Proponents of marijuana legalization often bring up nebulous claims that legalization would bring “more revenue through taxes” and “save money on law enforcement,” while rarely offering actual facts and figures. What can be asserted without proof can be dismissed without proof, so let’s look at the facts. From a fiscal standpoint, what would marijuana legalization really mean in Wisconsin?
How Much Additional Income Would Wisconsin Receive?
This is relatively easy to answer: More than $138 million per year from sales taxes at the state level with the excise tax of 15% proposed by the bill and more than $2.7 million per year in local sales tax revenue. The revenue could be much higher if the state imposes a higher tax rate.
Following a 2017 bill proposed by Democratic member of the Wisconsin State Assembly Melissa Sargent to legalize cannabis, the Wisconsin Department of Revenue published an estimate of the benefits of full legalization. It concluded that $138 million annually after 3 years is a likely outcome. This is an extremely conservative estimate, as “the department estimates that Wisconsin consumers will purchase 55.36% of the volume of marijuana purchased in Colorado,” but Wisconsin is slightly more populated than Colorado.
Besides direct tax income, legalization brought Colorado a lower unemployment rate. A study by the economic consulting firm Marijuana Policy Group estimates that 18,000 jobs were created by the cannabis industry, as well as soaring real estate value: Research published in Economic Inquiry found that legalizing marijuana increased housing values an average of $15,600 per home. Wisconsin could benefit from similar economic boons. This is unquantifiable income, but it represents massive profits for local communities.
“When marijuana is legalized, you now have an entirely new industry that is utilizing the services and products of other existing industries,” says Mason Tvert, spokesperson for the Marijuana Policy Project. “All cannabis businesses need to hire employees; they need to purchase real estate, growing supplies, nutrients, lighting, electricity, paper, marketing, printing, tax services... They will be creating business for many others throughout the state.”
How Much Money Would Wisconsin Save?
Prohibition costs money as it involves law enforcement institutions, as well as the legal and correctional systems. It is extremely complex to determine how much money would be saved if law enforcement stopped tracking down cannabis aficionados as cannabis represents only a fraction of the total cost.
There are countless sources presenting varying figures, but most vary from a bit less than $50 million per year to more than $100 million, sometimes much higher. The American Civil Liberties Union estimated in a 2013 study that Wisconsin would save an average of just $44.3 million of taxpayer money per year if cannabis was legal, which is on the lower end. An older study, led by Harvard economist Jeffrey Miron in 2010, was more scathing. He concluded that the U.S. would save $13.7 billion per year in government expenditures on prohibition enforcement if marijuana was legal. Additionally, tax revenue would increase by $6.4 billion annually. In Wisconsin specifically, he estimated that $170.5 million were spent in 2008 on marijuana prohibition and that, even without a special tax rate, full legalization would bring Wisconsin $61.12 million annually through sales taxes. Again, depending on the special tax rate for cannabis the state imposes, this increase in revenue would be significantly higher.
Presently, the Federal Bureau of Investigations (FBI) estimates that 53.4% of all drug-related arrests in the Midwest are for marijuana possession (48.1%) or sale (5.3%). That ratio is consistent every year in recent history. In 2016, the FBI estimated that 28,025 people were arrested on drug-related charges in Wisconsin, which means that roughly 15,000 people were arrested that year because of marijuana offenses; that represents more than 5% of all arrests made by law enforcement agencies that year.
As it happens, arresting someone is not free. “As of today, each stop a police officer makes for simple marijuana possession costs taxpayers $425, on average,” says Sargent. That number is similar to the one found in a UW-Madison study, which estimated that one drug-related arrest costs an average of $439 to Wisconsin taxpayers. Therefore, in 2016, marijuana-related arrests cost roughly $6.5 million.
Our state still considers marijuana possession a felony (after the first offense) punishable by up to 3.5 years in prison. In Wisconsin, the cost of keeping an adult in prison for one year varies between $32,000 and $40,000. A study by the nonprofit Vera Institute of Justice determined that in 2015, a Wisconsin inmate cost an average of $38,644 per year to state taxpayers. That data corroborates official statistics by the Wisconsin Department of Corrections, which claims that male inmates cost $32,394 and female inmates cost $39,724.
There are currently 23,641 inmates in Wisconsin, and in 2016, 10% of inmates were in prison for drug offenses, so $75.6 million to $94.6 million are spent exclusively to keep drug offenders imprisoned. Unfortunately, there are no official statistics telling us how many inmates are currently imprisoned specifically for cannabis-related offenses, but we do know that 15,000 people were arrested for marijuana offenses in 2016. Each person incarcerated for possessing marijuana costs up to $19,000 (for a six-month sentence) for a first offense and up to $133,000 (3.5 years) for subsequent offenses. Every 1% of the arrests that led to a conviction for the maximum sentence cost taxpayers nearly $20 million.
Moreover, calculations do not consider legal costs—such as the cost of judges, bailiffs or public defenders—nor collateral damages. A drug-related arrest is likely to end a career and destroy many future employment opportunities. That means that each of the 15,000 people arrested every year in Wisconsin will earn less money through employment, spend less money at local businesses and, therefore, decrease their overall contributions to the local economy. While our businesses decry the lack of skilled employees, our marijuana criminalization polices are exacerbating the problem.
“Police are spending time and resources arresting adults for simple marijuana possession, which they could be using for more serious crimes,” Mason Tvert adds. “Tens of thousands of people are being punished, whether it is by appearing in court, paying a fine, going to prison or having a permanent mark on their record, which comes at a significant cost. It can harm people for the rest of their lives; they lose their jobs or find it difficult to gain employment in the future.”
Moreover, according to the FBI’s data, more than 1/4th of people arrested on drug charges are African American. Most of the victims of the current system are poor people—often people of color—who can’t afford a lawyer, which perpetuates the cycle of poverty.
