The Economic Benefits of Marijuana

Since our blog has been up and running we’ve reviewed some of the less well known perspectives concerning the legalization of legalizing marijuana.  Now it’s time to break out the big guns!  This week we will be evaluating perhaps the most well known, and largely accepted argument advocating for the legalization of marijuana in the U.S. — the economic benefits.

Recently, acclaimed economist Milton Friedman, along with over 500 other prestigious slide_261869_1732346_freeeconomists, endorsed an open letter to the President, Congress, Governors, and State Legislatures which enumerated the benefits of legalizing marijuana.  Their letter calls attention to  Professor Jeffrey A Miron’s 2010 report The Budgetary Implications of Marijuana Prohibition; using his findings as the underlying premise for much of their letter.  The report indicates that a system of taxation and regulation would save $7.7 billion per year in state and federal expenditures on prohibition enforcement, and produce tax revenues of at least $2.4 billion annually if marijuana were taxed like most other consumer goods (and even potentially $6.2 billion annually if marijuana were taxed in a similar fashion to alcohol or tobacco).

When marijuana was first criminalized in 1937, our nation was in a radically different economic situation, and was able to allocate resources to its prohibition without significant detrimental fiscal effects.  In the article “Legalize Drugs and Stop the War on People”, Thomas Geers discusses the inordinate amount of money our government pours into prohibition efforts mentioning that, “$40 billion was spent on arresting 1,000,000 drug offenders in 1992. In 1993 and 1994 the $40 billion figure increased each year as did the number of drug arrests”. Although during the early 1990s the U.S. could afford to be spending $40 billion dollars a year on drug arrests; the economic situation of the country has drastically changed. Additionally, in a 2007 study featured in Forbes magazine, it was found that enforcing the marijuana prohibition costs tax payers $41.8 billion annually.

As our government continues to fight a war overseas and is reeling from one of the worst recessions since the Great Depression, there is simply not enough  room in the budget for arbitrary spending. Thus, given marijuana’s high potential to be a rich new source of tax revenue through the implementation of taxation and regulation, many feel that it should be legalized on this premise alone.

slide_261869_1732747_freeThe most dramatic example the economic benefits the legalization of marijuana could provide is seen in Oakland, a northern California city which currently faces a $31 million deficit and 17% unemployment.  Advocates of the economic advantages of legalizing marijuana have proposed the creation of 4 large-scale marijuana plantations, that could produce as much as 70,000 pounds of cannabis each year.

These facilities are told to have the potential to bring in an estimated $38 million a year in fees and taxes to the city, not only fixing the budget deficit; but also revitalizing the job market of the area and creating $7 million of surplus that the government could use towards improving education systems, local infrastructure, and other various agencies in need of attention.  If applied to the entire country, the legalization of marijuana has the potential to supply our federal government with enough funds to aid programs that are currently egregiously overextended.

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