IN THE

U.S. ECONOMY
J OB S , GROW T H & T A X R E V E NUE
2019 EDITION

© NEW FRONTIER DATA. ALL RIGHTS RESERVED.

TABLE OF
CONTENTS

LE T TER FROM THE PUBLISHER 2

E XECU TIVE SUM M ARY 3

A B O U T N E W F R O N T I E R D ATA 5

M E T H O D O LO G Y 7

BA SELINE A SSUMPTIONS & DEFINITIONS 9

Estimating Federal Tax Revenues Assuming National Legalization 11
Cannabis Demand Forecasts 11
Current Cannabis Forecast 11

INTRODUCTION 12

TOTA L U. S . F O R E C A S T E D D E M A N D 15

T H E C U R R E N T M O D E L : TA X R E V E N U E S I N A L E G A L PATC H W O R K N AT I O N 17
Jobs 18
Payroll Taxes 19
Business Taxes 21

CURRENT ISSUE: BANKING 23

C U R R E N T I S S U E : I M PA C T S O F I R S TA X CO D E 28 0 E 24

T H E T H E O R E T I C A L M O D E L : E CO N O M I C I M PA C T O F F U L L L E G A L I Z AT I O N 25
Jobs 26
Payroll Taxes 28
Business Taxes 29
Federal Excise Tax (15%) 30

DIFFERENCES BE T WEEN CURRENT & THEORE TIC AL MODEL 32

K E Y TA K E AWAY S , O B S E R VAT I O N S & P O L I C Y I M P L I C AT I O N S 34

CO N C LU S I O N 36

APPENDIX 1 37

APPENDIX 2 38

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 1

LETTER FROM
THE PUBLISHER

New Frontier Data is proud to announce
the release of 2019’s edition of Cannabis in the
U.S. Economy: Jobs, Growth & Tax Revenue.
As the U.S. legal cannabis industry continues to
mature, New Frontier Data has been tracking
the impact legalization has had on both jobs and
taxes in each legal state across the nation. By
our latest projections, if full federal legalization
had been enacted in 2018, by 2025, legalized
cannabis programs would have generated nearly
$130 billion in additional tax revenues, and have
created more than 1.63 million jobs.
In anticipation of the upcoming 2020 election
season, the consensus thinking is that more
expansive cannabis reform policies may become
a key topic of discussion for candidates seeking
to differentiate themselves, especially for those
who recognize the potential impact of full federal
legalization ahead of possible voter fears of an
economic slowdown.
New Frontier Data’s mission is to elevate the dis-
cussion around the legal cannabis industry globally
by providing unbiased, vetted information to
help stakeholders make informed decisions. We
provide individuals and organizations operating,
researching, or investing in the cannabis industry
with unparalleled access to actionable industry
intelligence and insight to succeed in this fast-
paced and dynamic market.
As the global leader in Big Data analytics for legal
cannabis markets, New Frontier Data is dedi-
cated to publishing reports of the highest industry
caliber. We hope that you enjoy all the benefits of
this one as you shape your strategy and action plan
within the cannabis industry!
Giadha Aguirre de Carcer
Founder and CEO, New Frontier Data

The intention behind this free report is there-

fore to examine the essential aspects of what
full legalization could look like in contrast to the
current state-by-state legal environment, and the
impact full nationwide legalization could have on
the U.S. Treasury.

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 2

CANNABIS DATA
AT YOUR FINGERTIPS
Introducing Equio’s Data Marketplace
Consumer Trends Data
Global Market Data
Hemp Data

CO MING SOON TO

Learn more at: Equio.solutions

or email us at: Sales@NewFrontierData.com
EXECUTIVE
SUMMARY

Fueled by surging public support,
new market expansion, and strong consumer
demand, the legal cannabis industry stands to
add $128.8 billion in revenue to the U.S. Treasury
while creating more than 1 million American jobs.
The legal cannabis industry has become an engine
of economic growth in the jurisdictions where
incorporated. This report examines the economic
impact of the current, state-by-state patchwork
of regulated environments, and explores the
anticipated impact of full nationwide legalization
on the U.S. Treasury. The report focused on
three areas: federal business taxes on cannabis
businesses, federal payroll withholdings, and
revenue generated from a federal cannabis sales
tax of 15%. A comparison is presented between
the current state of legalization (forecast over
2018–2025) and a theoretical nationally legal
model over the same period, with the end result of
such comparisons showing economic net benefits
both to the U.S. Treasury by $128.8 billion in
increased revenues, and in terms of increased
employment in excess of 1 million jobs created.
A s New Frontier Data is a nonpar tisan,
nonadvocacy, big data analytics company, the
intention of this exercise is neither to endorse nor
deter any position regarding merits of legalization.
Rather, this report is designed to provide an
impartial comparison of two models using credible
and vetted data.
By comparing the two forecasts from perspectives
for business taxes, payroll taxes, and federal sales
taxes, one can understand the effects which full
legalization would have on U.S. federal revenues.
There are several key findings from this report:
F E D E R A L B U S I N E S S TA XE S
If cannabis were to be fully legalized
and businesses taxed as normal
businesses at a standard 21% tax rate,
cannabis businesses would
infuse the U.S. economy with
an additional $31.0 billion
in the period of 2018-2025.
EMPLOYME NT
PAY R O L L TA X E S
Full legalization would result in more legal
businesses participating in the market,
more consumers participating in the legal
market, and more employees on official
payrolls, resulting in $8.4 billion in payroll
taxes. By 2025, payroll deductions
would increase to $9.5 billion.

