Cannabis: Legalization would bring far more to the national budget than expected

Enlarge image

Cannabis shop in Toronto (2019)

Photo: Eckhard Stengel / IMAGO

The German state would benefit significantly more from legalizing cannabis than previously assumed.

Public budgets would record a total of 4.7 billion euros in additional income and savings every year.

This is the result of a study by a research team led by Justus Haucap, economics professor at the University of Düsseldorf.

A calculation from 2018 was updated for the study, which at the time showed an annual effect that was around two billion euros lower.

The three possible partners of a traffic light coalition had all spoken out in their election programs in one form or another in favor of a regulated legal sale of cannabis for recreational use to adults.

So far, cannabis has only been allowed to be traded and sold for medical purposes in Germany.

The arguments for legalization are largely the same for the SPD, Greens and FDP - and have nothing to do with the financial effect on the state treasury: the illegal black market is dried up through controlled sales, which also enables better protection of minors and more effective addiction prevention.

Last but not least, it is wrong to criminalize millions of cannabis users.

1.8 billion euros through a cannabis tax

The windfall for public finances is therefore more of a welcome side effect than motivation for possible legalization.

However, it is a significant side effect.

But how does the sum of 4.7 billion euros come together?

The following graphic shows the individual items in the calculation:

A new

be

introduced

could account for the largest share, with annual revenues of 1.8 billion euros, a quantity tax in which a uniform amount would be charged per gram.

The goal is that a gram of cannabis can ultimately be bought for around ten euros, says Haucap, who was formerly head of the Monopolies Commission.

This amount corresponds to the current average price on the black market.

If one subtracts the value added tax of 19 percent from a good ten euros

from, there are still around 8.50 euros. For production, processing, transport and retail, including profit margins, the researchers estimate costs of four euros - which would result in a cannabis tax of around 4.50 euros per gram. The

itself would bring in around 650 million euros a year. In total, taxes on consumption alone would result in around 2.45 billion euros in additional income.

The second largest fiscal effect would result in considerable

and legal proceedings: the crime statistics recorded almost 228,000 cannabis-related crimes in 2020. According to

the calculations, this leads to costs of around 1.05 billion euros annually

for the

alone

. The

economists estimate the

at almost 315 million euros per year.

The rest of the financial impact on public finances would come from a

.

According to the calculations, around 27,000 full-time jobs subject to social security contributions could be created in Germany in production, processing and sales.

That would result in revenue from

,

and

of around 890 million euros.

The fact that the fiscal effect of cannabis legalization in the recalculation is now around two billion euros per year higher than in the first study from 2018 is attributed to four factors by Haucap's research team:

• According to the Epidemiological Addiction Survey, cannabis use is now higher than assumed at the time.

• The production of cannabis has meanwhile become significantly cheaper.

  This allows the cannabis tax per gram to be increased in order to still achieve the targeted sales price of ten euros.

• The higher consumption also leads to more new jobs.

• Thanks to improved data, it was possible for the first time to estimate the costs of the judiciary, which were not yet taken into account in 2018.

The calculations could at least make clear the magnitude that cannabis legalization would have for public finances.

Even if the traffic light parties want to reserve part of it for youth protection and prevention as well as counseling and treatment of addicts, some money could still be left for large projects such as climate protection or pensions.