Why Cannabis? Why Now?
Empirical Data continues to support Cannabis Theory!
From Greg Miller of the “Cannabis Investor Report”, May 20, 2019
A recent study demonstrates something we’ve known all along: Cannabis is a powerfully disruptive force.…
Back in December, I explained how cannabis had the potential to disrupt billion-dollar industries. And we now have clear data to prove it. A joint study conducted by the University of Connecticut and Georgia State University found that alcohol sales fell by 15% in states where medical marijuana became legal. Even correcting for demographic factors known to influence alcohol consumption, such as age, sex, unemployment rate, and median household income, that number holds true. And in states where recreational cannabis is legal, the number jumps to 20%. Normally, a one-fifth drop in a sector that traditionally generates lucrative tax revenue would be cause for concern for state lawmakers. In fact, these states aren’t worried at all – they’re celebrating…
A Tax Revenue Boom
Marijuana taxes tend to be much higher than alcohol taxes. For example, in Colorado, excise taxes on alcohol are applied by volume, so for every gallon of beer, the state collects a mere eight cents – regardless of how much that beer costs – and then the standard 6.5% state sales tax is applied for the consumer. Compare that with a 15% excise tax from cannabis cultivator to retailer and another 15% as a sales tax for end customers. And with Colorado cannabis sales reaching an astounding $1.2 billion last year alone, it’s easy to understand how the state crushed the projected $100 million in annual tax revenue. After a somewhat slow start in 2014, tax revenues in the state reached a whopping $270 million in 2018. And Colorado isn’t alone in this tax revenue boom.
Not an Isolated Event
Last year, Washington State collected $367 million in cannabis taxes, and California – a state that’s only just now beginning to fix its legalization woes – saw $345 million.
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California, who set tax rates too high and thereby bolstered the illicit markets, will serve as a cautionary tale to other states as they legalize cannabis and set their own tax rates.
In a way, the state’s mistake proves useful: We now have a good idea of how much is too much when it comes to taxes, and other states prove that cannabis can still be taxed at a higher rate than alcohol and consumers will continue to purchase legal, regulated product.
Of course, as “The Golden State” completes its transition to “California 2.0,” we can expect that number to grow. In fact, we can expect tax revenues to grow in every state. That’s because every single state that has legalized recreational cannabis has seen marijuana tax revenue increase year over year. To put it bluntly, for other states to continue missing out on this opportunity is irresponsible – and they know it. We’re going to continue to see states falling like dominoes. Going “all in” on cannabis today – before those remaining states go legal – is the best way to make sure you come out of this boom with a fortune.