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Fact check/How has marijuana legalization impacted state revenue and crime?

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Fact check: How has marijuana legalization impacted state revenue and crime?

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March 15, 2017
By Cory Eucalitto

Maryland State Sen. Richard Madaleno, D-Montgomery, sponsored legislation to legalize the adult possession of small amounts of marijuana, and to regulate and tax its sale.[1][2] At a press conference announcing the measures, Madaleno claimed, “Colorado and Washington are bringing in hundreds of millions in revenue without any increase in crime, with a more sensible approach to the issue of cannabis use.”[3]

Is Madaleno correct about crime rates in Colorado and Washington? Are those states generating hundreds of millions of dollars in revenue from taxing and regulating marijuana sales?

Decriminalization, by definition, has reduced arrests for marijuana possession, use, and sale in both states.[4][5] However, there is no reliable data on trends in other marijuana-related crime in either Colorado or Washington. The nation’s primary source of crime data, the FBI’s Uniform Crime Reporting (UCR) program, does not track drug crimes—only violent crimes and property crimes.[6] Both Colorado and Washington have issued reports on the impacts of decriminalization, but the scope and methodologies of each are very limited.[4][5]

Madaleno is correct about the revenue generated by marijuana sales. Between fiscal years 2014 and 2016, Colorado collected nearly $234 million in taxes and license fees related to sales of marijuana. During the same period, Washington collected nearly $256.5 million in excise taxes, license fees, and other marijuana-related revenue.[7]

Background: Maryland and marijuana

Maryland decriminalized possession of less than 10 grams of marijuana by adults in 2014, making it a civil offense rather than a criminal offense. The fine for a first offense is $100, which increases to $250 for a second offense.[8] (Prior to decriminalization, possession of less than 10 grams of marijuana could result in a maximum penalty of 90 days in jail and a $5,000 fine.)[9]

Also in 2014, the state created a program for the medical use of marijuana, although the dispensary system has not been established.[10]

SB 928, introduced on February 3, 2017, would eliminate civil penalties for the possession of marijuana (and products containing marijuana) for personal use. Adults age 21 and older would be allowed to possess one ounce of marijuana or the equivalent amount of a product containing marijuana or marijuana extracts, with certain exemptions. For example, landlords and innkeepers would be able to prohibit possession and use on their property. If enacted, the measure would also eliminate criminal penalties for the sale of marijuana by licensed cultivators, manufacturers, and retailers. SB 928 would also legalize the possession and sale of industrial hemp.[1]

A companion measure, SB 927, would regulate marijuana sales, impose a 9 percent sales tax on marijuana products, and impost an excise tax of $30 an ounce on sales by cultivators. The tax revenue would be dedicated to drug education and treatment, as well as to some K-12 and workforce development programs.[2]

Colorado: crime

Colorado voters approved a constitutional amendment to legalize the medical use of marijuana in 2000.[11] In 2012, they approved a constitutional amendment to legalize the possession of marijuana for personal use.[12] Since January 1, 2014, the retail sale of marijuana for personal use and possession of less than an ounce of marijuana (or an equivalent amount of products containing marijuana) has been legal for adults aged 21 and older.[13]

In March 2016, the Colorado Department of Public Safety (CDPS) issued a report on early findings related to marijuana legalization in the state. The authors cautioned that “it is too early to draw any conclusions about the potential effects of marijuana legalization or commercialization on public safety, public health, or youth outcomes” because it largely contained only data from the first year of legalization.[4]

According to the report:

  • Marijuana arrests decreased by 46 percent between 2012 and 2014 (from 12,894 to 7,004).
  • The proportion of marijuana arrests to total arrests fell from 6 percent in 2012 to 3 percent in 2014.
  • The number of juvenile marijuana arrests increased 5 percent between 2012 and 2014 (from 3,234 to 3,400).
  • The total number of marijuana‐related court filings declined 81 percent between 2012 and 2015 (from 10,340 to 1,954).

