New Comptroller Stringer Analysis: Legalizing Marijuana Could Lead to Millions in Tax Revenue for City and State

(New York, NY) — As support for marijuana legalization grows across the nation, New York City Comptroller Scott M. Stringer today released a new report on the fiscal impact of legalizing adult-use marijuana sales in New York. While New York State continues to study the implications of legalization, the Comptroller’s analysis estimates the potential market for adult-use marijuana in New York State at roughly $3.1 billion, including approximately $1.1 billion in New York City. By applying tax rates in line with other states, New York State could reap as much $436 million annually in new tax revenue from legal marijuana sales, while New York City could garner as much as $335 million – funds that could be used to invest in communities most damaged by decades of criminalizing marijuana usage and possession.

“This is not just about dollars – it’s about justice. Not only is marijuana an untapped revenue source for the City and the State, but the prosecution of marijuana-related crimes has had a devastating and disproportionate impact on Black and Hispanic communities for far too long,” said New York City Comptroller Scott M. Stringer. “There is simply no reason for New York to be stuck in the dark ages. This new analysis shows just how much New York City and State stand to benefit by moving toward legalization. Legalizing marijuana and reclassifying past convictions would be critical steps towards turning the page on decades of failed policies. This is an opportunity to do what’s right and build up the very communities that criminalization tore down.”

Estimated Size of Adult-Use Marijuana Market in New York
Using data from Washington State and Colorado, which legalized adult-use marijuana sales in 2014 as guides, the Comptroller’s office estimated:

• There are roughly 1.5 million regular marijuana users in New York State, of whom roughly 550,000 reside in New York City.
• Assuming New York marijuana users would spend amounts similar to those in Washington and Colorado (about $2,080 in annual spending per user), the Comptroller’s office estimated a total annual adult-use marijuana market of roughly $3.1 billion in New York State, of which $1.1 billion is attributable to New York City.
• These estimates are conservative, in that they ignore the potential impact of some 970,000 workers who work in New York City but live outside it, many of whom might purchase marijuana in the city if sales are legalized. They also do not account for the impact of foreign and domestic tourism on New York’s potential marijuana market.

Estimating the Size of the Adult-Use Marijuana Market

Potential Tax Revenues from Adult-Use Marijuana Sales
When estimating the potential tax revenues from marijuana sales in New York, the Comptroller’s office considered a number of factors, including New York’s existing tax regime for medical marijuana and the established excise taxes on items like cigarettes, beer, and liquor. The report found:

• A 25% retail excise tax in New York City would generate up to $336 million in tax revenue annually (and as much as $570 million in other New York State localities).
• For New York State, tax revenue is estimated at roughly $436 million annually, combining a 10% retail excise tax together with sales tax at the existing rate of 4%.

Estimated Tax Revenues from Adult-Use Marijuana Sales

• The combined maximum excise tax rate of 35% would be roughly equivalent to Washington State’s current marijuana retail excise tax.

Social Benefits and Considerations of Legalizing Marijuana
Along with establishing a new, sustainable stream of revenue, legalizing adult-use marijuana could reduce costs for public safety, help mitigate public health problems related to the opioid crisis, and help drive broader economic and social benefits that will accrue after eliminating a source of harm that has afflicted communities of color for so long.

In 2018, the Marijuana Regulation and Taxation Act was introduced by Sen. Liz Krueger and Assemblywoman Crystal D. Peoples-Stokes. The bill would legalize adult possession, while also creating a process to reclassify past convictions related to marijuana and to re-sentence individuals currently incarcerated as a result of a prior marijuana-related offense.

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