When President Donald Trump implemented the sweeping 2018 Tax Cuts and Jobs Act, most of America wasn't concerned with how the legal cannabis industry would be affected.
But a recent study from New Frontier Data, an analytics firm serving the legal cannabis industry, predicts that legal pot would generate $105.6 billion in tax revenue over the next eight years and create 654,000 jobs under Trump's tax overhaul — if it were legalized nationwide.
"Under the new business tax rate of 21 percent, the Trump tax cuts will come as welcome relief to cannabis business owners who already face tax hurdles because of 280E (prohibiting the deduction of expenses from the sale of schedule I and II substances). Lower tax rates may provide cannabis business owners greater capacity to grow and create more jobs," New Frontier CEO Giadha Aguirre De Carcer said in a statement accompanying the study. "New Frontier Data projects increased domestic and international expansion of new legal cannabis markets and $106 billion in tax revenue over an eight-year period in the U.S."
Employment numbers are based on New Frontier estimates of what it would take to run the industry if cannabis were legal in all fifty states; in that scenario, pot businesses would pay $3.3 billion in payroll taxes, with an expected increase to $5.3 billion by 2025. Assuming the federal government would impose a 15 percent sales tax on cannabis sales, the study estimates that pot businesses will remit $46 billion in sales taxes and $54.3 billion in business taxes in 2025, for a total of $105.6 billion.
C-corporation cannabis businesses (a corporation that is taxed separately from its owner) would benefit from a provision in the tax overhaul that reduces taxes on profits from 35 percent to 21 percent, according to Beau Whitney, senior economist for New Frontier. Other provisions — such as deducting depreciable assets immediately, research and development expenses, interest expenses and helpful provisions pertaining to Limited Liability Corporations and other forms of businesses — may be beneficial to cannabis companies but weren't included in the study.
Despite a broadening discussion around legal cannabis, only eight states — California, Colorado, Nevada, Alaska, Oregon, Washington, Maine and Massachusetts — and the District of Columbia have legalized recreational marijuana, but 46 states have approved or enacted some form of medical marijuana legislation, according to the National Organization for the Reform of Marijuana Laws.
Although the Trump administration's actions and words haven't been very kind to legal cannabis as of late, particularly those of United States Attorney General Jeff Sessions, New Frontier sees a growing landscape for commercial pot as Americans increasingly support it. In 2017 the legal cannabis industry made nearly $10 billion in revenue, with Colorado claiming more than $1.5 billion, according to the Colorado Department of Revenue — and that number is expected to rise in 2018.
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