in existing legalization states may also moderate if other states or the federal government legalize marijuana. Another consideration is that a nontrivial share of tax revenue in Colorado, Oregon, and Washington has been generated from collection of one-time application and licensing fees… As recreational marijuana becomes a more established industry, states will likely see a decline in the number of new entrants and therefore a decline in licensing revenue.”

Aside from revenues, Miron also looks at potential criminal justice cost savings resulting from the end of drug prohibition, which he estimates are “likely to be modest in practice, even if the number of drug arrests falls substantially.”

“Early experience suggests that governments will reallocate rather than reduce those expenditures.”

See below for Miron’s state-by-state calculations on the impact of drug legalization, courtesy of Cato:

Table 1: State and local expenditures attributable to drug prohibition, billions of dollars, 2016

All drugs Heroin/cocaine Marijuana Synthetic Other
29.37 12.78 6.04 4.93 5.62

 

Table 2: State and local expenditures attributable to drug prohibition, millions of dollars, 2016

State All drugs Marijuana Heroin/cocaine Other
United States 29,374.9 6,036.9 12,779.2 10,555.4
Alabama 252.9 51.2 111.5 90.2
Alaska 111.8 17.4 54.0 40.4
Arizona 615.1 96.7 286.3 232.0
Arkansas 192.9 40.3 82.8 69.9
California 5,963.4 951.4 2,718.4 2,293.0
Colorado 422.3 64.2 200.1 157.9
Connecticut 314.9 74.1 142.3 98.5
Delaware 113.5 25.1 48.5 39.9
Florida 1,170.0 180.4 564.3 425.2
Georgia 1,339.2 424.0 457.9 457.8
Hawaii 172.6 33.9 72.8 65.8
Idaho 140.7 23.2 63.8 53.7
Illinois 713.1 125.4 334.9 252.7
Indiana 637.6 236.5 193.0 207.4
Iowa 204.8 59.0 77.1 68.5
Kansas 206.5 54.2 81.5 70.7
Kentucky 276.9 56.8 122.2 97.9
Louisiana 376.2 72.2 170.0 133.9
Maine 174.5 63.5 67.1 44.0
Maryland 514.9 77.5 248.7 188.6
Massachusetts 481.0 115.5 215.5 150.0
Michigan 860.3 200.9 356.2 302.7
Minnesota 443.5 130.7 164.1 148.4
Mississippi 278.7 86.3 96.9 95.6
Missouri 335.8 76.6 141.5 117.5
Montana 160.4 28.7 68.4 63.3
Nebraska 147.2 31.1 63.2 52.8
Nevada 223.3 34.6 106.6 82.1
New Hampshire 175.7 65.2 67.0 43.5
New Jersey 669.3 117.8 320.5 231.0
New Mexico 345.1 59.3 149.4 136.4
New York 1,889.6 308.8 915.1 665.4
North Carolina 891.2 263.3 319.0 309.3
North Dakota 310.7 153.7 62.6 94.0
Ohio 650.2 111.0 311.3 227.7
Oklahoma 589.5 209.5 182.1 198.2
Oregon 375.4 57.2 177.7 140.4
Pennsylvania 1,033.0 179.6 493.7 359.6
Rhode Island 203.6 76.1 77.4 50.2
South Carolina 244.7 47.4 108.9 88.4
South Dakota 158.8 67.5 40.9 50.2
Tennessee 342.7 53.9 165.1 123.7
Texas 1,711.5 291.3 798.2 621.9
Utah 767.3 151.9 300.1 315.3
Vermont 69.3 19.5 29.5 20.4
Virginia 602.1 81.2 296.1 224.7
Washington 545.8 82.4 259.3 204.0
West Virginia 270.1 94.5 85.4 90.3
Wisconsin 414.8 62.7 199.1 152.9
Wyoming 223.5 42.9 89.3 91.3
District of Columbia 47.2 8.5 22.0 16.7

 

Table 3: Federal expenditures attributable to drug prohibition, billions of dollars, 2015 (in 2016 dollars)

All drugs Marijuana Cocaine Heroin Other
18.47 3.96 8.42 1.47 4.61

 

Table 4: State and federal tax revenues from drug legalization, billions of dollars, 2016

Total Marijuana Cocaine Heroin Other
Federal revenues 39.21 8.04 17.28 10.18 3.71
State revenues 19.60 4.02 8.64 5.09 1.86

