In November of 2012 Washington citizens passed Initiative-502 legalizing, but greatly controlling, the marijuana sector within the state. Legal possession for individuals over the age of 21 went into effect in December of 2012. Additional legislation setting up and regulating the market, producers, processors, and retailers, went into effect by the end of 2013. Licenses began being issued in July of 2014 and tax collection methods were set at a single 37% retail rate in 2015. This is when most data collection on the cannabis market began.
This study aims to establish a baseline understanding of the role of cannabis in Washington State’s economy and to determine a baseline expectation of the fiscal role it will play moving forward. A second, but equally important objective is to determine how legalization of homegrown cannabis might contribute to, or detract from, the estimated fiscal base. While medical exemptions exist for home-grown cannabis, recreational growing remains illegal under state law. The extent to which legalization of recreational home-grown cannabis will affect current market structures is a matter of debate. As such, estimates are made and a sensitivity analysis around those estimates is provided. Expected upper and lower-bound fiscal effects resulting from legalization of home-grown cannabis are then produced.
Data for the analysis came from extensive literature reviews focused on Canada, Colorado, California, and Oregon. A large review of academic literature regarding demand estimation of illicit drugs was conducted, as well as a review of the home-grown operations in Colorado and Oregon relative to their commercial operations. Data specific to Washington was obtained from the Washington State Liquor and Cannabis Board, the Cannabis Alliance, Hawthorn Gardening Co. and Scott’s Miracle-Gro, and various members of the cannabis sector including growers and retailers.