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Five Huge Economic Impacts if Cannabis is Federally Legal


Cannabis is a genus of flowering plants. Amusingly, there is no consensus on the number of species that can be found in the genus. Some people think there are three species, which would be Cannabis sativa, Cannabis indica, and Cannabis ruderalis. In contrast, other people think that Cannabis sativa is the sole species that encompasses everything else. On top of this, there is the position that both Cannabis sativa and Cannabis indica are full-fledged species, with Cannabis ruderalis being included in the former rather than the latter. Regardless, people have been using cannabis for a very long time. For proof, look no further than the fact that it was domesticated about 12,000 years ago in what is now northwest China. After which, cannabis was used by a wide range of people in a wide range of places for drugs as well as for fibers.

Why Was Cannabis Banned Anyway?

The United States used to produce a lot of cannabis. This was because its fibers were useful for making rope, sails, and clothing. As a result, the U.S. production of cannabis remained high until after the U.S. Civil War, which was when it was replaced in a lot of respects by a combination of imports and other domestically-produced materials. Still, it wasn't uncommon to see cannabis being included in the medicinal products of the late 19th century, though to be fair, this was the same period in which cocaine was being included in the medicinal products. In any case, U.S. opposition to cannabis started up in the early 20th century. The Mexican Revolution from 1910 to 1920 caused a surge in the number of Mexican immigrants in the United States, who brought the custom of smoking cannabis with them. As a result, certain segments of the U.S. population started circulating some very hysterical claims about the effects of smoking cannabis. For example, the claim that it provided its users with superhuman strength. Similarly, the claim that it provided its users with insatiable bloodlust. On top of these, this was the period when cannabis started being called marijuana, which might have been because that made it sound foreign. By the 1930s, there was enough U.S. opposition to cannabis that an effective ban was introduced in 1937. Something that was helped along by a lot of racism.

What Are Five Economic Impacts of the Federal Legalization of Cannabis?

Since that time, the perception of cannabis has continued to change. However, it is clear that the U.S. opposition to cannabis has become much weaker than before. This can be seen in how its use is now legal in a considerable number of states. Furthermore, this can be seen in how the U.S. House of Representatives managed to pass a bill to legalize cannabis on the federal level, though chances are very good that said bill won't be meeting the same success in the U.S. Senate. As such, it seems safe to say that the legalization of cannabis will remain a contentious issue for quite some time to come, with much of the debate focused on its economic impact.

1. Tax Revenue

Tax revenues are very important. After all, most people want their government to give them nice things. However, most people are less than enthusiastic about the taxes needed to pay for those nice things. Certainly, governments can borrow money for the purpose of funding their programs. Even so, there are serious limits on what is and isn't possible. Something that is particularly true for lower tiers of government, which tend to be less powerful. As such, it cannot be emphasized enough that tax revenues are very important. If cannabis is legalized on the federal level, that could mean a lot of tax revenues that could be used to fund a wide range of programs for a wide range of people. After all, there are taxes that can be charged on the growing of cannabis, taxes that can be charged on the sales of cannabis, and taxes that be charged on other cannabis-related processes. The exact numbers are unclear, particularly since they are dependent on the unclear amount of cannabis that would be purchased by people if cannabis was legalized on the federal level. However, the numbers from states that have legalized cannabis suggest that those numbers could be quite high. To name an example, the state of Colorado managed to collect more than $302 million from more than $1.7 billion in cannabis sales in 2016. As such, the report that claims that the U.S. federal government could collect a total of $105.6 billion in tax revenues by 2025 provided that cannabis was legalized on the federal level doesn't sound that unbelievable. That is a lot of money that could be put to good use in other areas, particularly if the funded programs provide cascading benefits.

2. Job Opportunities

Legalized cannabis could create a lot of jobs. Some of these job opportunities would be involved with the cannabis in a very direct sense. For example, there would be a need for people to grow it, process it, distribute it, and sell it. After all, cannabis wouldn't just go from the producer to the consumer on its own. Instead, there would be a need for entire networks to handle every single step from start to finish, which in turn, means a need for employees to staff those networks. Meanwhile, other job opportunities would be involved with the cannabis in a more indirect sense. Simply put, economic activity generates more economic activity. This means that there is an additional need for employees to provide the relevant products and services. If people are having problems picturing things, well, suffice to say that it is very common for businesses to hire accountants to handle their taxes. Similar things can be said for a lot of other indirect processes as well. Once again, the exact number of job opportunities are unclear. However, there are studies claiming that legalized cannabis could support more than 41,000 jobs in the state of Nevada, more than 81,000 jobs in the state of California, and more than 1 million jobs in the United States as a whole. Job opportunities are important because every job means a chain of cascading benefits. After all, most people aren't going to be putting most of their earnings into a savings account somewhere. Instead, they are going to be spending that money, which in turn, means more money for other people to spend. Something that can continue on for quite some time. That can do a great deal to stimulate the economy as a whole. Moreover, that means the collection of tax revenues the entire way, which is beneficial for government as well.

