It has been a long time coming, but now more countries across the globe are pushing for the legalization of cannabis as both a medicinal product as well as for recreational use. The biggest benefit that these pioneering states in the U.S. enjoyed was a strong stream of tax revenue, including the increased potential for tourism and retail sales. In Canada, cannabis retail sales also found some growth as stores slowly rolled out.
This report will explore the income figures that certain states and provinces across North America were able to rake in after legalizing cannabis.
Where is marijuana legal in Canada?
In Canada, recreational cannabis was legalized in October 2018 with the federal “Cannabis Act”, bringing online retail sales activation the following January.
The first round of legalization allowed for dried cannabis products to be sold in brick-and-mortar store locations. These stores were required to apply to a ‘lottery system’ style of application-granting, where only some companies were selected to be given the right to carry. Wholesale cannabis was also widely available through online purchases.
Canada recently legalized the use of cannabis edibles through what the industry calls “Cannabis 2.0”. Nowadays, you will find many marijuana dispensaries, along with convenient weed delivery services near popular areas.
Where is marijuana legal in the US?
In the U.S., marijuana is slowly becoming legalized in many parts of the country. Currently, the United States operates under more of a patchwork system, where some states have legalized weed while others did not.
The US states where recreational cannabis is legal include:
- District of Columbia
As of right now, there are 11 states where recreational marijuana is legal in the US.
Other US states have legalized the use of cannabis for medicinal-only purposes, including:
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Dakota
- Rhode Island
- South Carolina (in certain amounts)
- Texas (in certain amounts)
- Virginia (in minute amounts of THC)
- West Virginia
As of right now, there are 33 US states where marijuana is partially legal for medicinal use. With that said, there are different special interest groups campaigning for broader legalization. Don’t be surprised to see the legalization of marijuana across the United States in the future.
Marijuana Revenue in the US: Statistics
After a history of anti-cannabis hysteria, the U.S. is finding that cannabis is not as dangerous as previously advertised. In fact, many Americans see that marijuana provides a potential lucrative opportunity from a retail sales and tax revenue perspective.
As a case study, we will analyze the marijuana statistics in Colorado, the first U.S. state to legalize weed for both medical and recreational use. Based on these marijuana statistics, we can see a strong growth in tax revenue gains for the state between 2014 and 2018, posting a 294 percent growth in tax revenue.
Revenue from Marijuana Tax in Colorado
|Year||Marijuana Tax Revenue|
Source: Colorado Department of Revenue; “Marijuana Tax Data”
Colorado is not alone in boosting their economy after weed was legalized. Other U.S. states found a tremendous growth in tax revenue as well. In most cases, the actual tax revenue outpaced the projected tax revenue, according to data collected by Liberty Vittert at the Washington University in St. Louis.
In Colorado, the actual tax revenue collected from marijuana sales grew by 166 per cent; in Washington, this figure was 53 per cent more; For Oregon, actual tax revenue was 44 per cent less than projected; California missed its mark by 46 per cent; Nevada saw gains of 40 per cent; and finally, Alaska just managed to edge out with a 22 per cent gain on actual revenue compared to the projected revenue.
Projected Tax Revenue vs. Actual Tax Revenue
Source: Market Watch; Data Collected by Liberty Vittert, Washington University in St. Louis
Marijuana Revenue in Canada: Statistics
Canada’s cannabis legalization story had a bumpy start to it. Initially, the Ontario government lost $42 million in revenue through the Ontario Cannabis Retail Corporation, though officials blamed supply chain issues, product shortages and start-up costs for the loss of revenue. Despite the hiccup, the retail trade sales were able to find some incrementally inclining gains over the latter half of 2019, with a 41 per cent growth from June to October.
Cannabis Stores Retail Trade Sales in Canada
|Month, Year||Retail Trade Sales|
Source: Statistics Canada; “Retail Trade Sales by Industry”
The cannabis industry in Canada is hoping that “Cannabis 2.0” (describing the legalization of cannabis edibles in the Canadian market) will see stronger gains with a stronger product offering. Many consumers in Canada expressed more interest in edible cannabis products and beverages (such as cannabis gummies, chocolate, teas, beer infusions, etc.) than smoking products.
According to a report by BNN Bloomberg, Cannabis 2.0 was met with a strong surge of demand with 2,000 people placing orders on edible cannabis products within the first hour that they were made available. The hope here is that the cannabis retail industry will find more gains, expand more businesses and create more employment opportunities and gross domestic product (GDP) growth in the country.
There is a promising start to how weed can help the Canadian economy. So far, the sales have already added about $8.26 billion the country’s GDP in July alone, according to Statistics Canada.
How can legalizing weed help the economy?
On both sides of the border, it is clear to see that marijuana legalization has some great financial benefits for governments and businesses across North America. U.S. states that have legalized cannabis for both recreational and medical use have found a new, lucrative tax revenue stream. In many cases, the actual tax revenue surpassing the projected amount of growth.
Canada’s road to cannabis legalization was more of a bumpy ride, but now that the country has potentially caught its stride by introducing edible products in Cannabis 2.0, it appears that the industry is well on its way to the path of profitability.
In any case, safely and responsibly legalizing cannabis appears to be a worthwhile investment not only for those operating within the industry, but for everyone in the community.