The Economic Impact of Cannabis

Research and economic data collected in recent years shows that the cannabis industry positively affects the economies in states and municipalities by creating more jobs, increasing real estate values, and generating tax revenue that is used for a wide variety of purposes. 

Employment Benefits from the Cannabis Industry

With the opening of cultivation facilities, manufacturing facilities, dispensaries, and retail stores to support the legal cannabis industry, jobs are created. In addition to jobs that are directly involved with the marijuana supply chain, there are hundreds of ancillary jobs needed to keep the industry going. These include accountants, lawyers, and many more.

It is estimated that the legal cannabis industry employed 321,000 full-time workers across the 37 states in the United States with operational medical and/or cannabis programs as of January 2021. Of those full-time jobs, 24% (77,000) were added during 2020 showing a significant growth trend as more states launch and expand cannabis programs.

When you add in the estimated eight to 10 ancillary businesses that are thought to support every one licensed cannabis company, the employment numbers skyrocket. Based on this data and future predictions, it’s clear that regulated cannabis markets benefit states’ economies by creating thousands or tens of thousands of new jobs.

Real Estate Benefits from the Cannabis Industry

States that have legalized medical and/or recreational cannabis are seeing a significant increase in property values and lease rates where licensed cultivators, manufacturers, dispensaries, and retailers can operate. 

Due to strict zoning laws in many areas, marijuana businesses have a limited supply of properties to choose from to build their facilities. Property owners understand this and face their own risks when they rent to cannabis-related businesses. As a result, lease rates and property values skyrocket.

It’s not just commercial property and land values that benefit from the marijuana industry. A study of Colorado municipalities published in January 2018 found that housing values increased by 6% with cannabis legalization.

Tax Benefits from the Cannabis Industry

One of the easiest ways to track the economic benefit of the legal cannabis industry to states and local municipalities is through tax revenue, particularly in states that have legalized both recreational and medical cannabis since adult-use taxes are typically much higher than medical taxes. In fact, some states don’t tax medical cannabis at all, but it’s not unusual for adult-use cannabis to be taxed multiple times (excise tax, state sales tax, and local tax) and at rates as high as 15%, 17%, or even 37%.

How much do all of these taxes bring in for states? According to Motley Fool, California brought in $1,031,879,926 in tax revenue in 2020 – the most of any state. In Washington State, tax revenue in 2020 reached $469,200,000, and in Colorado, 2020 tax revenue was $387,480,110. 

Taxes collected by states and local municipalities are used for a variety of purposes – from funding community programs, education, and law enforcement to paying for the costs to run the state or town’s cannabis program.

The Cannabis Industry Provides a Positive Economic Impact

When a state allows the sale of medical and/or recreational cannabis, its economy benefits. That’s the conclusion numerous researchers have made after analyzing a number of economic factors over the past several years. Specifically, employment rates, real estate values, and tax revenue all increase with the approval of medical and adult-use cannabis.

MJBizDaily reported economic data in its 2021 Annual Cannabis Business Factbook that puts the economic impact of a legal cannabis market into perspective. Consider these facts:

  • Total U.S. economic impact from cannabis sales in 2021 is expected to reach $92 billion (up more than 30% from 2020).
  • Total U.S. economic impact from cannabis sales will increase to upwards of $160 billion in 2025.
  • For every $1 consumers and patients spend at retail locations, an additional $2.50 will be injected into the economy – much of it at the local level.
  • California’s legal cannabis industry is expected to add nearly to $20 billion to the state’s economy in 2021.
  • Legal cannabis markets in Colorado, Illinois, Oregon, and Washington will each add more than $10 billion to their local economies in the coming years.
  • Nevada’s economic impact per person from the legal cannabis industry will be approximately $1,917 in 2021.
  • Legal cannabis markets in Alaska, Colorado, and Oregon will each deliver approximately $1,500 per person into their economies this year.
  • California will deliver an estimated economic impact per person of $500 in 2021.

Bottom-line, the data shows that the cannabis industry has a positive economic impact on states and communities, and that impact hasn’t peaked yet.

Originally published 11/13/18. Updated 9/24/21.

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