A new report suggests that while legalizing marijuana might not eliminate the state’s budgetary woes, it could bring in millions in much-needed revenue.
The West Virginia Center on Budget and Policy, a nonprofit agency that regularly releases research on progressive causes, released a report Thursday that stated if marijuana was legalized and taxed in West Virginia at a rate of 25 percent of its wholesale price, the state could collect an estimated $45 million annually upon full implementation of the law. At a 15 percent tax rate, marijuana could bring in approximately $26.8 million in additional tax revenue, the center estimated.
Both Ted Boettner, executive director of the agency, and Tara Holmes, summer policy research associate and the author of the report, said that the figures are “ballpark.” But even conservative estimates are multimillion-dollar totals.
Boettner said that the state budget office told him they anticipate a $300 million deficit for fiscal year 2018, while Mike McKown, director of the state budget office, said they are still arriving at an estimate.
Holmes looked at the National Survey on Drug Use and Health, published by the U.S. Department of Health and Human Services, to determine approximately how often West Virginia residents are using marijuana, and how much they consume when they use it.
Using the survey’s mid-range estimate that 92,000 people used marijuana in West Virginia in the previous month, and the assumption that marijuana use is underreported by about 22 percent in surveys, she estimated that 532,044 ounces are consumed per year and that the marijuana industry is in an estimated $190 million industry in West Virginia.
Assuming that 6 percent of people would continue to buy on the black market, she found that tax revenue could range from about $19 million, at a 10 percent tax rate, to $70 million, at a 37 percent tax rate. She also provided the Gazette-Mail with a document listing the figures she used to arrive at the estimates.
Holmes estimated that if 10 percent of marijuana users who live within a 200-mile radius of West Virginia came to the state to purchase marijuana, and the state taxed marijuana at 25 percent, the state could collect an estimated $194 million. At a 15 percent tax rate, the state could see $116.5 million.
“To be clear, this study does not advocate any out-of-state residents breaking the laws of their home state,” she wrote.
The center also says legalizing marijuana could reduce criminal justice costs, increase tourism, and offer a pain relief treatment less addictive than opioids.
Citing a report from the American Civil Liberties Union, the center says that West Virginia spent more than $17 million enforcing the state’s marijuana laws in 2010.
Holmes also listed other limitations to the research. She noted that the federal government could someday start intervening in marijuana sales and that revenue would likely decline as other states legalize marijuana.
The center also notes that establishing a new regulatory system will cost money. According to the report, in fiscal year 2015, Colorado spent $8.6 million, or about 9 percent of total marijuana revenue, on enforcement, administration and taxation.
Holmes suggested the state could spend some of the marijuana revenue on substance abuse treatment programs. West Virginia has the highest overdose death rate in the nation.
“The argument can be made that marijuana should not be legalized because it is not necessarily a harmless substance,” Holmes wrote. “Yet, alcohol and tobacco could be seen as more harmful yet are legal. Their potential dangers are offset through the appropriate level of taxation. It makes little sense not to do the same with marijuana.”
Four states and the District of Columbia have legalized the recreational use of marijuana for adults, while 25 states allow for marijuana to be used for medical purposes and 21 states have decriminalized possession of small amounts of marijuana.
Linda Frame, spokeswoman for the center, said legalization or decriminalization is a matter of “modernizing” the law in the state.
“It doesn’t seem like a radical idea,” she said.
Medical marijuana bills have regularly failed in the West Virginia Legislature, under both Democratic and Republican leadership. A marijuana decriminalization bill also failed in the House of Delegates this year.
The bill, sponsored by Delegate Michael Pushkin, D-Kanawha, died in the House Health Committee. Delegate Joe Ellison, R-Mercer, chair of the health committee, did not return a call. Neither did House Speaker Tim Armstead, R-Kanawha.
Boettner said the political climate doesn’t change their goal to help lawmakers make informed decisions, and also noted that leadership could change.
“If we did reports based on only what could probably pass, we wouldn’t do much,” Boettner said.