Top 13 Results Marijuana Legalization Economic Impact in Colorado
Economic Impact of Marijuana Legalization
1. If done correctly, marijuana legalization yields economic benefits: employment, income, and tax benefits:
Already in 2019 only in Colorado
- 18,006 Jobs created in 5 million residents state
- $2.41 Billion in new economic activity. Revenues and income that were previously funneled underground are now taxed and earned within the state.
As a result in Colorado
- $997 Million – total amount of registered sales of cannabis products in 2019
- $122 Million – in total tax collections in 2019
2. 90 percent
The cannabis industry yields more employment and output per dollar than 90 percent of all industries in the Colorado state. Per dollar spent – Legal marijuana business generates more output and employment than 90% of industries in Colorado.
Here is why:
- All inputs sourced locally. Ownership and supply chain are almost entirely within Colorado. Cannabis products can not be imported
- Wage earners are all in-state residents
- Proprietors are primarily in-state residents (recently changed, but most ownership is within the state of Colorado)
3. 42.5 percent cannabis market growth rate
The marijuana market growth rate. Between 2018-2019 registered marijuana sales in Colorado increased by 42.5%.
- Driving factors: Transition from Black & Gray Market: 36.3%
- In-state resident Growth: 6.3%
- 2016 Growth: Will be caused by “out of state visitor demand.”
At proper rates – tax revenues can be substantial.
- Marijuana taxes will become largest excise source of income for the state by 2020
- Marijuana taxes will be more than three times greater than alcohol, about 25 percent higher than gaming and slightly higher than cigarettes taxes
4. 91.2 percent – Tax revenues increase rate between 2019-2019 as an effect of marijuana legalization.
- Twice as fast as demand hike, because all new surge is recreational, which is taxed at an accumulative rate of 36% or higher (depending on the city)
- Medical sales are taxed at 2.9% only. Medical growth was just 5.3% from 2019-2019
5. 11.3 percent
Projected market growth rate, in 2019-2020.
- Production increase will slow because the underground black market transition is almost complete
- Visitor sales, especially “sole-purpose” visitors, will decline as more states in the United States legalize cannabis industry and cannabis cultivation jobs
- Resident demand is only forecasted to grow about 7 percent per year, due to population growth and slightly higher pervasiveness
- Plunging prices drag total values down: -8.9 percent (in 2019/2019), and -7.4 percent (in 2019—2020)
6. “Jobs v. Badges”
Uninformed advocates and pundits misconstrue jobs vs. badges number.
- 26,939: Number of active employee “badges” at year-end 2019. But not all badges are full-time employment
- 12,592 direct, full-time equivalent jobs were funded due to marijuana sales in 2019
- 2.41: The current ratio of badges to full-time employees in Colorado. 2.41 badges = 1 (FTE) Full Time Employment Job
- 18,006: The combined impact of direct cannabis cultivation jobs in Colorado, plus ancillary employment and services caused by the new marijuana industry
7. 2020 year
The year that marijuana taxes will exceed cigarette taxes in Colorado (might reach $160 million in the year 2020).
8. Colorado State industry size context (2019 figures for comparative industries is most recent).
- 1.886 Million – Oil and Gas Drilling
- 997 Million – 2019 marijuana sales
- 777.4 Million – Value of all annual concerts and shows
- 633.8 Million – Total gold mining industry
Market expansion is mostly a transition from the illegal market, and from more state visitor purchases.
- The most hike is caused by users switching from drug dealers to legal stores
- New growth is driven by out-of-state visitors
- Local resident growth was only 6.2%, a small component of total market growth
9. The multiplier effect for marijuana legalization is:
- 35% larger than it is for Colorado’s mining industry (mineral, oil & gas, etc.), per each dollar spent
- 141% bigger than the state’s tobacco industry, because all cigarettes come from outside of the of Colorado
- 25% larger than general manufacturing because a significant portion of input materials are imported, and ownership can be outside of the state.
Washington and Colorado
10. 3:1 the ratio of Legal market capture between Washington and Colorado.
Legitimate regulation of marijuana legalization has been a significant factor for success in the state:
- Washington State suffered a 12-month setback due to lottery-based licensing regulations and ill-conceived taxation
- Washington’s population is 40 percent larger than Colorado, yet Colorado’s legal market has five times more sales than the Washington state market. ($353.6M in WA vs. $1,695M in CO)
- The slow start of the market has forced WA consumers to continue to choose illegal drug dealers instead of switching to the regulated and properly taxed legal market
- Since 2019, Washington completely changed their rules. Now revenues and legal capture rates are much higher in 2016.
Colorado State has 5+ Million residents, and Washington State has 7.06 Million. WA opened in July 2019, and Colorado started in January 2019. Revenues reflect the total of 2019 + 2019 regulated (legal) retail sales of all cannabis products.
11. 9 percent vs. 41 percent: Medical Marijuana tax revenues versus Share of Medical Marijuana Sales.
- Unlike Colorado, Washington State eradicated medical marijuana – leading to an upsurge in sales tax revenues for their state in 2016.
You cannot “fake it” in marijuana regulation
- Marijuana is complex, lack of data is no longer an excuse for mistakes
- Bad decisions will haunt states and counties for years
- Markets must be balanced, over supply or under supply both will cause distortions
- So long as marijuana business is a federal offense, states will be watched closely by federal authorities
12. Consumer patterns have changed
- Smoking marijuana buds remain predominant but are losing share to concentrates and edibles
- New customers start with edibles before exploring other products
- Heavy users increasingly prefer concentrates
- Vaporizers are gaining popularity for perceived health benefits and portability
13. Prices are slowly slumping. Saturation will come by the year 2020.
- Average prices sunk by 8.9% from 2018 to 2019, and are expected to continue dropping by 7.5% per year to 2020.
- Price effects caused by rising inventories, future inevitable federal marijuana legalization and shift to “low-cost / high-THC” products. (THC – tetrahydrocannabinol)
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