If New York State legalizes adult-use marijuana sales, New York City could see as much as $336 million in new tax revenue annually, according to a report released Tuesday by city Comptroller Scott Stringer.

Stringer’s analysis estimates the potential market for marijuana sales in the state at about $3.1 billion, including $1.1 billion in New York City. The state would stand to gain about $436 million annually in new taxes.

“There is simply no reason for New York to be stuck in the dark ages,” Stringer said. “This new analysis shows just how much New York City and State stand to benefit by moving toward legalization.”

Along with establishing a new sustainable stream of revenue, Stringer said that legalizing adult-use marijuana could reduce costs for public safety, help mitigate public health problems related to the opioid crisis, and help drive broader economic and social benefits.

NYC Comptroller Scott Stringer delivers remarks at City Hall.
"This is not just about dollars -- it’s about justice," says NYC Comptroller Scott Stringer. Edwin J. Torres/Mayoral Photography Office

“This is not just about dollars -- it’s about justice,” Stringer said. “Not only is marijuana an untapped revenue source for the city and the state, but the prosecution of marijuana-related crimes has had a devastating and disproportionate impact on Black and Hispanic communities for far too long.”

When estimating the potential tax revenues from marijuana sales in New York, the Comptroller’s office considered a number of factors, including New York’s existing tax regime for medical marijuana and established excise taxes on cigarettes, beer, and liquor.

The report found that a 25% retail excise tax in the city would generate up to $336 million in tax revenue annually -- and as much as $570 million in other state localities.

For New York State, the report said tax revenue was estimated at about $436 million annually, combining a 10% retail excise tax together with sales tax at the existing rate of 4%.

The combined maximum excise tax rate of 35% would be roughly equivalent to Washington State’s current marijuana retail excise tax, according to the report.

The report also used data from Washington State and Colorado, which legalized adult-use marijuana sales in 2014 as a guide to forecast the size of the market for the state and city.

There are an estimated 1.5 million regular marijuana users in the state, with about 550,000 in the city. Assuming New York marijuana users would spend amounts similar to those in Washington and Colorado (about $2,080 in annual spending per user), the Comptroller’s office estimated a total annual adult-use marijuana market of roughly $3.1 billion in the state and $1.1 billion for the city.

“These estimates are conservative, in that they ignore the potential impact of some 970,000 workers who work in New York City but live outside it, many of whom might purchase marijuana in the city if sales are legalized,” the report said. “They also do not account for the impact of foreign and domestic tourism on New York’s potential marijuana market.”

Earlier this year, the Marijuana Regulation and Taxation Act was introduced in the state Legislature by Sen. Liz Krueger and Assemblywoman Crystal Peoples-Stokes. The bill would legalize adult possession, while also creating a process to reclassify past convictions related to marijuana and to re-sentence individuals currently incarcerated as a result of a prior marijuana-related offense.

It is currently pending in Albany.

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Chip Barnett

Chip Barnett

Chip Barnett is a journalist with more than 40 years of experience. Barnett is currently Senior Market Reporter for The Bond Buyer.