A recent study says Kentucky could earn about $30 million per year in tax revenue if it legalized marijuana.
- Rachel Aretakis
- Reporter/social engagement coordinator- Business First
A recent study says Kentucky could earn about $30 million per year if it legalized marijuana.
NerdWallet, a personal finance website in San Francisco, estimates legal marijuana sales would earn the United States about $3 billion a year in tax revenue. The study calculated each state’s market size, the estimated number of marijuana users in the state, and the state and local tax rate, according to “Cannabis Cash: How Much Could Your State Make?”
Kentucky’s potential earnings from legalization lands about in the middle of other states. On the high end, California could earn $519 million and New York would get $278 million. The states with the least amount of revenue are North Dakota and Wyoming, each with about $4 million.
The study used data from the Substance Abuse and Mental Health Services Administration, which estimates that Kentucky has 107,144 marijuana smokers with a $142 million marijuana market size.
To put that into context, tax revenue from sales of cigarette and other tobacco products in Kentucky totaled about $22 million in August. Based on the NerdWallet study, revenue from marijuana taxes would be about $2.5 million per month for Kentucky.
Audrey D. Kline, an associate professor of economics at the University of Louisville, said it’s hard to tell a lot from the study about how estimates were determined, but she noted in an email to Business First that there are economic benefits to legalization.
One area that would benefit is tourism, she said. Although Kentucky wouldn’t see nearly as much marijuana-related tourism as Colorado does, “we’d likely have some due to Derby and other tourist attractions here in the region,” she wrote.
Colorado collected $2 million in marijuana tax revenue in January 2014, the first month marijuana was legalized for recreational use. The Denver Business Journal, a Business First sister publication, also reported that Denver saw an increase in hotel inquires after legalization and that a summit about marijuana investing was held in April.
But Kline said in an interview that she doesn’t think people would visit Kentucky solely because marijuana is legal.
Kline also noted that legalization could create economic development as retailers of marijuana and related products open.
“And with our hemp industry,” she said, “we’d already have some comparative advantage in job creation and crop cultivation.”
Rachel Aretakis covers innovation and technology, and she coordinates Louisville Business First’s social media.
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