States Consider Using Marijuana Tax Revenue to Help Communities Hurt by Drug Policies

In 2018, California collected over $345 million in tax revenue from its regulated marijuana market. That money could fund almost 10,000 public sector jobs, which the state could use to help people in neighborhoods that were disproportionately targeted by strict drug enforcement strategies, a new report argues.

“Communities of color were devastated by drug policies, and a job creation program funded by marijuana tax revenue would do the most to economically uplift them,” said Martiza Perez, one of the authors of the report from the liberal-leaning Center for American Progress.

With the tax revenue from marijuana sales, states could create public sector jobs that provide support services in schools and libraries, substance abuse services, and meal delivery to seniors. “Communities could decide for themselves what their needs are, but the goal would be to fill the gaps we see in distressed areas,” Perez said.

Since the movement for marijuana legalization has often been driven by states, Perez said that she thinks states should take the lead in exploring racially equitable ways to invest the revenue.

Prior to legalization in several states, politicians and activists said that legalization itself would promote equity, but those assertions have largely fallen short. In Colorado, the number of black juveniles arrested for marijuana infractions grew after legalization. In Washington state, four years after legalization, black people are still three times more likely to face marijuana charges than their white peers in the state. Ten states and the District of Columbia have legalized marijuana thus far.

Some states are now proposing using marijuana tax revenue to promote racial equity, putting it towards clearing the records of people arrested for previous offenses or funding community grant programs.

In New York, the issue is so important to some lawmakers that they have threatened to walk away from negotiating on legalization if racial equity is not at the forefront of tax discussions. Crystal Peoples-Stokes, the New York state assembly’s Democratic majority leader, pointed to the failures of other states in addressing economic justice for communities affected by harsh drug policies that have trapped people in the criminal justice system as the reason for her resistance. “I haven’t seen anyone do it correctly,” Peoples-Stokes told the New York Times. “They thought we were going to trust that at the end of the day, these communities would be invested in. If it’s not required in the statute, then it won’t happen.”

Perez said there is a growing chorus of those who want to expand marijuana market opportunities to people of color. In such a system, marijuana tax revenues would create employment for those affected by drug policies within the marijuana industry itself. More than 80 percent of legal cannabis companies are owned by white people because “legislation in many parts of the country [fails] to provide for an inclusive, representative legal cannabis industry,” wrote Katie Weiner, the associate managing editor of the Harvard Political Review, which published a recent report on the topic.

The overwhelming whiteness of the legal weed industry may have to do with the fact that marijuana is still an illegal drug at the federal level. Unless that changes, there likely won’t be bank loans for marijuana businesses, meaning owners must either be privately wealthy or seek out seed funding from venture capitalists and private asset managers. That itself creates a barrier for would-be entrepreneurs to get funding.

Many cities are taking on the issue with programs to make it easier for non-white entrepreneurs to step into the marijuana industry. In California, the cities of Oakland, San Francisco, Los Angeles, and Sacramento have special allowances for “equity applicants” that wave their licensing fees (which can sometimes cost more than $120,000) and provide technical assistance. To qualify, applicants have to have been convicted of a marijuana offense in the past, or live within an area where drug enforcement has made a disproportionate impact.

At the state level, Massachusetts is the first to broadly give advantages to formerly incarcerated people who want to get into the industry, while also prioritizing permit applications from minorities. Connecticut is also considering a process right now that would give applicants living in low-income neighborhoods a three-month head start, should the state legalize marijuana and start the permitting process.

The idea of using marijuana tax revenue for racial equity programs is also gaining steam at the federal level. The Marijuana and Freedom Opportunity Act would create a fund to support small businesses run by socioeconomically disadvantaged people, and Sen. Cory Booker’s Marijuana Justice Act would create a community reinvestment fund to dole out grants for job training, reentry services, health education, and other initiatives.

But congressional action hasn’t gone far enough, Perez said, as most of the federal bills related to marijuana don’t address race. That’s why she hopes states will take a stronger stance in promoting racial equity, but to do that, they’ll need to readjust their priorities. “Often, politicians think of marijuana tax revenue as a way to supplement strapped state budgets, not fix past harms,” she said. “So first and foremost, that needs to change, and states need to prioritize these communities.”