A recent economic analysis anticipates that Ohioans stand to gain more from the legalization of recreational cannabis than they would lose, with an estimated net benefit of $260 million annually.
As voters prepare to decide on Issue 2, which would permit adults over the age of 21 to use cannabis recreationally, the Columbus-based think tank Scioto Analysis provided insights into the potential financial impacts of such a measure, the Ohio Capital Journal first reported.
The memo, which follows the initiative on the ballot for the Nov. 7 election, draws on data from states where recreational use is already legal to project outcomes for Ohio.
Follow the Money
According to the report, the benefits of Issue 2 largely hinge on the generation of tax revenue, specifically through a proposed 10% excise tax that would supplement the standard sales tax. That excise tax is projected to generate $190 million a year.
Much of that windfall will be allocated to two social benefit programs: the Cannabis Social Equity and Jobs Fund and the Substance Abuse Addiction Fund. Those dedicated funds are projected to provide real returns on investment, with the equity and jobs fund potentially generating $5.76 in benefits for every dollar spent and the substance abuse fund even more.
In terms of employment, the analysis predicts that legalization could create approximately 3,300 jobs in the first year, contributing an estimated $190 million in wages across the state, though this number is considered an upper limit.
“The key reason benefits are likely to outweigh costs when it comes to marijuana legalization is how the tax dollars raised are going to be used,” said Michael Hartnett, a firm policy analyst, wrote. “The programs outlined in the ballot initiative have historically been very efficient ways to use public dollars, and will likely generate a lot of value for Ohioans.”
For consumers, the shift to a legal market could result in millions of savings a year on cannabis purchases, the report posits. That consumer surplus, the economic measure of consumer benefits, represents the difference between the amount consumers are willing to pay for a product and the price they actually pay.
Scioto Analysis calculated the effect in Washington to estimate what might happen in Ohio. It looked at how much people stopped buying weed when the tax went up in Washington, and used that to figure out how much more weed they might buy in Ohio with lower taxes.
The analysts concluded that people in Ohio likely will get about $98 million in consumer surplus from legal weed, though it could be lower if the illicit market remains strong in the state.
Moreover, legalization could lead to a dramatic drop in arrests for marijuana possession, resulting in more than $38 million in savings from reduced law enforcement and legal expenses.
According to analysis of ACLU data, the average cost of a single marijuana-related arrest to law enforcement is approximately $4,400. Additionally, individuals arrested face, on average, $10,900 in expenses, including attorney fees, court costs, and lost income. Washington state’s experience following the legalization of cannabis indicates a sharp decline in arrests, with an 87% decrease for adults over the age of 21.
Incarceration costs are a significant part of the equation. The Health Policy Institute of Ohio calculated the cost of incarcerating one person at $30,600 annually. Reducing marijuana-related incarcerations could, therefore, offer considerable economic relief to the state’s budget.
The report, however, does acknowledge potential costs, including a decrease in worker productivity and an increase in impaired driving incidents, with an anticipated 1,700 additional intoxicated-driving arrests each year at a cost of $130 million. Drawing from a 2017 study, the report suggests a 1% drop in worker productivity across several industries, costing Ohio workers around $760 million in lost productivity in the first year.
The analysis suggests that the financial benefits of legalizing would outweigh the drawbacks.
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