Could GOP Tax Reform Bill Encourage States to Legalize Marijuana?

shutterstock 526594918
shutterstock 526594918

State and local officials may have to consider marijuana legalization to make up for lost revenues if the GOP tax bill is passed.

The expansion of legal marijuana could accelerate in the coming years, and not just because close to 90 percent of Americans support medicinal use and over 60 percent support legalizing recreational sales.

If the current GOP tax bill awaiting a vote by the U.S. Senate is passed, states may become more inclined to legalize marijuana.



State and local tax deductions (SALT) may be eliminated if the bill is passed. Residents in highly taxed states such as New York and New Jersey could see their taxes raised by as much as 7-8 percent if SALT deductions disappear.

Should residents flee to states with lower taxes, officials will have to find new ways to make up for lost property, income, and sales taxes previously paid by their former residents.

The elimination of SALT could also impact remaining residents. With higher taxes many individuals could choose to spend less on dining out, entertainment, and purchasing goods and services. Some residents may also be motivated to report less taxable income.

State and local officials would be under pressure to relieve the financial crunch and this could be where legalized marijuana comes in. It is not easy to create brand new thriving industries that can be taxed at high rates and generates millions of dollars.

But we know of one industry that can do exactly that.

The GOP tax plan seems as if it is being rushed and while the Congressional Budget Office and other analysts have given the bill a poor rating, the bill could be passed as early as later today.

As CNBC contributor and political analyst, Bradley Tusk suggested, the GOP tax bill is seen as an attack on blue democratic states. But if the bill paves the way for nationwide marijuana legalization, it could be progressives having the last laugh.

“In getting revenge on blue states by eliminating the state and local tax deduction (SALT) in the new federal tax bill, the Republican Congress and Donald Trump may be giving all of those states every incentive to legalize recreational marijuana today – and eventually legalize other drugs too,” Tusk wrote on CNBC today.

One of those blue states had plans to legalize recreational marijuana even before the GOP tax bill was introduced. New Jersey’s Governor-elect, Phill Murphy, made marijuana legalization and criminal justice reform a large part of his campaign. The New Jersey legislature made plans to approve recreational marijuana sales months ago in anticipation of anti-marijuana critic and current Governor Chris Christie.

New York state may not want to leave money on the table and could join its neighboring state in legalizing.

Currently, 8 states have approved recreational marijuana use and 29 allow for medical marijuana use.