Once The Smoke Clears, Will Marijuana Become The Lifeblood Of The California Economy?

criticalfinancial.comCalifornia’s economy of high taxes and utterly high spending, may be causing businesses and citizens to move east (often times to Texas) but its liberal view of the medical marijuana industry is encouraging economic growth.  It’s interesting to know that cannabis is believed to be California’s number one agricultural crop representing a $14 Billion industry.  How is it that so many people have to smoke marijuana to calm their daily pains?  I realize there is a rise in the cases of cancer, and marijuana helps alleviate the pains associated with chemotherapy, but it seems like marijuana has become the “aspirin” for nearly every sickness.  Am I missing something? The benefits of smoking weed are really starting to shake the medical scene.  I am not a marijuana smoker, but are these people just so high that they actually forget their illnesses?

Anyway, back to the economics of the situation.  Significant growth opportunities exist for California, and many others states for that matter, if the medical marijuana industry continues it’s popularity.  Opportunities in product safety education, product tracking, marketing, social media, data mining, and patient education, will flood the economy.   As the medical marijuana industry matures, it attracts talented entrepreneurs and business professionals from a broad cross-section of industries, eager to apply their expertise in an exciting new industry.  Then there is the likelihood of further taxation.  California needs revenue, their economy is run on the funding of government programs, and with that, the revenue generating private sector becomes imminently important.  It doesn’t appear as if California plans on stopping its spending ways anytime soon!  California was the first to legalize the use of medical marijuana in 1996, but since then, others states are seeing the revenue it generates and are changing their laws to make it legal, or at least non-criminal.  According to an article on cannabissearch.com marijuana moguls and investors are starting to jump into the market, so it appears people have figured out how to build wealth from weed.

According to minyanville.com, the tax revenue that California’s, several hundred marijuana dispensaries, generated upwards of $100 million in 2012, which doesn’t put a dent in their $3.6 billion deficit, but hey, they gotta start somewhere.  California’s economy has a very dismal future.  Layoffs and foreclosures are still routine, schools are closing or trying to operate four days a week.  They just passed Proposition 30 which adds an extra 3% tax to all those who make $1 million or more in income.  The politicians and the media claim it will help struggling schools and other essential services they so desperately need.  That is if they dont decide to create a new green energy initiative or polar bear sanctuary with the increased revenue.  The tell tale sign of California’s economic future could be measured by the number of people leaving the state and right now that number is growing.  I was always told that if you tax something, then you get less of it.  Maybe that is what is happening here, California is doing it’s best to tax people more, so now they are getting less of them (people that is)?  This could also be the result of the medical marijuana industry, the more they tax it, ultimately the less they may get of it.

Your thoughts?

 

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11 Comments

  1. My understanding of California’s economy is that it’s in an abysmal state because every time they have money, they spend it on entitlements, pensions, social services, and other not so easily canceled things. This works great in an economic boom. Not so great when the bust happens.

    I suspect that marijuana will be a growth industry over the next couple of decades, but it’s too soon to call winners and losers. Personally, I see cigarette companies picking this up and running with it as soon as the legal risk is removed.

  2. Jim says:

    That’s a good point about the cigarette companies running with it, because I would assume it is going to take a powerful lobby to benefit from marijuana sales and the cigarette companies have that lobby.

  3. Erika says:

    As a CA resident, I can say our economy is pretty bad right now because we do keep spending and spending without generating enough revenue to sustain it. I do think marijuana will eventually become legalized and the taxes could really help out the economy. People seem to do it anyway, whether it’s legal or not.

    • Jim says:

      For sure Erika, I think California will have to do something to generate revenue, with businesses and people leaving, then the tax base shrinks. If you continue to raise taxes though, that will cause people to think twice if the beautiful beaches are really worth it?

  4. Back last year I went to Austin, TX for a conference and the economy was growing hugely due to the fact that so many people were leaving California and more specifically Silicon Valley and heading to Austin or better known as Silicon Hills. It’s seems that since Texas has no state taxes and are more loose on a lot of things more people and businesses are moving to this state.

    In fact Dell and a lot of the countries top fortune 500 companies reside in Texas for those very reasons. I think if California wants to fix it’s problem they need to start looking at what Texas is doing.

  5. If they can actually regulate the drug, then it could be a huge revenue driver. Medical marijuana is small potatoes compared to legalized public consumption.

  6. Jim says:

    That’s for sure Grayson, California will leave it to the politicians to maximize the tax revenue!

  7. If California was smart they would legalize it and tax it. I don’t think this will happen until it’s far too late. Only time will tell!

    • Jim says:

      I agree, I think they will find a way to maximize the tax, but their spending is so far past the point of fiscal sanity that they are doomed! Thanks Marvin!

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