Imagine a scenario in which Obama legalized marijuana way back in 2014.
Well, there’s a couple of reasons why we are going to take that year in particular as our starting point:
- Colorado legalized recreational cannabis that year
- Obama missed his chance to reschedule cannabis
- Democrats had a majority in the Senate
I chose Colorado’s legalization date as the imaginary federal legalization date since the regulators have been really adamant about stats collection and analysis in Colorado.
Most people knew that Obama brought people who’d fight for legalization on his team, such as the former Deputy AG James Cole who issued the now famous Cole Memo.
However, not many people know that Obama had thoughts about decriminalizing marijuana during his second term. In fact, the former Attorney General Eric Holder said that there was an internal struggle within Obama’s administration, and the side persuading him not to do it won.
So, who’s to say Obama wasn’t contemplating even legalization back in 2014?
In the Congress, the situation was flipped compared to how it is now — Senate was held by the Democrats while John Boehner and the Republicans held the House.
Boehner is now spearheading the legalization lobby as he has recently taken up the helm of the National Cannabis Roundtable.
Numbers don’t lie
We’re gonna do a little bit of napkin math in order to see how much taxes the federal government could have collected if the numbers were proportionate to those in Colorado.
Here are the facts:
- Colorado’s population represents ~1.75% of the total population in the US
- Sales reported in 2017 amount to $1,507,702,219 (or ~1.5 billion USD)
- Regulators collected $247 million USD that year (I will round up to 250 for math’s sake)
So, with just those 3 numbers we can do some kind of math and wildly speculate. So that’s just what we’re going to do.
The taxes collected in 2017. represent about 17% of the total sales reported, which we’ll take as our federal tax as well. In this calculation we won’t account for state and local taxes.
Let’s blow those numbers up.
Approximated United States Sales
Federal Tax Collected
$38,960,853,123 or ~ 39 billion
~ $6.6 billion
$56,748,701,535 or ~ 56.75 billion
~ $9.65 billion
$74,510,597,961 or ~ 74,5 billion
~ $12.7 billion
$85,939,026,483 or ~ 86 billion
~ $14.6 billion
$88,104,391,560 or ~88,1 billion
~ $15 billion
Now, I’m no math genius, but I know my way around a calculator, and if you check my math you’ll see that these numbers match.
I find it shocking that the United States chose to keep cannabis illegal when the government could collect billion in taxes.
In fact, if America had legalized cannabis in 2014, the government could have collected up to $15 billion USD in taxes last year.
Taxes are something America takes very seriously, and it rarely misses the opportunity to remind its citizens of that, which makes me think — “Did they even mull over this issue?”.
The answer is yes, of course. Politicians love bringing up cannabis taxation, and how they should do it in the case someone suddenly legalizes cannabis.
However, taxing cannabis can also be very taxing on your ability to tax people (ha-ha, taxception!).
If the taxes are too high people just won’t enter the industry, or they’ll find ways to work around the legal industry. This has been going on in many places that already legalized marijuana.
If the federal government ever decides to legalize and tax marijuana, the taxes should be kept reasonably low so that the industry would flower in the first few years.
After that, once the industry gains its footing the federal government could consider raising taxes as a way to boost the economy.
Alas, this is all just speculation as the federal government may never actually legalize recreational cannabis, although we hope it will sometime soon.
Once the government is set on legalizing marijuana, we’ll also know what type of taxation model will be implemented in the cannabis industry.