Implications of Cannabis Legalization for the US Federal Budget

By Alex Brill, Brian J. Miller, Stan Veuger

Federal legislation to legalize, regulate, and tax cannabis could have significant impacts on the federal budget. While the specific details of any potential cannabis legalization legislation are unknown at present, such reforms are likely to affect both tax receipts and federal outlays through a wide range of mechanisms including excise tax collections, changes in the size and composition of the labor force, and the major federal health care programs. We identify the main federal budgetary implications of legalizing cannabis and estimate their likely magnitude where possible.

AEI Economics Working Paper 2023-16 Updated March 2024   Washington, DC: American Enterprise Institute, 2024. 41p.