Experts: Marijuana Legalization Can Boost State Finances

Friday, 31 Jan 2014 07:59 AM

By Dan Weil

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A legalization of marijuana could provide a major lift for states' financial positions, experts tell Fortune.

Colorado already has legalized marijuana for recreational use. The Colorado Legislative Council Staff estimated that legalization will provide tax revenue of $100 million over the next two years, Fortune reports.

In Washington State, where recreational sales turn legal later this year, a fiscal impact study indicated legalization could generate tax revenue of up to $1.9 billion over the next five years, Fortune reports.

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"It [legalization] would be a real positive for states that are struggling right now," Thomas Doe, CEO of Municipal Market Advisors research firm, told Fortune.

"They have got such an infrastructure funding gap — and they have challenges with funding their pensions — that this is significant revenue."

Gregory Whiteley, portfolio manager for government securities at DoubleLine Capital, concurs.

"By all accounts the legal recreational marijuana market is potentially quite large, so the impact on state and local finances could be significant," he told Fortune.

Experts say it's even possible that states could issue bonds backed by marijuana taxes. That idea is "definitely on my radar," Whiteley said.

Meanwhile, a recent Wall Street Journal/NBC News poll shows that 55 percent of American adults back legalization of marijuana.

Not surprisingly, support is strongest among the young. Almost 75 percent of those aged 18-34 favor legalization, compared to a bit more than 50 percent of those aged 35-49 and 38 percent of those aged 65 and older.

The survey of 800 adults was conducted Jan. 22-25.

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