Study: Legalizing marijuana would add $113 million in tax revenue

• Opponents of marijuana legalization say the potential costs to public safety outweigh revenue benefits
• Study cautions officials to not overestimate tax revenue from legalizing the drug

Arizona could see as much as $113 million in new tax revenue if it legalized marijuana for recreational use and imposed a 15 percent levy on the drug, a new study found.

The study by the non-partisan Tax Foundation comes as cannabis supporters in Arizona prepare to turn in hundreds of thousands of signatures to try to put their legalization effort before voters in November.

The Campaign to Regulate Marijuana Like Alcohol wants to ask voters to legalize the drug for recreational use. If approved, the measure would establish licensed shops where sales of the drugs would be taxed at 15 percent. The proceeds would fund education, including full-day kindergarten, and public health.

Under the proposed Regulation and Taxation of Marijuana Act, adults 21 and older could possess up to 1 ounce of marijuana and grow up to six plants in their homes without obtaining licenses, as long as the plants are in a secure area. The initiative also would create a Department of Marijuana Licenses and Control to regulate the "cultivation, manufacturing, testing, transportation and sale of marijuana."

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The Tax Foundation's study based its estimates for Arizona on sales per capita in Colorado and Washington, the first states to legalize cannabis for recreational use.

According to the study, if all 50 states imposed retail marijuana taxes, total collections could range from between $5.3 billion at a 15 percent rate to $8 billion at a 25 percent tax rate.

A mature marijuana industry in Arizona could raise $113 million annually if taxed at 15 percent; $150 million if taxed at 20 percent; and $188 million if taxed at 25 percent, the analysis concluded.

The study cautioned officials to not overestimate tax revenue from legalizing the drug, saying revenues started out slowly in Colorado and Washington as their legalization programs and regulatory systems took shape.

The Tax Foundation estimated a robust U.S. marijuana industry could generate up to $28 billion in tax revenue for federal, state and local governments combined. That estimate includes $7 billion in federal revenue: $5.5 billion from business taxes and $1.5 billion from income and payroll taxes.

An earlier study by the Grand Canyon Institute estimated Arizona would generate $72 million in 2019. Prior to that estimate, the legalization campaign estimated Arizona could raise $40 million for schools and called the figure "very conservative."

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"While ending prohibition is the No. 1 reason to legalize marijuana use for adults, providing tens of millions of dollars for schools and local governments is a significant bonus for voters," Marson wrote in a statement. "These are dollars that no longer go to drug cartels but instead help our schools and local governments provide important services. "

But Seth Leibsohn, chairman of Arizonans for Responsible Drug Policy, said potential revenues should not outweigh the potential costs of "bad public policy." He said the estimated revenue is a fraction of the state's $9.6 billion budget.

"Like every other study I’ve seen on marijuana revenues, this one only tells half the story — income — which is a bad way to build public policy because it does not take into account costs like treatment, rehabilitation, counseling, accidents, enforcement, criminal violations and true education deficits," he wrote in a statement. "To legalize marijuana based on guesswork with only estimations of income, and nothing about costs, all while upending decades of hard prevention work in our health, education and law-enforcement fields is an absolute public-policy danger."

The analysis also cited experiences from some state legislators from Colorado and Washington.

At a national legislative conference in 2015, lawmakers from those states when asked what they would do differently said they would have preferred to enact legislation to create a legalization system, rather than doing it by ballot initiatives, "due to the difficulty of changing inflexible language approved by voters."

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