 

Table 5: State tax revenues from drug legalization, distributed by population, millions of dollars, 2016

State Total Marijuana Cocaine Heroin Other
All states 19,603.33 4,020.00 8,640.00 5,090.00 1,856.67
Alabama 296.52 60.81 130.69 76.99 28.08
Alaska 45.07 9.24 19.86 11.70 4.27
Arizona 416.48 85.41 183.56 108.14 39.45
Arkansas 181.91 37.30 80.18 47.23 17.23
California 2,382.11 488.49 1,049.89 618.51 225.61
Colorado 332.86 68.26 146.71 86.43 31.53
Connecticut 218.99 44.91 96.52 56.86 20.74
Delaware 57.67 11.83 25.42 14.97 5.46
Florida 1,236.75 253.62 545.09 321.12 117.13
Georgia 623.07 127.77 274.61 161.78 59.01
Hawaii 87.06 17.85 38.37 22.61 8.25
Idaho 100.97 20.71 44.50 26.22 9.56
Illinois 784.33 160.84 345.69 203.65 74.29
Indiana 403.97 82.84 178.05 104.89 38.26
Iowa 190.72 39.11 84.06 49.52 18.06
Kansas 177.57 36.41 78.26 46.11 16.82
Kentucky 270.30 55.43 119.13 70.18 25.60
Louisiana 285.22 58.49 125.71 74.06 27.01
Maine 81.22 16.65 35.79 21.09 7.69
Maryland 366.23 75.10 161.41 95.09 34.69
Massachusetts 414.44 84.99 182.66 107.61 39.25
Michigan 605.87 124.24 267.03 157.31 57.38
Minnesota 334.92 68.68 147.61 86.96 31.72
Mississippi 182.62 37.45 80.49 47.42 17.30
Missouri 371.19 76.12 163.60 96.38 35.16
Montana 63.05 12.93 27.79 16.37 5.97
Nebraska 115.69 23.72 50.99 30.04 10.96
Nevada 176.17 36.13 77.64 45.74 16.69
New Hampshire 81.26 16.66 35.81 21.10 7.70
New Jersey 545.86 111.94 240.58 141.73 51.70
New Mexico 127.09 26.06 56.01 33.00 12.04
New York 1,206.34 247.38 531.68 313.23 114.25
North Carolina 613.04 125.71 270.19 159.18 58.06
North Dakota 46.23 9.48 20.38 12.00 4.38
Ohio 708.95 145.38 312.46 184.08 67.15
Oklahoma 238.70 48.95 105.21 61.98 22.61
Oregon 245.86 50.42 108.36 63.84 23.29
Pennsylvania 781.45 160.25 344.42 202.90 74.01
Rhode Island 64.49 13.22 28.42 16.74 6.11
South Carolina 299.02 61.32 131.79 77.64 28.32
South Dakota 52.41 10.75 23.10 13.61 4.96
Tennessee 402.89 82.62 177.57 104.61 38.16
Texas 1,675.66 343.62 738.53 435.08 158.70
Utah 182.70 37.46 80.52 47.44 17.30
Vermont 38.25 7.84 16.86 9.93 3.62
Virginia 511.17 104.82 225.29 132.73 48.41
Washington 437.42 89.70 192.79 113.58 41.43
West Virginia 112.47 23.06 49.57 29.20 10.65
Wisconsin 352.36 72.26 155.30 91.49 33.37
Wyoming 35.83 7.35 15.79 9.30 3.39
District of Columbia 40.95 8.40 18.05 10.63 3.88

 

Table 6: Summary of expenditure savings and additional revenues from drug legalization, billions of dollars, 2016

All drugs Marijuana Heroin/cocaine Other
Expenditures State 29.4 6.0 12.8 10.6
  Federal 18.5 4.0 9.9 4.6
Total 47.9 10.0 22.7 15.2
Revenues State 19.6 4.0 13.7 1.9
  Federal 39.2 8.0 27.5 3.7
Total 58.8 12.0 41.2 5.6

 

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.

Tom Angell is the editor of Marijuana Moment. A 15-year veteran in the cannabis law reform movement, he covers the policy and politics of marijuana. Separately, he founded the nonprofit Marijuana Majority. Previously he reported for Marijuana.com and MassRoots, and handled media relations and campaigns for Law Enforcement Against Prohibition and Students for Sensible Drug Policy. (Organization citations are for identification only and do not constitute an endorsement or partnership.)

