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Marijuana Legalization Might Not Lead to Tax Revenue Boom, Say Policy Experts

Sarah Kovash
90.5 WESA

A new report from policy experts has a warning for states like Pennsylvania that may consider legalizing marijuana: don't rely on estimated tax revenue, because it's tricky to guess.

Alexandria Zhang, a research officer with Pew Charitable Trusts and one ofauthors of the report,said it's really hard to make estimates on how much money could be made through legalized marijuana in part because it's such a new thing in the United States.

Colorado first started selling in 2014, so data only goes back five years. 

"This revenue has proven to be highly unpredictable," Zhang said. "And there's little information about whether it will be reliable in the long term."

Last year, Pennsylvania's Auditor General Eugene DePasquale released a projection that annual tax revenue from legalizing marijuana could be $581 million annually. A spokesperson for the AG said there have been no estimates on revenue since, and declined an interview. 

Zhang said prediction is also hard because every state has its own tax system. She said in the first six months of selling legalized marijuana, Nevada saw 40 percent more revenue than the state expected. Conversely, California saw 40 percent less than expected in the same time frame.

"There's high initial growth in revenue in these states, which is expected as markets ramp up in the beginning," Zhang said. "This growth really significantly tapers as markets mature."

At the end of the day, any revenue generated from marijuana legalization is still money that can be used, Zhang said. She recommends its use for one-time expenses or savings, rather than a dependent annual source of funds.