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Legal Marijuana Could Generate $132 Billion In Federal Tax Revenue

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Over $132 billion in federal tax revenue and more than one million jobs could be created over the next decade.

According to the Washington Post, a new study shows that legalizing marijuana across the country could lead to federal tax revenues of $132 billion and create over one million new jobs over the next decade.

New Frontier Data, a data analytics firm focused on the cannabis industry, forecasts that if legalized on the federal level, the marijuana industry could create an entirely new tax revenue stream for the government, generating millions of dollars in sales tax and payroll deductions.

“When there are budget deficits and the like, everybody wants to know where is there an additional revenue stream, and one of the most logical places is to go after cannabis and cannabis taxes,” said Beau Whitney, a senior economist at New Frontier Data.

The analysis estimates $131.8 billion or more in federal tax revenue between 2017 and 2025, including retail sales tax, payroll tax deductions and business tax revenue.

The federal government would reap $51.7 billion in sales tax from a legal marijuana market between 2017 and 2025, entirely new revenue for a business that remains illegal -- and unable to be taxed -- federally.
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“If cannabis businesses were legalized tomorrow and taxed as normal businesses with a standard 35 percent tax rate, cannabis businesses would infuse the U.S. economy with an additional $12.6 billion this year,” said Giadha Aguirre De Carcer, the CEO of New Frontier. (The corporate tax rate was lowered to 21 percent in a sweeping tax bill President Trump signed last month.)

To date, recreational marijuana is legal in just eight states, but 29 have legalized the drug for medical use.

In the three states where adult use has been legal for the longest period of time – Colorado, Washington and Oregon – there had been a combined total of $1.3 billion in tax receipts, according to the study.

Attorney General Jeff Sessions has openly shared his disapproval of legalizing marijuana, going so far as to rescind Obama-era guidance that mostly ensured states choosing to legalize the drug would not be bothered by the federal government.

Advocates for legalization hope that Congress will step in to end marijuana prohibition across the board:

“Okay, now Congress, do something,” said Morgan Paxhia, managing director at Poseidon Asset Management, which invests in marijuana businesses. “Here’s a chance to do something meaningful that could move the industry in a much safer direction.”

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