Reefer Revenue

Reefer Madness

The latest incarnation of “reefer madness” is the idea that the legalization of marijuana is the solution budget woes. I’m amazed how often students suggest legalizing marijuana as their answer on assignments about balancing the budget. So, I was intrigued when I saw that the folks over at “Nerd Wallet” had put together some analysis of potential state revenue from legalized marijuana (“Cannabis Cash: How Much Money Could Your State Make From Marijuana Legalization?“).

Nerd Wallet’s estimate assumes at 15% surtax on marijuana similar to the tax in Colorado on top of the Texas’ existing sales tax rate (they use 8.15%). Of course, it’s hard to estimate the size of a market for a product that is currently illegal. I’ll just have to take their word on their estimates of how many people under 25 are/will be using marijuana. In then end, they are very proud of their nation-wide estimate of $3.1 billion per year. I’ll leave others to point out how that compares to the federal deficit.

I’m focused on Texas. Nerd Wallet’s estimate for Texas is $166 million. They take pride in pointing out how their figures compare to the budgets of small state agencies. A more realistic way of looking at this is to consider how this compares to the Texas budget overall. The bottom line is that revenue from marijuana sales would total just under .3% of the Texas state budget. That does not take into account administrative costs of the state takes up the task of deciding who gets to sell marijuana and the costs of any regulation of the product itself.

It’s worth noting that this year Texas is expected to bring in just over one billion dollars from the alcohol beverage tax alone. There are lots of other sources of revenue that could produce as much money as a tax on marijuana. You’re not going to win over many conservative Texans unless you make a bigger dent in the bottom line.

There are lots of other reasons to consider decriminalization of marijuana. However, the idea the legalization of marijuana is some kind of budget balancing miracle is a bigger hallucination than the drug itself would ever induce.

Nerd Wallet Map


Is Texas ready to change its mind on marijuana?

A Texas Tribune story (“Expecting Pot Penalties to Decrease? Slow Your Roll“) explored whether of Texas is ready to change its policy on marijuana. Shortly after that, the Texas Tribune released  poll results on Texans’ attitudes about marijuana.


Only 23% of respondents support the current policy of marijuana being illegal in all cases. Almost half of respondents (49%) support legalize something like possession for personal use and another 28% support medical marijuana.

So, about 3/4 of Texans support some kind of change to the state’s drug policy. The question is whether or not change will come to Texas.

Gubernatorial candidate Wendy Davis announced that she supports medical marijuana. That does indicate some support for changing the law, but it’s  a long way from legal marijuana. Meanwhile, Greg Abbott does not support any changes to the drug laws.

Remember this if you’re thinking about Texas suddenly joining other states in decriminalizing or legalizing marijuana: Texas law allowed for life in prison for simple possession of marijuana until the 1970s. The state’s libertarian leanings  often lose out when they run into Texans’ social conservatism.

Change is going to be slow because the people most opposed to reforming marijuana laws are at the heart of the base of the Republican party. It’s a great example of how the rules of the game matter. A majority of Texans might favor changing the state’s marijuana laws. However, the majority of the primary voters  choosing the nominees of the majority party in Texas probably do not. Representative democracy is often about who shows up and most Texans do not show up for party primaries.