A new study by a UConn economist says legalizing recreational marijuana in Connecticut would generate between $784 million and $952 million in new state tax revenue over five years.
The study, funded by a national group that lobbies for marijuana legalization, says direct new revenue from legalization would range from $35 million to $48 million in the first year of sales to as high as $223 million in the fifth year.
The money would help the state in the long run, but officials say the program would not be up and running quickly enough to directly impact the current fiscal year’s deficit of $2 billion, driven largely by the coronavirus pandemic. The General Assembly has debated marijuana legalization for several years and that debate is expected to resume when lawmakers return to session in January.
UConn professor Fred Carstensen, the study’s author who serves as the director of the Connecticut Center for Economic Analysis at the UConn School of Business, said that multiple variables would change the amount of jobs created and tax revenue generated. The number of jobs, for example, could range from a low of 10,424 to a high of 17,462 in the fifth year, depending how much of the tax revenue is spent by the state in an attempt to generate economic activity.
“The worst-case scenario is they don’t do anything with it,” Carstensen said of the tax revenues. “They don’t spend it at all and put it in the rainy day fund — 17,000 [jobs] is the most optimistic in which all of the money is used to preserve programs.”
Since recreational marijuana is illegal in New York and Rhode Island, the study said Connecticut would benefit from legalization as buyers would cross the borders from the two neighboring states.
Recreational marijuana is legal in Massachusetts and sales there began in November 2018. The Bay State sold more than $420 million of legal marijuana in the first full year stores were open, generating more than $70 million in state and local taxes.
Revenue estimates from the legalization of marijuana in Connecticut have varied widely; the legislature’s nonpartisan fiscal office in 2018 estimated annual revenue of $30.1 million under the Massachusetts marijuana taxation model and $63.9 million under the Colorado model, where a higher tax rate is applied. Both estimates are for the first full year of the program.
Lawmakers are wary of pushing tax rates in Connecticut too high, saying that state residents would skip over the border to Massachusetts or continue buying on the black market. Massachusetts currently has a combined excise and sales tax rate of 17% and allows cities and towns the option of an additional local tax of up to 3 %.
“No matter which tax regime the state chooses and no matter how it spends the new revenues, legalization will generate significant job creation, strong growth in GDP, and hundreds of millions in new tax revenues,” the study says. “In the face of the challenge of recovering from the COVID-19 pandemic, legalization offers a path to a stronger recovery.”
The $15,000 study was paid for by the Marijuana Policy Project, a national group that lobbies for legalization and says on its website that it “ran winning campaigns in eight of the 11 legalization states.”
But deputy House Republican leader Vincent Candelora of North Branford, an opponent of marijuana legalization, said that proponents do not mention the heavy social costs of legalization.
“The other piece of this that needs to be factored is the increase in DUIs, hospitalizations, drug abuse — all of that,” Candelora said. “I think what can’t be lost is [Carstensen] has been commissioned and paid for by a group that’s advocating for the legalization of marijuana. It’s not as if this is an independent think tank that’s looking at these numbers. I put some value into it, but not much because this organization is advocating for the legalization of marijuana. This is sort of an advocacy piece — paid for by them.”
Candelora said decisions about legalizing marijuana should be based on multiple factors, including the impacts on youths and health.
“Both sides of the aisle and both sides of the issue have all agreed this is not a financial decision,” he said. “We shouldn’t be basing our decision on tax revenue. Even the advocates have felt that way.”
The Connecticut Police Chiefs Association has lobbied against legalization, saying that officers do not have a fool-proof test to detect marijuana in the same way that they can test drivers’ blood alcohol content.
Candelora said legalizing marijuana is not a strictly partisan issue in Connecticut, noting that marijuana legalization efforts have failed despite Democrats controlling the state House of Representatives and state Senate.
Gov. Ned Lamont has said he supports marijuana legalization, and took his strongest stance on the subject earlier this year when he included a plan to study the legalization of marijuana in his budget. The plan included $275,362 in funding for two full-time state employees to develop regulations to for legal marijuana sales.
“I do believe that our state is better off developing a well-regulated market for cannabis than continuing to rely on the black market,” Lamont wrote in testimony submitted for a March public hearing on marijuana legalization. “The black market results in unsafe product, gives children easy access, and results in increased policing costs and efforts. A well-regulated adult use market for cannabis would reduce all of these issues.”
The marijuana bill and all other legislative business was short-circuited when the state Capitol shut down in March due to the pandemic.
Christopher Keating can be reached at email@example.com
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