When it Comes to Marijuana, Some Revenue is Not Worth Taking

As cities and towns in Massachusetts consider whether to allow marijuana-related uses in their communities, many are doing the math and deciding it’s not worth it.

Westborough was the first to “Opt Out” AND others are following suit having asked themselves whether increased drug use and it’s predictable impacts on youth use rates, adult heavy use of an increasingly potent drug, and youth and adult addiction, are compatible with the brand of their communities.

The media loves headlines pronouncing the amount of revenue that taxing marijuana commerce may bring into states. But as is often the case with marijuana coverage, rarely do reporters inquire deeply and rarely do they put marijuana revenue into the context of public health, enforcement and societal costs, and seldom do they do the math.

In the business world, any potential revenue stream is weighed against ability to meaningfully contribute to the financial health of the company and against its costs. The same should be true for revenue derived from State and Federal policy.

The possibility of $100 million a year in state tax revenue from commercializing marijuana is getting a lot of press in Massachusetts for example.

$100 million in revenue per year would contribute a mere .002% of the State’s annual ($40.1 Billion) budget. It takes around $110 million PER DAY to run the State. So all the revenue would net Massachusetts less than one day’s operating needs.

That amount of revenue (.002% of total budget) alone, in business, is insufficient motivation to pursue a new market segment. Then look at the costs. When you associate the costs of regulation, enforcement, addiction, prevention, public health, healthcare, and societal costs, and the proposition is a total loser. And that’s before the inevitable price collapse that sees revenues decline as pot prices tumble under over supply.

The same is true for cities and towns. In Westborough the voters overwhelmingly (by a vote of more than 80% of the voters) chose to pass on this revenue because, 1) these uses are incompatible with their brand as family and education focused; and 2) because the revenue is not worth taking. Westborough voters did the math. If commercial marijuana uses generated $1 million in revenue, at the 2% local tax rate allowed in the law at the time, the Town would realize a meager $20,0000 dollars in tax–.0002% of its operating budget. Even at 3%, the revenue is paltry.

Beyond the numbers, if you look at this industry ethically, we should reflect on the actions of CVS Pharmacy. CVS chose to give up $2 Billion in annual revenue from sale of tobacco products. Two BILLION is two thousand million. Every year. That’s 20 times what The Commonwealth might see in annual revenue.

Why? Because a) it was deemed incompatible with the CVS brand as a wellness company; and b) because it was, in their words, the “right thing to do.”

Some revenue is not worth taking. As Denver Mayor Hancock famously said, “We will never prosper disguising marijuana proceeds as taxes and fees.”