Legal Recreational Marijuana Creates Thousands Of Jobs, Safety, Quality And Variety

A new report released today says the legalization of marijuana for adult use in New York State will create tens of thousands of jobs and add hundreds of millions in revenue over the next 5 years. The report, Economic and Revenue Impact of Marijuana Legalization in New York State—A Fresh Look, was written by James Parrott of the Center for New York City Affairs at The New School and economist Michele Mattingly.

Parrott and Mattingly looked at the economic impacts of legalization across the country to forecast the effects of the proposed bill in New York.

The report found New York will see sizable economic benefits in the form of excise and sales tax revenue, jobs and overall economic output from the new industry to contribute to the state’s revenue goals in the wake of the COVID-19 pandemic and resulting economic crisis and budget shortfall.

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The pandemic has taken a greater jobs toll in New York State than in any state except Hawaii.

If New York becomes the 16^th state to legalize marijuana during the 2021 legislative session, annual retail sales of adult-use marijuana are projected to rise from $566 million in fiscal year 2023—when legal sales are expected to be first authorized—to $2.6 billion in 2027, and could reach $3.9 billion by 2032.

The experience of other states shows that legal sales grow rapidly in the first several years as current users are drawn away from the illicit market and new users are attracted by the safety, quality assurance, and product variety that legalization provides.

That market size would generate up to $159 million in state excise and sales tax revenue in fiscal year 2023 and $765 million in annual tax revenue by 2027 based on Governor Cuomo’s proposed tax structure—which includes a 10.25 percent excise tax, a potency tax and would subject retail sales to the sales tax.

On a cumulative basis more than $2.5 billion in total state taxes would be generated over the first five years.

On a cumulative basis more than $2.5 billion in total state taxes would be generated over the first five years. In the Governor’s proposal, additional tax revenue would be generated for localities by the local portion of the sales tax, and under a  proposal co-sponsored in the legislature by Senator Liz Krueger and Assemblywoman Peoples-Stokes, four percent in excise taxes would benefit municipalities and counties.

The legislature’s proposal would generate slightly lower state taxes than the governor’s proposed tax structure, and about the same amount of local taxes.

The report developed the first detailed economic model for New York to gauge the economic and employment impact of legalization.

The authors estimated that every $1 billion in sales in New York would create 19,400 jobs in the cultivation, manufacturing, distribution and retail segments and an estimated $848 million in employee compensation and several hundred million dollars in business income.

The authors estimated that every $1 billion in sales in New York would create 19,400 jobs in the cultivation, manufacturing, distribution and retail segments and an estimated $848 million in employee compensation and several hundred million dollars in business income.

These jobs include those directly employed in the marijuana supply chain as well as by suppliers to the industry and the jobs supported by the consumer spending of those workers. Projections show that in the first year, more than 11,000 jobs would be supported.

In fiscal year 2027, over 50,000 jobs would be supported, equating to $2.2 billion in employee compensation and over $2 billion in business income.

In fiscal year 2027, over 50,000 jobs would be supported, equating to $2.2 billion in employee compensation and over $2 billion in business income.

The report found that adult-use marijuana sales will add $6 billion in economic output in New York by fiscal year 2027.

The authors also found, in addition to the state and local tax revenues related to marijuana sales, that the economic activity generated by this new industry will create significant state and local income and sales taxes, and local property taxes.

These taxes, $122 million in local taxes and $155 million in state taxes in the fifth year, stem from the incomes and consumer spending of workers employed in and supported by this new industry, and the property and income taxes paid by the new businesses.

The marijuana legalization proposals advanced by the Governor and the legislature both aim to provide economic opportunities to communities that have been disproportionately affected by the war on drugs.

“A legalized adult-use cannabis industry can inject billions into our state economy and address longstanding inequities with smart policies in place. As New York works to develop new revenue streams to address critical budget needs and repair the economy in the wake of the COVID-19 crisis, legalization provides a substantial opportunity to create new and diverse small businesses, quality jobs and strengthen rural and urban economies and communities,” said lead author economist James A. Parrott.

About the lead author: James A. Parrott is the Director of Economic and Fiscal Policies at the Center for New York City Affairs at The New School. Parrott worked with the City of New York and the City of Seattle to establish minimum pay standards for for-hire vehicle drivers. He served on Governor Cuomo’s Tax Reform and Fairness Commission and the New York City Advisory Commission on Property Tax Reform. While at the Fiscal Policy Institute, Parrott was the lead author for several editions of The State of Working New York. His recent work at The New School has focused on the Covid-19 economic impact, see: http://www.centernyc.org/covid19-economic-impact. He has a PhD in Economics from the University of Massachusetts, Amherst.