The Kansas City arm of the FED says legalized marijuana increases tax revenue, jobs and real estate sales.
According to an analysis published by the Kansas City arm of the Federal Reserve, legislation legalizing marijuana at the state level has had a “significant” economic impact, leading to more jobs, increased tax revenue and a positive impact on real estate markets.
The bank represents the 10th district of the FED, which includes states such as Colorado and New Mexico that currently have legalized medical and recreational marijuana. In addition, Missouri and Oklahoma, which currently only have medical marijuana programs, also fall under the jurisdiction of the Kansas City branch.
The report states, “Overall, the marijuana industry has had a significant effect on the economies of Tenth District states in the initial years after legalization. The emergence of the industry has led to higher employment and stronger demand for commercial real estate. In addition, tax revenues have increased as marijuana sales have grown.”
"Overall, the marijuana industry has had a significant effect on the economies of Tenth District states in the initial years after legalization. The emergence of the industry has led to higher employment and stronger demand for commercial real estate. In addition, tax revenues have increased as marijuana sales have grown.”
- Economic Study, Federal Reserve Bank of Kansas City
However, the study also found that the current federal prohibition of cannabis has led to significant challenges, particularly concerning the lack of access to traditional banking systems for many small businesses.
The report continues, “Marijuana legalization has also been associated with challenges for both the industry and localities more broadly, including access to banking services and concerns among some local officials about its effects on public health and safety.”
"Marijuana legalization has also been associated with challenges for both the industry and localities more broadly, including access to banking services and concerns among some local officials about its effects on public health and safety.”
- Economic Study, Federal Reserve Bank of Kansas City
With Missouri voters set to decide on adult-use legalization on the ballot next month, the potential for continued expansion within the district will only increase the positive influence on tax revenue, jobs and real estate.
Moreover, while the cannabis industry within the district is moderate in size compared to others across the country, the far-reaching effects of its incremental growth are substantial nonetheless. As an excerpt from the study indicates,
“Currently, employment in the marijuana industry makes up a small share of total employment in Tenth District states, with estimates ranging from less than 0.30 percent of total employment in Missouri to around 1.35 percent of total employment in Colorado (Cox, 2022; Barcott & Whitney, 2022). []
Although this share is relatively small, new jobs in the marijuana industry can nevertheless contribute substantially to total employment growth, particularly in the years immediately following legalization. For example, Colorado issued around 38,000 occupational licenses in the first four years after legalization, 2014–17 (Felix, 2019). During the same period, Colorado added a total of 280,000 new jobs across all industries, suggesting that employment in the marijuana sector may have contributed up to 13.6 percent of the state’s employment growth. [2]”
Along with the growth in employment numbers, the increased tax revenues and tightened real estate markets powerfully demonstrate the positive economic impact brought on by the legalization of marijuana at the state level.
Moreover, while the bank stops short of advocating for legalization at the federal level, it strongly suggests that state-level markets could be strengthened by action on the part of Congress to afford marijuana businesses better access to the banking system.
To that end, congressional lawmakers are efforting to assemble a package of marijuana reform proposals expected to include favorable banking language for the cannabis industry.
This past Friday, Sen. Cory Booker (D-NJ) said that he is “very hopeful” Congress will be able to enact marijuana policy changes during the lame-duck session after the November election.
As Election Day looms, we will continue to see more states address the issue of legalized marijuana from a medical and recreational standpoint. Furthermore, as access to cannabis increases state by state over the intervening years, its potential health benefits and economic impact will hopefully compel the federal government to take action to "deschedule" marijuana and finally make this magical plant legal for all Americans.
