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Right pot laws can maximize revenue, minimize use, says economists

A new study offers insights into legalization’s hazy effects on government revenue

Under federal law, marijuana use is still illegal, even though nearly half of U.S. states sanction its use for medical purposes. Colorado legalized the drug for recreational use in 2012, and the move not only stoked Denver’s housing market, it garnered $135 million in pot-related taxes and fees in 2015 alone. Those numbers are naturally intriguing to other states considering legalization (Washington, Oregon, and Alaska have already followed in Colorado’s footsteps).

But now, a recent study published by economists Liana Jacobi and Michelle Sovinsky is offering new insights into how marijuana legalization and taxation impacts drug use—and tax revenues for cities and states. The research used price and access data from Australia, which places pot in a similar legal limbo.

Jacobi and Sovinsky found that a tax rate of 25 percent—Colorado’s rate—hits the sweet spot in terms of maximizing tax revenue, deterring a third of users under the age of 21, and not encouraging a black market. Additionally, the economists calculated that the United States stands to gain between $4 billion and $12 billion every year by legalizing and taxing marijuana.

Did increased access translate into a higher rate of use? Yes. According to the study, younger men have the best access to illegal marijuana, and the data shows usage numbers decreasing as people age. But with legalization comes better access for women and older people.

Jacobi and Sovinsky estimate that roughly 19.4 percent of adults in the U.S. would use marijuana if it were made legal. A recent Gallup Poll found that 13 percent of Americans currently admit to using the drug.

Source: Journalist’s Resource