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Congressional Republicans don’t seem keen on letting D.C. become a state, manage its own budget, or—among other issues—completely legalize marijuana. But, if the District were able tax and regulate pot like Colorado and Washington, it could generate upwards of $10 million a year, according to a new report by the Tax Foundation, a think-tank.
It’s currently illegal to sell cannabis in D.C. thanks to federal-budget language introduced by Maryland Rep. Andy Harris in 2014. The congressional rider, as it’s known, bars the District from using funds to “enact or carry out any law, rule, or regulation to legalize or otherwise reduce penalties associated with the possession, use, or distribution of any schedule I substance,” under which category marijuana falls. Legalization advocates hope to remove the rider and rid the District of its “gray market” for weed.
D.C. may not see a regulatory scheme for marijuana sales until the political winds change. Still, the Tax Foundations find that if the District instituted a 15 percent tax on such legal purchases, it would bring in about $11 million a year in revenue; at 20 percent, it would produce $15 million a year, and at 25 percent, it would generate $18 million a year. Notably, the estimates are based on the “sales per capita observed so far in Colorado and Washington,” meaning that actual revenue could be different within the capital.
“If every state imposed a retail marijuana tax, total collections could range from $5.3 billion at a 15 percent rate to $8.8 billion at a 25 percent rate,” the authors explain. “Lower tax rates may capture more of the gray and black market than Colorado and Washington have to date, and state revenues in that circumstance could reach as much as $18 billion.”
A previous estimate of D.C.’s earning potential from taxing weed sales at 15 percent pegged potential revenue at $20 million a year. That figure derived from a 2013 bill led by At-Large Councilmember David Grosso that sought to set up a regulatory plan.
According to the Tax Foundation, Colorado garnered $56 million in 2014 from taxing marijuana and $113 million in 2015; it “will likely exceed $140 million” this year. As of April 2016, Washington’s “state sales average over $2 million a day, which would mean excise tax revenue reaching some $270 million per year.”
“While the revenue can be in the tens or even hundreds of millions of dollars, it takes a lead time to develop,” the group’s report notes. “Revenues started out slowly in Colorado and Washington, as consumers became familiar with the new system and after state and local authorities spent time and money setting up new frameworks and regulatory infrastructure.”
You can read the full report here.