Legal Marijuana Could Net Virginia $300 million in Yearly Tax Revenue

November 17, 2020 by Dan McCue
Virginia Gov. Ralph Northam

Richmond, Va. – Virginia could reap more than $300 million in tax revenue a year if lawmakers were to legalize recreational marijuana, according to the Commonwealth’s legislative watchdog.

In a new report, the Joint Legislative Audit and Review Commission says it would take about five years to reach $300 million in annual tax revenues, but along the way it would create more than 11,000 jobs and reduce arrests in the state by 84%.

This past summer, a law decriminalizing the possession of a small amount of marijuana took effect, but Gov. Ralph Northam and others said the law doesn’t go far enough and want to fully legalize the drug.

The commission was tasked with looking at the pros and cons of such a move and to explore how the state could create a regulated commercial market.

To research the issue, commission members conducted over 100 interviews, looked at the laws and regulations of states that have already legalized marijuana and read over 200 academic journal articles.

The commission said it would take more than two years to establish a functioning commercial market, and that it could cost as much as $20 million up front to do so.

According to the report, before moving forward, the General Assembly would have to authorize the development of a statewide market for commercial adult use marijuana sales.

Virginia would need to issue licenses for five types of major business operations that comprise the marijuana industry: cultivation, processing, distribution, retail sales, and testing.

The panel noted other states and countries have taken varying approaches to structuring their commercial markets, and that Virginia could use lessons learned from these experiences.

Virginia could allow ‘vertically integrated’ businesses, in which a single business can be licensed to cultivate, process, distribute, and sell marijuana at retail.

Or it could instead prohibit vertical integration by not allowing businesses with a retail license to obtain licenses for cultivation or processing.

Regardless of the market structure chosen, licensed testing labs would be needed to test products for purity and quality. These labs should be independent of any other marijuana operations.

The number of licenses issued would depend on demand for legal marijuana. Based on the commercial marijuana markets in other states, the commission said, Virginia could eventually issue between 100 and 800 cultivation licenses, 30 and 150 processing or distribution licenses, and 200 and 600 retail licenses.

Northam said Monday he plans to propose legislation on the matter when the Virginia General Assembly convenes in January. He told reporters he wants a “responsible approach” that promotes racial equity and preserves youth safety.

Northam acknowledged the process could take years, but he said that he’s confident the drug will eventually be legal for personal use.

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