Industry updateLegalizing weed in Texas would generate billions in tax revenues, report says

A mature regulated market could generate US$2.7B in annual sales, and save taxpayers US$311M per year in enforcement costs: Vicente Sederberg LLP
Jared Gnam Jared GnamOctober 23, 20208 min

Texas could collect US$500 million annually in tax revenue, and create upwards of 40,000 new jobs if it legalizes recreational weed, a national law firm says.

With several key U.S. states expected to green light adult use by next year, Vicente Sederberg LLP released a report this week exploring the economic benefits of policy reform in one of the country’s biggest illicit markets.

A regulated, mature market in the Lone Star State would generate US$2.7 billion in annual sales, and save taxpayers an estimated US$311 million per year in criminal justice costs, the firm says.

Stakes are high in the state considering 1.5 million adults consume weed on a monthly basis, says Dwight Clark, a senior policy analyst at Vicente Sederberg who previously worked in the Texas Legislature.

“There are well over a million adults in the state who regularly consume cannabis, so enforcement costs are substantial,” Clark said in a statement. “If cannabis were regulated … criminal justice resources could then be redirected toward other, more pressing matters. Plus there would be significant revenue left over that could be used to fund other programs and services.”

Director of Sederberg’s Austin office Shawn Hauser notes how other states are realizing the economic benefits of legalization amid falling tax revenues during the pandemic.

In Colorado, which legalized adult-use in 2014, cannabis tax revenues have amounted to more than US$282 million this year alone. Based on Colorado’s combined tax rate of 20.6 per cent on cannabis, Vicente Sederberg estimates a mature Texas market would generate US$1.1 billion in tax revenues every two years.

“Texas is leaving an enormous amount of money on the table by keeping cannabis illegal,” Hauser said.

But legalizing weed would likely be a hard sell in Texas. While hemp production has been regulated since last year, state officials are trying to ban smokable hemp flower and CBD is only permitted for medical use if extracts are low in THC.

For now, Texans will have to wait and watch as other states advance reform.

Vermont became the 11th state to pass legislation for a regulated adult-use market this month, Maine launched its previously approved recreational economy Oct. 9 and Missouri medical patients bought their first licensed products on Oct. 17.

During the U.S. election on Nov. 3, five additional states could legalize.

New Jersey, Arizona and Montana will vote on recreational ballot measures, Mississippi will decide on a medical ballot and North Dakotans will weigh in on both recreational and medical ballots.

There’s a good chance that all six measures will pass, according to New Frontier Data, which forecasts US$3.3 billion in annual sales before 2025 if that happens.

Read more: Five state cannabis ballots could add US$9B to American market

In a new report, the market research firm estimates U.S. illicit sales are worth over US$66 billion per year.

Legalizing weed in Texas would generate billions in tax revenues, report says
NORML’s cannabis car wash event in Arlington, Texas. Photo by Ruby and Luan via Flickr

Among states that haven’t legalized medical or adult-use, Texas commands the biggest unregulated market at US$4.3 billion in annual sales, the report states.

With stigmas dropping and established consumer packaged goods industries getting in the weed game, New Frontier projects legal U.S. sales to reach $35 billion by 2025.

That projection doesn’t include assumptions for any additional states passing legalization measures from now until 2025, nor potential federal policy changes in that time.

Top image of State Capitol building in Austin, Texas by Earl McGehee via Flickr

 

jared@mugglehead.com

@JaredGnam

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