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New Report: Legalized Marijuana Could Generate up to $82M for RI

Wednesday, April 09, 2014


A new report by Open Doors estimates Rhode Island could bring in between $21.5 million to $82 million in revenue from the current legislative proposal to tax and regulate marijuana.

Read the report HERE

According to OpenDoors' new report “Estimated Effects of the Tax and Regulate Legislation in Rhode Island," the current tax and and legalization legislation, H 7506 and S 2379, which would create a $50/ounce excise tax on all marijuana sold at wholesale and impose a 10% special sales tax on all marijuana and marijuana products sold at retail, would result in taxes that would generate $7.6 to $21 million for alcohol and drug abuse treatment and education, $10.5 to $50 million for the general fund, and $1.9 to $5.2 million for medical marijuana research.

Estimated tax revenue was calculated using research methods developed by the federal government, economists at the RAND Institute, and Harvard University. Dr. Angela Dills, Ph.D., Associate Professor of Economics at Providence College, said, "The revenue calculation in this report is based on a well researched and standard methodology, and Rhode Island can expect taxes somewhere in the range of this $21.5-$82 million estimate."

The report takes into account the various estimates for how much marijuana is currently being consumed in Rhode Island; predicted changes in price and their impact on levels of consumption; the level at which marijuana will be taxed; and the amount of marijuana that will be taxed. According to Professor Dills, "The policy report by Open Doors translates previous research to the particulars of legislation introduced in Rhode Island and provides a reasonable estimate for tax revenue."

Open Doors on Implications

Nick Horton, a policy specialist at OpenDoors and author of the report, stated, "Passage of this legislation means tens of millions of additional revenue for necessary Rhode Island programs, including those that treat alcohol and drug abuse. While multiple variables makes it impossible to know for certain how much money Rhode Island will see, but we can be pretty confident that the state will realize between $21.5 and $80 million a year as a result of this policy change." Mr. Horton previously served on the Senate's Special Commission on Marijuana Prohibition in 2010, for which he helped conduct research on the predicted impact of the marijuana decriminalization legislation that took effect in April of 2013.

OpenDoors also worked with the Department of Corrections, Research, and Planning to estimate there are about 42 sentences issued per year in which marijuana delivery is the controlling charge. While the overall financial cost to the state is relatively low, the report highlights the human burden of each of these incarcerations for a nonviolent crime. The report also points out that blacks and Hispanics are sentenced disproportionately for these offenses; the rate of incarceration for marijuana delivery for blacks and Hispanics is two times greater than their percentage of the population.

According to Pat Oglesby, former chief tax counsel of the U.S. Senate Finance Committee and founder of the Center for New Tax Revenue, “we are at the beginning of figuring out how marijuana might be taxed. The taxes in H. 7506 and S. 2379, the proposed Rhode Island Marijuana Regulation, Control, and Taxation Act, would be a significant improvement over the marijuana taxes in Colorado and Washington, the two states where marijuana is already legal. In Colorado and Washington, excise taxes are based on price. But prices can go down, so price-based taxes may prove too volatile. And prices can be artificially gamed. The Rhode Island bill’s per-ounce tax base is more stable and harder to manipulate. It’s a better tax plan.”


Related Slideshow: New England States with Highest Marijuana Arrest Rates

Prev Next

6. Massachusetts

National Rank for Arrests per Capita: 51

2010 Arrests Per Capita: 18

National Rank for Raw Arrests: 49

2010 Raw Arrests: 1,191

Photo: Flickr/Blind Nomad

Prev Next

5. Vermont

National Rank for Arrests per Capita: 48

2010 Arrests Per Capita: 119

National Rank for Raw Arrests: 51

2010 Raw Arrests: 737

Photo: Flickr/Victor

Prev Next

4. New Hampshire

National Rank for Arrests per Capita: 33

2010 Arrests Per Capita: 210

National Rank for Raw Arrests: 41

2010 Raw Arrests: 2,769

Photo: Flickr/Blind Nomad

Prev Next

3. Rhode Island

National Rank for Arrests per Capita: 31

2010 Arrests Per Capita: 214

National Rank for Raw Arrests: 43

2010 Raw Arrests: 2,243

Prev Next

2. Maine

National Rank for Arrests per Capita: 30

2010 Arrests Per Capita: 214

National Rank for Raw Arrests: 40

2010 Raw Arrests: 2,842

Prev Next

1. Connecticut

National Rank for Arrests per Capita: 23

2010 Arrests Per Capita: 247

National Rank for Raw Arrests: 25

2010 Raw Arrests: 8,815

Prev Next

Number One Overall

Washington D.C.

