How much cannabis tax revenue is NZ missing out on?

With very similar population sizes, Colorado is the ideal state in the USA to use as a benchmark for potential tax revenue a “marijuana tax” could net the New Zealand government. The state with a population of just over five million, was able to distribute approximately US$52 million to the health sector, US$38 million to education and a further US$9 million to local governments. The numbers don’t lie, this is money well spent.

Failure to regulate New Zealand’s cannabis market not only affects the health and wellbeing of those who would benefit from access to medical marijuana, it also has an economic impact on the wider community. How? The opportunity cost of taxing cannabis.

It’s no great revelation that the government is missing out on substantial amounts of revenue by refusing to establish a legal marketplace in which medicinal and recreational marijuana could be taxed. Indeed, it’s one of the most common arguments made by proponents when discussing the pros and cons of legalising cannabis. While this might not be a particularly novel idea, what is relatively new is the reality of just how cannabis taxation is benefiting communities in which marijuana has been legalised.

How are Colorado cities spending their marijuana sales tax revenue?

Colorado, where the use and possession of both recreational and medicinal marijuana is legal, is one of the best regions in the world to use as a case study when considering the benefits of regulating New Zealand’s cannabis market.

In 2015, the state sold almost US$1 billion worth of cannabis, according to figures collated by the Colorado Department of Revenue. Furthermore, as Time reported, the state collected almost US$70 million in marijuana taxes in the 2014/15 financial year – approximately US$28 million more than the revenue generated from alcohol taxes.

This is a pretty nice windfall by any measure, but what exactly are the cities of Colorado spending the money on?

Well, as the Denver Post explained, many of the smaller towns throughout the state are using the revenue to upgrade infrastructure, improve access to higher education and generally increase the living standards of their citizens.

Aurora, for example, is committing US$1.5 million of its cannabis taxes to help the homeless. Additional money is going toward improving the quality of roads and building a new recreation centre.

Adams County, on the other hand, is choosing to focus on education. The region is spending more than US$500,000 of revenue generated from marijuana sales to fund scholarships for low-income students. Northglenn, another town in Colorado, will be using its money to revamp city facilities and improve infrastructure.

How could New Zealand benefit from taxing cannabis?

Given Colorado’s success with taxing cannabis, it’s easy to see how New Zealand could benefit from adopting a similar model. According to NORML, analyses from the Drug Policy Forum Trust estimated that cannabis taxation could provide New Zealand with as much as $50 million in revenue per year.

What could the government spend this money on? As NORML noted, a chunk of this revenue could be used for education, treatment and evaluation programmes. Past this, however, it would really be up to policymakers to decide how to best spend the money in order to deliver the maximum value to communities around the country.

With government budgets so often falling into the red, cannabis really could play a key role in supporting New Zealand schools, upgrading critical infrastructure and improving the health and wellbeing of everyday Kiwis.