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Recreational Marijuana: Can it be an Economic Catalyst?

Northern Lakes Economic Alliance    231-582-6482

Janet Koch, Community Development

In November 2018, a majority of Michigan voters approved a recreational marijuana initiative. The initiative is now known as the Michigan Regulation and Taxation of Marihuana Act, or MRTMA.

Many municipalities have already passed ordinances to opt-out of allowing recreational marijuana, but others are still debating their decision. One common topic is how recreational marijuana might or might not impact the municipality’s economy. Solid data, however, is difficult to find. A search of academic peer-reviewed journals of the last 13 months with the criteria “marijuana” and “economic development” returned only nine articles, and none of them contained anything close to a thorough discussion of recreational marijuana’s impact on a local economy.

The International City/County Management Association (ICMA), in a September 2018 report titled Local Impacts of Commercial Cannabis, notes that the cut flower industry in California has been declining for years, and that some flower growers see a switch to growing marijuana as a way to save their businesses. On Cape Cod, the same thing is happening with some small farmers. The report also cites the efforts of Cotton Plant, a small town in Arkansas (population under 600), that is working through the licensing of a medical marijuana operation in hopes of sparking an economic revival.

But the common thread to these stories is that licensing is still in its early stages. Colorado voters approved recreational marijuana in 2012, and those licenses began to be issued in 2014. However, the ICMA report cautions that, “Early analyses on the potential economic impacts of the cannabis industry are fraught with assumptions that can multiply into gross exaggerations and unrealized expectations.”

The conclusion? We don’t know if recreational marijuana can be an economic catalyst, not yet anyway. In addition, there are other questions about recreational marijuana that do not have definitive answers. How will recreational marijuana impact tourism? How much tax revenue could be generated? Will property and personal crimes rise or fall? For these questions, and many more, learning the answers will take time.

Contact Janet Koch, Community Development Specialist at NLEA (231-582-6482, if you’d like to more information on this topic.

And here’s a fun fact: as with other business activities the federal government declares illegal, a 2013 article in The Tax Lawyer, a publication of the American Bar Association, states that marijuana businesses are still obligated to pay federal income tax.

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