According to FBI data, Colorado’s overall violent crime rate declined every year between 2007 and 2013 (from 348 per 100,000 residents to 308 per 100,000 residents).[14][15] In 2014, the rate of violent crime increased by 0.3 percent (to 309 incidents per 100,000 residents from 308 in 2013).[16] However, the rate increased 3.9 percent in 2015 (to 321 incidents per 100,000 residents).[17]


The number of property crimes declined by 4.9 percent from 2013 to 2014 (from 2,659 incidents per 100,000 residents to 2,530).[15] [16] The rate increase by 4.4 percent in 2015 (to 2,642 incidents per 100,000 residents).[17]


Washington: crime

The retail sale of marijuana for adult use began in Washington on July 8, 2014, following voter approval in 2012. [18] [19] Marijuana for medical use was legalized in the state in 1998.[11]

The Washington State Office of Financial Management in 2015 issued a “baseline report on the monitoring impacts of recreational marijuana legalization.” (A slightly updated version was issued in January 2016.) The crime data is limited.[5]

According to the report:

  • All criminal activities involving marijuana decreased between 2012 and 2014. Possession, the most common incident, decreased by 63 percent (from 5,133 incidents to 1,918).
  • The number of law enforcement incidents involving marijuana fell 63 percent percent between 2012 and 2014 (from 6,336 to 2,326). Concurrently, incidents involving amphetamines and heroin increased.[20]
  • The number of marijuana incidents at primary and secondary schools increased by 40 percent between 2012 and 2014 (from 258 to 361).

According to the FBI’s crime report, Washington’s violent crime rate decreased 13.2 percent between 2007 and 2013 (from 333 per 100,000 residents to 289). The rate fell 1.4 percent in 2014 (to 285 per 100,000 residents), and to 284 per 100,000 in 2015.

The property crime rate declined nearly 8 percent between 2007 and 2013 (from 4,031 incidents per 100,000 residents to 3,710). In 2014, it stayed roughly the same (3,706 incidents per 100,000 residents) but decreased 6 percent in 2015 (to 3,464 incidents per 100,000 residents).[14][17]

Revenue: Colorado and Washington

Colorado imposes two sales taxes and an excise tax on marijuana: one sales tax with a rate of 2.9 percent; a second sales tax with a rate of 10 percent; and a retail excise tax of 15 percent. In addition, the state derives revenue from licenses for the production and sale of marijuana.[21] [22]

Between fiscal year 2014 and fiscal year 2016, the sale of personal use marijuana generated nearly $234 million in general revenue for the state.[22] In the same period, the excise tax generated $69.6 million. (The excise tax revenues are dedicated to public school capital construction.)[4][22]

State revenue from recreational marijuana in Colorado
Fiscal year Marijuana licenses and application fees Marijuana sales tax (2.9 percent rate) Retail marijuana sales tax (10 percent rate) Retail marijuana excise tax (15 percent rate)
2014 $2,425,200 $2,706,299 $9,023,352 $3,014,839
2015 $4,545,830 $11,816,410 $42,017,797 $23,995,775
2016 $5,263,010 $19,410,953 $67,094,524 $42,630,839
Total $12,234,040 $33,933,662 $118,135,673 $69,641,453
Source: Colorado Department of Revenue, “2016 Annual Report,” December 18, 2016


Washington originally imposed sales taxes and an excise tax on personal use marijuana, as well as business and occupancy taxes on marijuana retailers, processors, and cultivators. In July 2015, the state replaced those taxes with a single excise tax of 37 percent paid by the retail customer.[23]

The Washington State Liquor and Cannabis Board, which regulates marijuana production and sales, reported $256.5 million in revenue between fiscal years 2014 and 2016.

The revenue is deposited in a dedicated account established by state law. The funds are used to pay for the board’s regulatory activities, and to fund research and education programs on marijuana use.[24]

Revenue from marijuana sales collected by the Washington State Liquor and Cannabis Board
Fiscal year License fees Excise tax Other marijuana income
2014[25] $1,780,000 $0 $0
2015[26] $1,060,000 $64,630,000 $20,000
2016[27] $3,000,000 $186,000,000 $0
Total $5,840,000 $250,630,000 $20,000


Conclusion

Maryland State Sen. Richard Madaleno, D-Montgomery, is sponsoring bills to legalize the adult possession of small amounts of marijuana, and to regulate and tax its sale. “Colorado and Washington are bringing in hundreds of millions in revenue without any increase in crime, with a more sensible approach to the issue of cannabis use,” Madaleno said at a press conference.[3]

There is limited information about the impact on crime of marijuana decriminalization in Colorado and Washington. The primary source of data, the FBI’s Uniform Crime Reporting program, does not track drug crimes as it does violent crimes and property crimes.[6] Both Washington and Colorado have issued reports on crime and decriminalization, but the scope and the methodologies are very limited. Madaleno is correct about the revenue generated from the sale of marijuana in Colorado and Washington.

