Analysis: If Texas Legalizes Cannabis, It Could Collect More Than Half a Billion Dollars Per Year in New Tax Revenue

Establishing a regulated cannabis market could also create tens of thousands of new jobs and save taxpayers $311 million annually in criminal justice costs, according to an economic analysis by Vicente Sederberg LLP.

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AUSTIN — PRESS RELEASE — Texas could collect more than half a billion dollars per year in new tax revenue and create upwards of 40,000 new jobs if it legalizes and regulates cannabis for adult use, according to an economic analysis released Oct. 19 by Vicente Sederberg LLP, a national firm specializing in cannabis law and policy. The state could also save millions of taxpayer dollars per year in criminal justice costs.

"States across the country are seeing the benefits of legalizing and regulating cannabis," said Shawn Hauser, a partner at Vicente Sederberg who heads the firm's Austin office. "It is inspiring lawmakers in prohibition states to reexamine the efficacy and costs of their current policies and take a closer look at the alternatives. The goal of this report is to provide a snapshot of the economic benefits Texas would experience if it started treating cannabis more like alcohol for adults 21 years of age and older."

The report — which can be viewed and downloaded here — includes the following key findings:

  • There are more than 1.5 million adults 21 years of age and older in Texas who consume cannabis on a monthly basis. If the state regulated cannabis for adult use, it would see an estimated $2.7 billion per year in cannabis sales.
  • If Texas taxed adult cannabis sales at the same rate as Colorado, it would generate more than $1.1 billion dollars per biennium in new state revenue. It could also raise an additional $10 million per year through a modest business license fee, which would help offset the costs of administering the regulatory program.
  • A regulated adult-use cannabis market in Texas would result in hundreds of new businesses, creating an estimated 20,000-40,000 direct jobs in the cannabis industry, as well as tens of thousands of indirect and induced jobs.
  • Ending misdemeanor arrests and prosecutions for low-level cannabis possession offenses in Texas would save the state an estimated $311 million per year.

"A regulated cannabis market would be an economic boon for the Lonestar State," Hauser said. "Hundreds of millions of dollars in new tax revenue and tens of thousands of new jobs would be especially helpful in overcoming the losses stemming from the COVID-19 pandemic. Texas is leaving an enormous amount of money on the table by keeping cannabis illegal."

The stakes are particularly high in Texas due to its size and population, according to Dwight Clark, a senior policy analyst at Vicente Sederberg who previously worked in the Texas Legislature.

"There are well over a million adults in the state who regularly consume cannabis, so enforcement costs are substantial, to say the least," Clark said. "If cannabis were regulated, the revenue from license fees and taxes would easily cover the costs of administrating the system and enforcing regulations. Criminal justice resources could then be redirected toward other, more pressing matters. Plus there would be significant revenue left over that could be used to fund other programs and services."

The report was authored by Andrew Livingston, director of economics and research at Vicente Sederberg. Clark and the firm's policy consulting affiliate, VS Strategies, also contributed.