Politics

Hemp Farmers Guaranteed Federal Crop Insurance Through Disaster Bill Amendment

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The Senate approved a bill on Thursday that is mostly focused on providing relief aid to areas impacted by natural disasters—but it also includes a provision ensuring that hemp farmers qualify for federal crop insurance.

The hemp section was inserted into the legislation at the behest of Senate Majority Leader Mitch McConnell (R-KY). Though similar language already exists in the 2018 Farm Bill, which federally legalized hemp and its derivatives, the senator took an added measure to provide clarity to farmers who want access to the insurance option ahead of the 2020 planting season.

“Beginning not later than the 2020 reinsurance year, the Federal Crop Insurance Corporation shall offer coverage under the wholefarm revenue protection insurance policy (or a successor policy or plan of insurance) for hemp (as defined in section 297A of the Agricultural Marketing Act of 1946 (7 U.S.C. 1639o)),” text of the provision states.

“Provided, That such amount is designated by the Congress as being for an emergency requirement pursuant to section 251(b)(2)(A)(i) of the Balanced Budget and Emergency Deficit Control Act of 1985,” it continues.

The Senate passed the bill by a vote of 85 to 8. The House is expected to approve the disaster legislation by unanimous consent by the end of the week, and President Donald Trump has offered assurances that he will sign it into law.

The legalization of hemp has sparked strong interest among farmers in states from Colorado to Kentucky, but it will still be some time until the U.S. Department of Agriculture (USDA) develops and implements its federal regulatory guidelines.

Agriculture Secretary Sonny Perdue said that while his department would not rush its rulemaking process, it still intends to implement the regulations before the 2020 planting season. After that point, USDA would be able to approve regulatory plans submitted by individual states.

McConnell, who championed the hemp legalization provision, has urged the quick and effective implementation of such regulations, and he’s suggested that he’d introduce standalone legislation to resolve any “glitches” in its rollout.

While not a standalone bill, the hemp-focused provision of the disaster legislation seems to indicate he plans to make good on that promise.

The senator has made much of his pro-hemp agenda, arguing last month that his role in reforming hemp laws is at “the top of the list” of reasons why voters should reelect him in 2020. He also cited hemp as an agricultural alternative to tobacco when he introduced a bill this week to raise the minimum age requirement to purchase tobacco products from 18 to 21.

Mitch McConnell Touts Hemp As He Proposes Raising Tobacco Purchase Age Limit

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Congressional Report Urges DEA Action On Marijuana Cultivation Applications

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A congressional committee report attached a large-scale spending bill containing marijuana-related protections has been amended to include a call for the Drug Enforcement Administration (DEA) to finally act on long-pending applications for federal licenses to grow cannabis for research purposes.

The legislation itself, which was released by a House subcommittee last week, could still be further amended as it goes through the legislative process. But as approved by the full House Appropriations Committee on Wednesday, the bill stipulates that none of the Fiscal Year 2020 funds it allocates may be used by the Justice Department to interfere in state-legal medical marijuana programs.

The provision has been federal law since 2014, but its inclusion in the initial subcommittee proposal as introduced is the earliest it has ever surfaced in the legislative process for the annual spending bill. While advocates hoped broader protections for adult-use cannabis states would also be included in the base legislation, that rider isn’t in the bill—at least not yet.

There was also a technical problem with the legislation that wasn’t resolved by the committee manager’s amendment, the text of which has not been posted but was obtained by Marijuana Moment. The medical cannabis provision lists the states and territories its protections apply to—but it left out the U.S. Virgin Islands, which legalized medical marijuana in January.

Similar errors have occurred in past versions of the legislation, when legal medical cannabis states North Dakota and Indiana were not included in an earlier version of the rider, and advocates hope that the language will be amended on the House floor.

But while that fix didn’t make it into the bill at the committee level, the directive to the DEA about cannabis cultivation licenses was added to the committee report attached to the bill via the manager’s amendment.

“The Committee urges the Drug Enforcement Administration to expeditiously process any pending applications for authorization to produce marijuana exclusively for us in medical research,” the revised report states.

The DEA has faced significant pressure from lawmakers, advocates and scientists to approve applications for additional marijuana manufacturers to produce research-grade cannabis. Currently there is only one federally authorized facility, and the quality of its product has long been criticized.

