Earlier this week, Scioto Analysis released a cost-benefit analysis on legalization of the sale and purchase of marijuana for recreational use. A couple of months ago, I wrote a commentary for the Ohio Capital Journal about what the potential impacts would be of legalization of recreational marijuana infor Ohio.
A member of the League of Women Voters of Metropolitan Columbus contacted me soon afterwards to see if I would speak on the topic for their Education and Advocacy committee. They were interested in having someone come in to speak on the “pros” and “cons” of the initiative.
My colleague Michael Hartnett and I decided to present on the costs and benefits of legalization of recreational marijuana use, inspired by the cost-benefit analysis we were conducting at the time. I spoke on the benefits, and Michael spoke on the costs.
In that spirit, we thought it would be valuable for us to write a pair of blog posts on the topic as Ohio draws nearer to a statewide vote on the legalization of the sale and purchase of marijuana for recreational use.
Here is what we found about the benefits of recreational marijuana use.
Tax revenue for employment and substance abuse treatment programs
The largest benefit we project from the legalization of sale and purchase of marijuana for recreational use is tax revenue generated for employment and substance abuse treatment programs.
A 10% excise tax will be applied to all purchases of marijuana for recreational use. These funds will mostly go to a new “cannabis social equity and jobs fund” and “substance abuse addiction fund” which will finance employment and substance abuse treatment programs.
We estimate the state will raise about $190 million per year from excise taxes. Because estimates from the Washington State Institute for Public Policy show large social benefits for both of these types of programs, we estimate the benefits of these programs will generate a value of about $800 million per year.
It’s worth noting these funds may change after the ballot initiative is passed. The state legislature can amend Issue 2 however it wishes to since it is an initiated statute and some legislators have already indicated interest in particular in changing the use of tax revenue.
Industry Employment
Legalization of the sale and purchase of marijuana for recreational purposes constitutes creation of a new industry. Looking at the size of industries in other states that have legalized the purchase and sale of marijuana for recreational purposes, we estimate Ohio will add about 3,300 new jobs to support this industry. We estimate this will lead to about $190 million in new wages due to the new jobs.
Consumer Surplus
Another benefit of legalization of the sale and purchase of marijuana for recreational use is that more people will have access to a good they did not have access to previously. We estimate the total value consumers will get from having access to a new market at $98 million.
Crime
Finally, the legalization of a market means fewer people facing prosecution for marijuana-related crimes. Using trends seen in other states around legalization, we estimate there will be about 4,400 fewer arrests per year if the sale and purchase of marijuana for recreational use were legalized.
So there it is: more tax revenue for employment and substance abuse treatment programs, more jobs, more things people want, and less crime. There will certainly be benefits to the legalization of the sale and purchase of marijuana for recreational purposes. Now hang tight for when my colleague Michael releases his blog post on the costs of the program.