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Report highlights potential economic impact if Montana voters approve recreational marijuana

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Posted at 1:20 PM, Sep 30, 2020
and last updated 2020-09-30 15:20:54-04

If Montana voters approve recreational marijuana use it could bring a whole new version of "Rocky Mountain High" - not just for the experience, but for the tax revenues generated by residents and tourists alike.

The Bureau of Business & Economic Research (BBER) at the University of Montana was asked to look into the potential tax income from legal recreational cannabis by New Approach Montana, which is sponsoring the two initiatives in November. And the report shows a "significant boost in revenue," generating more than $43 million dollars per year.

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Our basic finding is that a 20 percent tax levied on legalized sales of cannabis, as envisioned in the initiatives, has the potential to collect between $43.4 and $52.0 million per year in revenues to the state in the years 2022-26. As shown in the table above, these revenues reflect cannabis sales to both Montana residents and to visitors to the state. In dollar volume, the recreational cannabis market total sales between $217.2 and $259.8 million over the five year period shown.

“We're not totally surprised when you get into this just a little bit. You realize that Montana is a state with a higher fraction of adults who say they use cannabis than other states. And that's not unusual for the Mountain West," said Patrick Barkey, director of the BBER.

More adults say that they use cannabis than the national average – the most recent National Survey of Drug Use and Health reports that 14.3 percent of adults in Montana said that they used marijuana in the last 30 days, compared to the national average of 9.3 percent.

What does jump out in the report is the reference to tourism as a source of that tax revenue. Barkey said it boils down to the simple behavior of people shopping as they travel. “When you visit Montana, you visit Montana's retail establishments of all kinds. I mean, we all do. We all do when we travel anyplace. And those that use cannabis are likely to visit retail establishments that sell cannabis were those to be legalized in Montana," said Barkey.

The report finds visitor sales, starting at just under 6 million, could climb to nearly 17 million in five years. And like Washington and Colorado, that could be concentrated around usual tourist destinations like ski resorts.

Barkely said,“It's hard to know exactly how those things are going to take off in a different state like Montana. But I think if you were to look at states that we could compare ourselves to Washington and Colorado are not perfect but they're close. They're mountain communities. They have a lot of the same attractions and demographics are not all that different. They are more urbanized certainly. But there's some things we can learn from them, and that's the kinds of things we tried to put in our report.”

BBER said there are lot of variables, from how legal pot would be regulated, to how robust the selling infrastructure would be, plus new forms of consumption, such as cannabis edibles.

The Bureau's report didn't look at the "social costs" of legal pot, nor did the agency endorse the initiatives. Click here to read the complete report (PDF).

Verbatim text of the initiatives from the Secretary of State website:

  • CONSTITUTIONAL INITIATIVE NO. 118 A CONSTITUTIONAL AMENDMENT PROPOSED BY INITIATIVE PETITION: Under the Montana Constitution, a person 18 years of age or older is an adult, except that the legislature or the people by initiative may establish the legal age of purchasing, consuming, or possessing alcoholic beverages. CI-118 amends the Montana Constitution to allow the legislature or the people by initiative to establish the legal age for purchasing, consuming, or possessing marijuana.
  • INITIATIVE NO. 190 A LAW PROPOSED BY INITIATIVE PETITION: I-190 legalizes the possession and use of limited amounts of marijuana for adults over the age of 21. I-190 requires the Department of Revenue to license and regulate the cultivation, transportation, and sale of marijuana and marijuana-infused products and to inspect premises where marijuana is cultivated and sold. It requires licensed laboratories to test marijuana and marijuana-infused products for potency and contaminants. I-190 establishes a 20% tax on nonmedical marijuana. 10.5% of the tax revenue goes to the state general fund, with the rest dedicated to accounts for conservation programs, substance abuse treatment, veterans’ services, healthcare costs, and localities where marijuana is sold. I-190 allows a person currently serving a sentence for an act permitted by I-190 to apply for resentencing or an expungement of the conviction. I-190 prohibits advertising of marijuana and related products. Marijuana taxes and fees will generate about $48 million annually by 2025. Marijuana fees will fund program administration and enforcement. Marijuana taxes will contribute to the general fund and special revenue accounts for conservation, veterans’ services, substance abuse treatment, healthcare, and local governments. The general fund will net $4 million.