National Rank for Arrests per Capita: 1

2010 Arrests Per Capita: 846

National Rank for Raw Arrests: 34

2010 Raw Arrests: 5,115

Photo: Flickr/Torben Hansen


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What will be the cost of enforcing these regulations? We already have a tobacco smuggling problem due to high taxes on cigarettes, that we spend millions to curb.

Comment #1 by Wuggly Ump on 2014 04 09

Yep, definitely a revenue generator. I hope they didn't forget to figure the tax on the hard marijuana candy that was recently found being distributed by a 14 year old at one of Rhode Island's middle schools. I am almost sure that the illegal drug trade will dry up when taxes are put in. Who would ever think of avoiding taxes. Yep, millions to be made.

Comment #2 by Roy D on 2014 04 09

shame, shame shame--- ri is last in just about everything and this is what our leaders focus on...

Comment #3 by john paycheck on 2014 04 09

This is just another great reason to end the failed policy of marijuana prohibition. Our towns and municipal governments are in trouble, and we can't afford to keep slashing their budgets. Taxing marijuana won't completely solve the problem, but it will help us fill in some of the holes! This is one among many reasons to end prohibition and regulate marijuana.

Comment #4 by Jared Moffat on 2014 04 09

"(...)tens of millions of additional revenue for necessary Rhode Island programs, including those that treat alcohol and drug abuse." I hope people reading this article realize what a crucially important point this is! Substance abuse issues can be utterly devastating and, left untreated, it reinforces the stigmatization against addicts. Giving addicts the proffessional rehabilitative care they NEED is one of many steps in the right direction. As these programs gain momentum our mental image of 'addicts' will shift from some deplorable and dangerous person living on the streets to family members, friends, and co-workers who just need a little bit of extra support. I'm glad this legislation will provide the monetary bottom-line needed to make that little bit of extra support a reality! Addiction is a mental illness of sorts, and it makes sense to me that we start treating it as such.

Comment #5 by Dash Spiegelman on 2014 04 09

The truth of the matter is that RI has a larger percentage of marijuana users than even Colorado has (number 2 in the nation, second to Vermont I believe). Look at the tax revenue that Colorado has generated over these first couple of months of legalized "pot" shops. Also, look at the reports on crime, which have gone down dramatically in that state. RI is a state that is in dire need of jobs, revenue and social revamping. All three aspects would be assisted from full legalization in this state. Besides, the real question shouldn't be about dollars and cents anyways. the real question should be about our basic rights as human beings. Prohibition is a violation of our constitutional rights to life, liberty and the pursuit of happiness.

Comment #6 by David Sorgman on 2014 04 09

I suggest everyone take a minute and read the report. These estimates are pretty conservative and logical. Something that's definitely worth mentioning is the revenue it will bring in for local businesses and the economy, as well as the potential job creation. Rhode Island needs to act now before neighboring states get the advantage of acting first.

Comment #7 by Eric Casey on 2014 04 09

Quite a world the pot heads are pushing for, it was just reported that a 4th grader in Providence brought marijuana to his school.

Comment #8 by Roy D on 2014 04 09

This could be huge. In addition to bringing in tens of millions of dollars, think of all the money the state would save that is currently being spent on enforcement. The war on drugs as it's being fought is not working - we need to focus on honest, open education and rehabilitation for those with addictions.

The amount spent on enforcement and associated prison costs for the war on drugs is ridiculous. Hopefully, we'll be able to turn it around and use the momentum for good!

Comment #9 by Gordon Wade on 2014 04 10

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