See also

Sources and Notes

  1. ↑ 1.0 1.1 General Assembly of Maryland, "Senate Bill 928," accessed February 23, 2017
  2. ↑ 2.0 2.1 General Assembly of Maryland, "Senate Bill 927," accessed February 23, 2017
  3. ↑ 3.0 3.1 WAMU, “Maryland Legislators Introduce Bills To Legalize And Tax The Sale Of Marijuana,” January 30, 2017
  4. ↑ 4.0 4.1 4.2 4.3 Colorado Department of Public Safety, "Marijuana Legalization in Colorado: Early Findings," March 2016
  5. ↑ 5.0 5.1 5.2 Washington State Office of Financial Management, Forecasting and Research Division, "Monitoring Impacts of Recreational Marijuana Legalization, 2015 Update Report," January 2016
  6. ↑ 6.0 6.1 UCR only tracks violent crimes of murder, rape, robbery, and aggravated assault, and property crimes of burglary, larceny-theft, motor vehicle theft, and arson. Whether marijuana figures into these crimes is not reported. FBI: Uniform Crime Reporting, "A Word About UCR Data," accessed February 23, 2017
  7. ↑ See tables below.
  8. ↑ WUSA, "Md. governor signs marijuana bills into law," April 14, 2014
  9. ↑ The Washington Post, "Maryland Senate passes bill to decriminalize possession of small amounts of marijuana," March 14, 2014
  10. ↑ Maryland Medical Cannabis Commission, "Welcome to the Natalie M. LaPrade Maryland Medical Cannabis Commission," accessed February 23, 2017
  11. ↑ 11.0 11.1 National Conference of State Legislatures, "State Medical Marijuana Laws," accessed February 23, 2017
  12. ↑ Ballotpedia, “Colorado Marijuana Legalization Initiative, Amendment 64 (2012),” accessed February 23, 2017
  13. ↑ The Denver Post, “World’s first legal recreational marijuana sales begin in Colorado,” January 1, 2014
  14. ↑ 14.0 14.1 FBI: Uniform Crime Reporting, “Crime in the United States, 2013: Table 5, Crime by State, 2007,” accessed on February 23, 2017
  15. ↑ 15.0 15.1 FBI: Uniform Crime Reporting, “Crime in the United States, 2013: Table 5, Crime by State, 2013,” accessed on February 23, 2017
  16. ↑ 16.0 16.1 FBI: Uniform Crime Reporting, “Crime in the United States, 2014: Table 5, Crime by State, 2014,” accessed on February 23, 2017
  17. ↑ 17.0 17.1 17.2 FBI: Uniform Crime Reporting, “Crime in the United States, 2015: Table 5, Crime by State, 2015,” accessed on February 23, 2017
  18. ↑ The New York Times, “Sales of Recreational Marijuana Begin in Washington State,” July 8, 2014
  19. ↑ Ballotpedia, “Washington Marijuana Legalization and Regulation, Initiative 502 (2012),” accessed February 23, 2017
  20. ↑ The report uses the same definition for “incident,” as the FBI’s UCR, meaning that not every incident resulted in an arrest.
  21. ↑ The different license and application fees can be found here: Colorado Department of Revenue, “Fee schedule,” accessed February 28, 2017
  22. ↑ 22.0 22.1 22.2 Colorado Department of Revenue, “2016 Annual Report,” December 18, 2016
  23. ↑ The Spokesman-Review, “Washington Gov. Inslee signs recreational pot reform law,” July 1, 2015
  24. ↑ Washington State Legislature, “RCW 69.50.540, Dedicated marijuana account—Appropriations,” accessed February 28, 2017
  25. ↑ Washington State Liquor Control Board, "Fiscal Year 2014 Annual Report," accessed February 23, 2017
  26. ↑ Washington State Liquor and Cannabis Board, "Fiscal Year 2015 Annual Report," accessed February 23, 2017
  27. ↑ Washington State Liquor and Cannabis Board, "Fiscal Year 2016 Annual Report," accessed February 23, 2017
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