3. Investment Opportunities

Investing comes with an inherent element of risk. However, different people can have very different degrees of tolerance for risk. For example, there are some people who are more concerned about protecting their wealth than anything else, meaning that they won't invest unless there is a very low chance of their investment falling through. In contrast, there are other people who are more concerned about growing their wealth, which is why they are willing to take some risks so long as they think that the rates of return will be worthwhile. In either case, risk on its own discourages investment because the overwhelming majority of people see risk as something to put up so long as the benefits are sufficient rather than as something beneficial in its own right. Currently, cannabis is in a state of considerable uncertainty. More and more states have been legalizing it. However, there remains a concern that the legalization of cannabis will be stalled at some point in time, which in turn, would put a serious limiter on the profit-making potential of cannabis companies. The federal legalization of cannabis would do a great deal to make it clear that the United States won't be giving back on this anytime soon. Something that should provide a massive boost to investor confidence by assauging their fears of regulatory risks.

4. Reduced Crime

A large number of people are still being arrested for cannabis-related offenses on a regular basis. The legalization of cannabis on the federal level would presumably cause this number to plummet, though it wouldn't eliminate such cases altogether. In any case, there are a lot of people who would argue that this would be good from a societal perspective because about nine in ten arrests for cannabis-related offenses are for possession rather than either sale or manufacturing, which aren't particularly problematic for society as a whole. The federal legalization of cannabis would eliminate this issue, which could bring about a number of benefits. For example, a lot of police resources go towards cannabis-related offenses, so those could be freed-up for more serious concerns. Similarly, that means a lot fewer people who are being forced through the legal system, which is extremely disruptive on their lives and thus their economic productivity. This is particularly true because that kind of thing can leave a serious stain on their records, thus haunting them throughout their future search for employment. It isn't a coincidence that proposals to legalize cannabis on the federal level often go hand-in-hand with proposals to let some of those who have been convicted of cannabis-related offenses get those incidents removed from their records.

5. Health Consequences

Support for legalizing cannabis seems to be becoming stronger and stronger. However, there are very good reasons why this doesn't just automatically extend to other drugs. After all, there are some drugs that are either addictive enough, destructive enough, or both that it would be very unwise to let them become more accessible. The research has made it clear that cannabis isn't one of these drugs. Even so, that doesn't mean that cannabis is harmless. More research is still needed on the subject. Having said that, some effects of cannabis use have become well-established. In the short run, it can impair people's ability to learn things, remember things, and do complicated tasks. Generally speaking, this shouldn't be a huge issue because most people have the good sense not to operate heavy equipment while they are in said state. Unfortunately, some people do these things anyway in much the same way that people drive while intoxicated anyway. In rare cases, it is also possible for cannabis use to trigger a psychotic episode, which can be very distressing. Meanwhile, there are some long-term effects of cannabis use as well. For instance, people who choose to smoke cannabis can find it causing damage to their lungs because cannabis smoke contains some of the same problematic compounds as tobacco smoke. Furthermore, it is possible to become addicted to the stuff, though the chances of this happening are lower than with either alcohol, tobacco, or opioids. On top of that, there is evidence showing that cannabis use in the long run can harm people's mental health as well as parts of people's thinking.

Health effects can have a very direct economic impact. After all, it affects people's economic productivity. Moreover, there are costs associated with them having to go to the hospital, which aren't limited to just them. Cannabis doesn't seem particularly bad in this regard even when compared with certain drugs that are already legal. Even so, it is reasonable for people to point out that the legalization of cannabis will presumably increase the number of users, which in turn, means an increase in these health effects and thus the economic impact of these health effects. As such, the legalization of cannabis isn't just 100 percent positive from an economic perspective. The examination of which is important because a comprehensive understanding is needed to make better decisions than otherwise possible even if the negative effects are probably not enough to outweigh the positive effects.

Allen Lee

Written by Allen Lee

Allen Lee is a Toronto-based freelance writer who studied business in school but has since turned to other pursuits. He spends more time than is perhaps wise with his eyes fixed on a screen either reading history books, keeping up with international news, or playing the latest releases on the Steam platform, which serve as the subject matter for much of his writing output. Currently, Lee is practicing the smidgen of Chinese that he picked up while visiting the Chinese mainland in hopes of someday being able to read certain historical texts in their original language.

Read more posts by Allen Lee

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