Legalizing Marijuana: Five Facts about Colorado

Controversies over the economic benefits of legalizing recreational marijuana have been flooding the news lately, but what are the real effects the legalization could bring to the economy? As Washington and Colorado became the first two states to approve the drug’s recreational use since 2012, Colorado has been serving as an experimental lab for the nation to determine the impact of legalization. One 2016, voters in California, Maine, Massachusetts, and Nevada approved recreational marijuana initiatives. As of today, eleven more are considering changing regulations on retail cannabis. Here are five facts on the economic implication in Colorado after legalization that I think you should know before getting out your vote on the this matter.

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Tax Revenue form Marijuana Sales

In Colorado, recreational marijuana is taxed heavily as a consumer product. It is subject to three layers of taxes in Colorado: 2.9% sales tax, 10% special sales tax, and 15% excise tax. Its retail sales pulled in nearly $200 million in tax revenue in 2016 which accounted for 1.3% of Colorado’s total tax collection, according to state fiscal analysts. The state has accumulated over 2 billion tax revenue since legalization. The government has well devoted the tax collection to two funds: The Building Excellent School Today (BEST) Fund and the Marijuana Tax Cash Fund, stated by Colorado Legal Council. Every year, the first $40 million in tax revenue will go to the BEST fund, which is devoted to local school districts to build and improve school facilities. The rest of the state sales tax collected on retail marijuana will be contributed mainly to the Marijuana Tax Cash Fund, which distributes to healthcare and public safety.

More Employment in a Fast Growing Industry

Legal marijuana created 18,005 full-time jobs and added about $2.4 billion to the Colorado economy in 2016, an analysis from the Marijuana Policy Group (MPG) shows. The analysis also reveals that cannabis industry has been the second fast-growing industry in the state surpassing casinos and liquor. However, among the 2,677 marijuana licensees that are currently active in Colorado, just seven leading retailers account for approximately 75% of total sales. As larger, more competitive companies are growing, smaller, less competitive firms struggle and eventually exit the market. Due to high compliance cost, consolidation is not caused merely by price competition but instead by high compliance costs. A large number of small operations are unable to properly comply with the state’s complex regulations. As the seven main retailers become the price maker and set a relatively high price on recreational marijuana, marijuana becomes a pricy consumer product.

Rise in marijuana-related offenses and youth usage

From a socioeconomic perspective, marijuana-related charges dropped by 60% in Colorado. However, Colorado’s overall youth marijuana use increased approximately 20% from 2013 to 2015, which is 74% higher than the national average. Marijuana use among Colorado high school students increased 19%, and school expulsions for marijuana-related reasons increased 40% between 2012 and 2016, reported by the National Sheriff’s Association. In addition,  the legal cost associated with marijuana-only DUI offenses has risen 87% between 2012 and 2015. Since legalization, Colorado has been experiencing an increasing number of fatal crashes. Wong found that before legalization, about 8.3% of drivers involved in fatal crashes had THC in their blood, but after legalization, 17% of drivers had THC in their blood. Nevertheless, Wong reasoned that the study was not sufficient to prove that marijuana was a key cause of those crashes, but it is likely that marijuana was at least one contributor to those fatal crashes.

Black Market Still Strong

Fox news revealed a shocking fact that legal recreational cannabis is satisfying only 59% of the need for marijuana in Colorado. The remaining 41% of users are turning to the black market and to medical marijuana growers. Colorado has lost nearly $250 million to black market sales. Convenience is the main reason why residents continue to break the law. Before legalization, the underground marijuana economy had matured over 80 years, and its transaction system had been highly structured. There were online sales of and delivery services for cannabis. Due to the high level of taxation on marijuana at government-licensed dispensaries, legal sellers impose a significantly high price together with the 26.9% tax rate. This price difference of $180 per ounce compared with $350 per ounce at legal retail encourages low-income residents to purchase marijuana from the black market. These underground networks have undoubtedly become more intricate since Colorado’s legalization has gone into effect.

