COVID-19 has put our world into a state of uncertainty and created a sizable dent in global growth – but could cannabis cushion the economy?
When we come to the day where businesses can resume as normal, states will face difficult decisions about where to allocate the remainder of their budget, meaning that we could see employees laid off and government-funded programs cut to try and balance the loss.
The virus is forcing businesses to halt altogether, and across the planet – even Goldman Sachs stated that “financial service giants predict no earnings growth this year and modest earnings growth in 2021”.
It bears the question of why, this time around, the cannabis industry is getting the short end of the stick in some regions, when it could quite possibly be a real benefit to continue to serve, even in the event of a global pandemic.
In response to an uproar of demand and illicit businesses coming back to the surface, the government of Ontario swiftly reversed their call to halt licensed businesses from operating by allowing click and collect, curbside service, and same-day home delivery, but that’s not the case everywhere.
By legalizing cannabis on a federal level, there could truly be a notable difference when it comes to taxable revenue funneling back into the economy when we’ll need it the most.
Could Cannabis Cushion the Economy?
Speeding up legalization could help with tax shortfalls
“We’ve been thinking a lot about how life will change post-virus, and one big difference will be that state and local governments are going to encounter large unexpected tax receipt shortages,” wrote Jessica Rabe, Researcher for DataTrek.
“That’s particularly true when it comes to sales and income taxes amid stressed consumer balance sheets and massive layoffs. And unlike the Federal government, states can’t print unlimited amounts of money.”
From states who have legalized recreational cannabis to-date, we know that they benefit from hundreds of millions of dollars annually from tax revenue, so legalization of adult-use cannabis in the remainder of the states, Rabe points out, could be a really easy way to boost taxes without driving citizens out of their state, as raising income tax might cause.
Currently, there are 11 states who have proactively legalized recreational cannabis, with an additional 15 that have decriminalized the drug in one way or another.
While some states haven’t been successful in their efforts to push legalization forward such as New York, Colorado is a prime example demonstrating the value behind liberating the substance, bringing in over $1.2 billion since legalization in 2014.
“If Colorado can raise +$300 million from recreational and medical marijuana sales in a year, New York can certainly earn over $1 billion as long as the state taxes and regulates adult-use sales reasonably,” said Rabe.
With conservative estimates shooting as high as $1.3 billion in revenue each year, New York and other states experiencing revenue loss during COVID-19 should seriously consider utilizing the infrastructure the state already has in place for medical cannabis and starting the initiative to serve for recreational as well.
“The economic impact from this virus may be enough for some states, such as New York, to finally get enough votes to pass such legislation,” Rabe wrote. “While we recognize legal marijuana is a controversial topic for many people, the budget shortfalls that COVID-19 will create may sway opinions about the issue.”
Canna-businesses continue waiting for the green light
As COVID-19 began ramping up, concerns around public safety were as well, which sparked emergency measures to take place.
With new fast-acting regulations put in place, businesses are quickly reacting and adapting. Luckily we have progressive states and provinces which already have these sectors operational, and companies were at-the-ready to lend a hand the moment there was permission and demand.
Although cannabis is still advancing and maturing, it has shown a lot of potential and passion surrounding servicing the community, which is especially evident during a global crisis like this. Businesses in the cannabis industry will continue to wait patiently for regulations to evolve.
So while legalization won’t totally solve budget issues, cannabis could certainly cushion the economic blow of the pandemic.
If states are serious about finding a sensible solution to lost tax revenue from COVID-19, they should be looking at the potential from their current situation, and what business opportunities have proved that they’re ready when the government is to flip the federal legalization switch.
We hope that in the next couple of years to come that the industry will finally be accepted just like any other business, and finally be able to seize its many opportunities it has to grow in the economy.
Just like how the world has changed to incorporate alcohol post-prohibition, we hope to see the same one day for cannabis.
Trying times call for solutions, not grandstanding. And that’s right where cannabis sits.