DEA announced a process to license additional cultivators during the final months of the Obama administration in  2016, but the Justice Department under then-Attorney General Jeff Sessions refused to act on more than two dozen pending applications. Current Attorney General William Barr has pledged to look into the matter, and has said he agrees that approving additional manufacturers is necessary.

Advocates hope that the new committee report language could help to finally spur movement at the department.

“The DEA is a disaster on marijuana and they need to stop obstructing research ASAP,” Michael Collins, director of national affairs for the Drug Policy Alliance, told Marijuana Moment.

“It’s beyond ridiculous that they won’t act on these applications. Even prohibitionists like Project SAM agree,” he added, referring to the anti-legalization group Smart Approaches to Marijuana. “And when the guys who get their drug policy from the 1920s say you’re behind the times, that’s pretty embarrassing.”

Justin Strekal, political director for NORML, said that Sessions “was the only government official opposed to cannabis research, and he is no longer employed.”

“Now is the time for AG Barr to follow through on his commitment and allow researchers pathways to consumer-grade cannabis,” he said.

Another provision included in the appropriations bill would offer protections for states that have implemented industrial hemp pilot programs under the 2014 Farm Bill. The Justice Department wouldn’t be allowed to use its funds to interfere in such programs under the proposal.

Of course, the 2018 version of the agriculture legislation removed hemp and its derivatives from the Controlled Substances Act, shifting regulatory responsibility onto the U.S. Department of Agriculture instead of the Justice Department, so that provision may not be especially relevant going forward.

The bill will next head to the Rules Committee, which will decide the list of amendments—potentially including additional cannabis-related ones—that can be considered on the House floor.

Read the text of the manager’s amendment with the DEA marijuana language below: 

Managers Amendment FINAL by on Scribd

Presidential Candidates Are Cosponsoring A New Marijuana Descheduling Bill

Photo courtesy of Mike Latimer.

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House Committee Approves Immigration Bill With Marijuana Protections

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A congressional committee voted in favor of a wide-ranging immigration bill on Wednesday, and the legislation includes marijuana-related protections for people who were brought to the U.S. as children.

Under the DREAM Act as approved, having low-level cannabis convictions, or engaging in state-legal cannabis-related activities such as working in the regulated marijuana industry, would not be counted against applications for permanent resident status for so-called Dreamers.

The House Judiciary Committee advanced the bill in a 19-10 vote, without specific discussion about the cannabis provisions.

The section concerning eligibility for permanent status stipules that having three or more misdemeanor convictions could be grounds for ineligibility—but the bill creates an exemption for “simple possession of cannabis or cannabis-related paraphernalia” or “any offense involving cannabis or cannabis-related paraphernalia which is no longer prosecutable in the State in which the conviction was entered.”

The text seems to indicate that immigrants who engaged in cannabis-related activities prior to a state reforming its marijuana laws would still be protected even if that activity was not state-legal at the time.

Similar language appears under a separate section about grounds for a provisional denial of an application for adjustment of status. Applicants would be exempted from such a denial if their conviction was for “simple possession of cannabis or cannabis-related paraphernalia” or “any offense involving cannabis or cannabis-related paraphernalia which is no longer prosecutable in the State in which the conviction was entered.”

A previous version of the legislation, filed in March, didn’t include the specific eligibility requirements related to certain criminal activity, nor did it contain any explicit marijuana protections. It’s possible that House Democrats thought up the exemptions during a brainstorming session earlier this month about potential bill revisions aimed at building more support.

The next likely stop for the DREAM Act will be the House Rules Committee before heading to a full floor vote.

There’s been growing interest in reforming marijuana policies as they apply to immigrants and visitors to the U.S.

Earlier this month, four congressional Democrats sent a letter to the head of the Justice Department and Department of Homeland Security to end the practice of rejecting naturalization applications solely because the applicant worked in a state-legal marijuana market. That came after the U.S. Citizenship and Immigration Services (USCIS) released a memo specifying that such activity could render them morally unfit for citizenship.

And last week, Rep. Earl Blumenauer (D-OR) introduced legislation aimed at resolving marijuana-related border issues, whereby visitors who admit to using cannabis or working in their country’s legal industry can be denied entrance.

New Congressional Bill Aims To Resolve Marijuana Industry Border Issues

Photo courtesy of Philip Steffan.

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.
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