Home » Marijuana legalization would add $260M to Ohio economy, study predicts.

Marijuana legalization would add $260M to Ohio economy, study predicts.

Despite what some of the truest of believers might contend, legalization of marijuana would come with costs to Ohioans. But an economic analysis that was released last week found that the benefits would outweigh those costs by a quarter-billion dollars a year.

Issue 2, an initiative that would legalize recreational marijuana for people over 21 in Ohio, is on the ballot in next Tuesday’s election.

A study by Columbus-based Scioto Analysis attempts to identify the pluses and minuses that would come with such a move in a state where medical marijuana is already legal.

To do the analysis, the group used studies from states such as Washington and Colorado, where recreational weed has long been the law. To examine how the pros and cons identified in those states might play out in Ohio, the researchers looked at economic and census data, as well as at crime statistics.

The biggest benefit they identified has to do with the extra revenue passage of Issue 2 would produce, with its 10% excise tax on top of Ohio’s normal sales tax. But the report explains that the benefit isn’t merely from the $190 million a year legalization is expected to generate, but instead from how a big portion of those funds would be spent.

“Tax revenue on its own is not a social benefit, but rather a transfer from taxpayers to the public sector that is then used to pay for goods and services purchased by the government,” it says. “Thus, benefits are only generated when goods and services purchased by governments have positive spillovers.”

The positive spillovers the researchers identified were the 36% of revenue Issue 2 earmarks for the Cannabis Social Equity and Jobs Fund and the 25% earmarked for the Substance Abuse Addiction Fund.

Working with analyses of similar funds in other states, the group estimated that the Ohio equity and jobs fund would create $5.76 in benefits for every dollar spent and the substance abuse fund would create $9.19. Thus, the Scioto Analysis report said, directing revenue to those two funds could be expected to create $820 million worth of benefits for Ohioans each year.

“Our models predict that Ohio will add roughly 3,300 new jobs in the first year after legalization,” the report said. “Assuming these jobs are full time and pay matches the average wage across the state of Ohio, this will amount to about $190 million in wage benefits for workers across the state. Since these jobs are likely to include part-time work and may be lower than the average wage across the state, this may represent an upper bound on the value of employment generated by legalization.”

There also would be benefits for recreational weed users themselves. The study estimates that by creating a legitimate recreational market, Issue 2 would allow that group to pay $98 million a year less for marijuana than they otherwise would be willing to pay.

And if weed is no longer illegal for adults over 21, it stands to reason that there will be fewer arrests.

“One study on arrest rates in Washington found that marijuana arrests fell by 87% for adults aged 21+ and by 46% for adults aged 18-21 after legalization of the sale and purchase of cannabis for recreational purposes,” the study said. “This confirms that for the population that would be allowed to legally use cannabis recreationally, arrests almost completely disappear, but the effect is smaller for the population where it would still be illegal to use cannabis.”

It added, “Using data from the FBI’s Uniform Crime Report on the number of cannabis-related arrests in Ohio, we estimate that there would be about 4,400 fewer arrests per year if recreational cannabis were legalized. Adding up the cost of those arrests, and assuming that 6% of those people would have been convicted of felonies, this amounts to over $38 million in savings for Ohio.”

But the expected benefits of legalized recreational marijuana have to be weighed against the expected costs.

A big one stems from the fact that in states that have already legalized, workers became less productive.

“One study from 2017 found that across four industries (mining; construction; arts, entertainment, and recreation; and accommodations and food Service) average productivity per worker fell by just over 1% in states that legalized recreational cannabis,” the report said. “Monetized, this equates to roughly $900 of lost productivity per worker for Ohio.”

There are a lot of workers in Ohio, and using federal employment data, the report said, “we estimate that legalizing recreational cannabis will cost workers across the state about $760 million in lost productivity in the first year of legalization.”

There are also negative public-safety implications associated with legalizing recreational pot. Namely, more intoxicated drivers would be on the road, and “this will lead to more car crashes that cause property damage, injury, and death,” the report said. It estimated that legalization would lead to an additional 1,700 intoxicated-diving arrests each year in Ohio and come at a cost of $130 million.

Balancing benefits and costs, the study estimated that Ohioans would receive $260 million in annual benefits if Issue 2 passes next Tuesday.


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