Deteriorating Racial Disparities

Speaking of how race and class play into the impact of Colorado’s legalization, the state’s legal system has been widely accused of only middle-class white families benefit from marijuana legalization in Colorado; poor people and minorities have not received the same benefits. Before legalization, minorities were charged with and convicted of drug crimes at rates significantly higher than white people were, despite their using marijuana at similar rates. On the contrary, the underground market works extremely well in the black and Latino community.

The Colorado government set the barrier to the legal marijuana industry excessively high. To enter the industry, the seller has to be a Colorado resident with good legal standing; the seller also needs thousands of dollars in capital to get licensed and to build a marijuana facility in compliance with state laws. The current Colorado regulations support those with wealth. Minorities who have limited access to wealth have little ability to enter the industry. Also, for those minorities who were charged with a drug-related felony before legalization, state law has made it impossible for them to join the industry now that marijuana is legal. This has kept many minorities working in the black market.

Racial disparities are persisting after legalization regarding encounters with the law, especially in the case of public consumption. The primary cause or the disparity is Colorado’s prohibition against using cannabis “in plain sight,” which disproportionately affects people of color and people living in poverty. Homeless people and those who live in shared spaces may not be able to keep their marijuana use out of sight.

There are numerous economic benefits to the legalization of recreational marijuana. Just like alcohol, states can benefit from the billions earned from taxing and regulating marijuana. States can save the millions spent enforcing authorities that prevent the use of marijuana.

In Colorado, retail marijuana sales pulled in nearly $200 million in tax revenue, which accounted for 1.3% of Colorado’s total tax collection. Colorado managed to accumulate over 2 billion in tax revenue since its legalization. Just as Colorado devoted tax collected to two funds: The Building Excellent School Today (BEST) Fund and the Marijuana Tax Cash Fund. Other states can also use tax funds to build local school districts, improve school facilities, and contribute to the distribution of healthcare and public safety.

Furthermore, An analysis from the Marijuana Policy Group (MPG) showed that marijuana created 18,005 full-time jobs and added about $2.4 billion to Colorado’s economy. The analysis also revealed that cannabis industry is the second fastest growing industry in the state surpassing casinos and liquor. There is still more to be expected from the marijuana industry.

However, from a socioeconomic perspective, Colorado’s overall youth marijuana use has increased by approximately 20% from 2013 to 2015, which is 74% higher than the national average. Groups against the legalization marijuana may state this as a problem, but fail to consider the fact that governments around the globe moderate addictions such as tobacco use. Tobacco use, which causes numerous lethal illnesses and a variety of diseases, is legal while a plant with many is not.

Furthermore, Prohibiting the use of marijuana in plain sight does not make sense for people living in poverty. Racial disparities are persisting after legalization in Colorado, especially in the case of public consumption. The primary cause or this disparity is a prohibition against the use of cannabis “in plain sight.”This law only affects people of color and people living in poverty. Homeless people and those who live in shared spaces should be left alone since they are not able to keep their marijuana use out of sight.

Apart from economic benefits, Research reveals that marijuana can help people who drink too much. People usually either drink or smoke, hardly ever both. This information reveals how marijuana legalization can help with the drinking and driving problem.  Driving under the influence of marijuana is not exactly legal, but one is less likely to be involved in a traffic accident compared to when drunk. Those against legalization may argue that Wong in Colorado found an increase in the number of people with THC in their blood during crashes. This evidence is not sufficient to prove that marijuana is a key cause of the increase in crashes.

The benefits of legalization of recreational marijuana far outweigh the disadvantages. Why imprison people for deciding what they put inside their bodies? States should worry more about alcohol and tobacco, which cause more harm to the body in high doses, and behind the wheel.

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Legalizing marijuana: Five facts about Colorado. (2019, Oct 10). Retrieved October 1, 2022 , from

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