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Marijuana Tax and Public Transit: What’s next?

With the votes tallied, there are now three more states that have approved recreational marijuana (California, Massachusetts, and Nevada) initiatives and three different states that have approved medical marijuana (Florida, North Dakota, and Arkansas).  As we have seen with Colorado, the introduction of marijuana for either recreational or medical use leads to a significant influx in tax revenue.  The difficult decision left to elected leaders is where the additional tax revenue should be going?

Marijuana Tax and Public Transit: The Colorado Example

When Colorado approved Amendment 64, which made recreational marijuana legal, they had a plan in place that required the first $40 million in revenue raised to be credited to the public school’s capital construction assistance fund.  Being that Colorado’s fiscal year 2015 brought in $129 Million in taxes from recreational marijuana, the $40 million was deposited into the agreed upon funds.  Additionally, local governments get a 15 percent cut of the state’s special sales tax on pot, with which they can choose how to spend the funding.

With the introduction of recreational marijuana in three new states, there are large sums of money that can be put towards underfunded government programs like education, public transit and infrastructure.  With a majority of the proposals specifying the money for schools, enforcement methods or general research the windfall expected includes $50 – $60 million for Massachusetts, $66 million for Nevada, and $1 billion for California on an annual basis.  With each state controlling its own regulation the distribution of these funds are vastly different from the model set by Colorado with states like California choosing to put their money into research and medical/educational programs.

The Case for Funding Public Transit Infrastructure Improvement

One item that hasn’t come into discussion on where marijuana taxes should go is infrastructure improvement.  Throughout the United States, agencies rely on federal funding to make upgrades to their systems and otherwise have to look for a sales tax increase, as seen on the most recent presidential election ballot, or deal with their outdated technology and infrastructure.  Marijuana brings an interesting opportunity to the forefront that could allow transit systems to move closer to becoming self sustainable.  I believe there are two key factors that transit agencies would benefit from if they were to receive additional funding from a marijuana sales tax:

Addressing the “Band-Aid” Fix – Historically, receiving federal funding leads to “Band-Aid” fixes versus helping to correct the problem.  A steady stream of additional funds would allow transit agencies to make small fixes that lead to a significant overall improvement over time.  With regards to recent news, the additional investment has the potential to help agencies like the Metro in Washington, D.C. from having to shut down due to safety concerns or the Massachusetts Bay Transit Authority from considering privatization.

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Dealing with the Reurbanization of America – not only does transit continue to grow, but cities are quickly becoming denser.  In the decade between 2004 and 2014, miles traveled by passengers increased by 21%.  This can be directly compared to a population growth of 9 percent and an increase of highway travel of only 2%.  Additionally, as more people are centralizing in cities, it will be specific transit agencies that will bear the burden of not only dealing with increased demand for transit over other forms of transportation but also the major trend of millennials moving towards cities.  Mass transit is only becoming more vital to the general health of American cities.  Individuals rely on public transit professionally and socially, however, it’s now being forced to deal with the increased burden by using the same funding.  The addition of a marijuana sales tax that feeds mass transit would allow transit agencies relief when dealing with the increased demand on each system.

The increase in demand for public transportation versus highway travel is illustrated in Figure 2 below.

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Mass transit is only becoming more critical to the general health of American cities.  Unfortunately, the demand for public transit is being outpaced by the funding support and transportation agencies throughout the United States are struggling to find a source of funding.  The means with which individuals get to work, school, and social activities is at risk of failing if additional funding isn’t provided.  The addition of a marijuana sales tax that feeds mass transit would allow transit agencies relief when dealing with the increased demand on each system.

Any time there is a new source of funding there are going to be numerous hands waiting to get a piece of the pie.  With that said, there are plenty of good sources that would benefit from receiving a portion of the marijuana sales tax and we believe public transit should be one of those sources.  As the lifeblood to moving people through cities, it is vital that something is done to help the public transit industry as it deals with outdated technology and increase in population.