Cannabis Taxes Could Generate $132 Billion, Create 1.1 Million Jobs by 2025
Style Magazine Newswire | 1/10/2018, 6:05 a.m.
Washington –New Frontier Data, the authority in data, analytics, and business intelligence for the cannabis industry, released a new study, Cannabis In the U.S. Economy: Jobs, Growth and Tax Revenue, examining what full adult use legalization of cannabis could generate in terms of federal tax revenue and jobs for the United States economy. New Frontier Data forecasts that cannabis has the potential to create cumulatively $131.8 billion in federal tax revenue and 1.1 million new jobs by 2025.
“The three most common business taxes that any standard business pays to the federal government are federal business taxes, payroll taxes and sales taxes. If cannabis businesses were legalized tomorrow and taxed as normal businesses with a standard 35% tax rate, cannabis businesses would infuse the U.S. economy with an additional $12.6 billion this year,” said New Frontier Data CEO Giadha Aguirre De Carcer.
This report examines three aspects of what full legalization would look like in contrast to the
current, state-by-state patchwork of legalized environments, and the anticipated impacts which full nationwide legalization would hold for the U.S. Treasury.
These three aspects include federal business taxes on cannabis businesses, federal payroll withholdings, and revenue generated from a federal cannabis sales tax of 15%. A comparison is presented between the current state of legalization and a theoretical model over the same period, with the end result of such comparisons showing economic net benefit both to the U.S., and in terms of increased jobs creation.
If full legalization occurred in all 50 states today, there would be an excess of 782,000 jobs, and would increase to 1.1 million jobs by 2025.
Full legalization would result in more legal businesses participating in the market, more consumers participating in the legal market, and more employees on official payrolls, resulting in $4 billion in payroll taxes. By 2025, payroll deductions would increase to $5.9 billion.
Assuming a sales tax at the federal level was implemented at 15%, the total tax revenues from 2017–2025 would theoretically be $51.7 billion. This amount of revenue would be entirely new revenue to the U.S. Treasury, as there are currently no federal sales or excise taxes.
By combining the business tax revenues, the payroll withholdings based on the theoretical employment required to support the industry, and the 15% retail sales tax, one can calculate the total federal tax revenue potential of legalization: The combined total is estimated to be $131.8 billion.
The difference between the current structure and the theoretical model is a $76.8 billion increase in federal tax revenues.