United States: federal legalization of cannabis could bring in $129 billion in taxes (and create 1.6 million jobs)

Potential federal legalization of cannabis in the U.S. could help reduce the country's debt while creating millions of jobs, according to a new report from cannabis data analytics company New Frontier Data.

Jobs, growth and taxes

In their new report,  Cannabis in the US Economy: Jobs, Growth and Tax Revenue, 2019 Edition analysts from New Frontier predict that a flat tax of 15% on all legal cannabis sales could raise $73.7 billion by 2025. The US Treasury is currently prohibited from collecting taxes on illegal drugs, even though each state is free to legalize.

Federal legalization would also enable cannabis companies to invest in the 39 states that have yet to legalize cannabis for adults, with the creation of several hundred thousand jobs as a result. The report notes that the cannabis industry generated around 82,000 jobs this year, and predicts that if full legalization occurred in every state, more than 1.46 million new jobs would be created. According to analysts, this number could rise to 1.63 million jobs by 2025 with the industry's hoped-for growth.

Increased employment would also bring in another source of tax revenue for the federal government: payroll taxes. Full legalization would enable the financial sector to serve the cannabis industry without fear of reprisal, just like the companies that will be created. According to the report, payroll taxes for new employees in the industry are expected to reach $9.5 billion by 2025.

Nationwide legalization would also allow the U.S. Treasury to collect revenue for the first time from businesses already working with cannabis. Currently, the U.S. government only collects income taxes from all activities that comply with state laws, amounting to around $4.7 billion in 2017. However, the combination of tax revenues, payroll taxes and sales tax could increase federal tax revenues by $128.8 billion, according to the report's projections. Federal legalization of cannabis for adults would also allow cannabis companies to enter the U.S. stock market, which could prove to be a boon for the country's financial sector.

2020 elections in sight

«In the face of so much speculation about the economic downturn, the possibility that federally legal cannabis could create up to a million new jobs and nearly $130 billion in tax revenue will likely be of interest to regulators and presidential candidates in 2020,» a declared Giadha Aguirre de Carcer, CEO of New Frontier Data. «Cannabis is already being considered as an investment option for portfolio managers and fund managers, as a hedge against the economic downturn impacting more traditional investments.»

Even if the federal government continues to ban cannabis, analysts still believe that the legal U.S. cannabis industry will outgrow the 41 billion in total sales by 2025. But without federal legalization, the U.S. Treasury won't be able to tax these profits, not to mention the expense of prohibition.