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 4

 EXECUTIVE SUMMARY
F E D E R A L S A L E S TA XE S
At a 15% federal sales tax, total
revenues from 2018–2025
would be $73.7 billion. That
amount would be entirely new revenue
to the U.S. Treasury, as there are
currently no federal sales or excise taxes.
POTENTIAL JOBS
If full legalization occurred in all 50
states today, there would be in excess
of 1.46 million jobs, increasing to
1.63 million jobs by 2025.
© NEW FRONTIER DATA, ALL RIGHTS RESERVED
TOTA L T H E O R E T I C A L
TA X R E V E N U E S
The total combined taxes under
full federal legalization would
reach $175.8 billion between
2018–2025 based on business tax
revenues, the payroll withholdings
based on the estimated employment,
and the 15% retail sales taxes.
THEORETICAL VERSUS
CURRENT STRUCTURE
The difference between the current
structure and the theoretical model
represents a $128.8 billion
increase in federal tax revenues.
| NEWFRONTIERDATA.COM | 5
ABOUT NEW
FRONTIER DATA
New Frontier Data is an independent,
technology-driven analytics company specializing
in the global cannabis industry. It offers vetted
data, actionable business intelligence and risk
management solutions for investors, operators,
researchers, and policymakers. New Frontier
Data’s reports and data have been cited in over
80 countries around the world to inform industry
leaders. Founded in 2014, New Frontier Data is
headquartered in Washington, D.C., with addi-
tional offices in Denver, CO, and London, UK.
New Frontier Data does not take a position on the
merits of cannabis legalization. Rather, its mission
and mandate are to inform cannabis-related
policy and business decisions through rigorous,
issue-neutral, and comprehensive analysis of the
legal cannabis industry worldwide.
For more information about New Frontier Data,
please visit: NewFrontierData.com.
Mission
New Frontier Data’s mission is to elevate the
discussion around the legal cannabis industry
globally by providing unbiased, vetted infor-
mation for educating stakeholders to make
informed decisions.
© NEW FRONTIER DATA, ALL RIGHTS RESERVED
Core Values
• Honesty
• Respect
• Understanding
Vision
Be the Global Big Data & Intelligence Authority
for the Cannabis Industry.
Commitment to Our Clients
The trusted one-stop shop for actionable
cannabis intelligence, New Frontier Data pro-
vides individuals and organizations operating,
researching, or investing in the cannabis industry
with unparalleled access to actionable industry
intelligence and insight, helping them leverage
the power of big data to succeed in a fast-paced
and dynamic market.
We are committed to the highest standards and
most rigorous protocols in data collection, anal-
ysis, and reporting, protecting all IP and sources,
as we continue to improve transparency into the
global cannabis industry.
| NEWFRONTIERDATA.COM | 6
A B O U T N E W F R O N T I E R D ATA

Report Contributors

P U B L I S H ER
Giadha Aguirre de Carcer, Founder &
Chief Executive Officer, New Frontier Data

ED I TO R
John Kagia, Chief Knowledge Officer,
New Frontier Data

L E A D AU T H O R
Beau R. Whitney, Vice President and
Senior Economist, New Frontier Data

CO N T R I B U T I N G A N A LY S I S
Kacey Morrissey, Director of Industry
Analytics, New Frontier Data

CO P Y ED I TO R
J.J. McCoy, Senior Managing Editor,
New Frontier Data

PROJ EC T M A N AG ER
Hovanes Tonoyan, Research Team Project
Manager, New Frontier Data

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 7

METHODOLOGY
Data in this report are drawn from a
variety of sources, including:
G OV E R N M E N T AG E N C I E S
We obtained data from global and country-spe-
cific agencies on topics ranging from census data
and the rates of illicit cannabis use among various
cross-sections of the population, to the policy and
regulatory frameworks in place governing cannabis
in various markets.
P R I VAT E C O M PA N I E S
Businesses operating in legal markets have been
critical sources for insights about the growth
and future of cannabis. In addition to sales
data and product performance, interviews with
business owners and staff have provided invalu-
able perspectives regarding the challenges and
opportunities facing operators in the current
market environment.
AC A D E M I C A N D
MEDICAL INSTITUTIONS
Research conducted by a broad range of academic
institutions, medical centers, think tanks, and
universities provides rich information about issues
surrounding the industry, such as the health effects
of cannabis consumption, the potential medical
applications, and the socioeconomic implications
of cannabis prohibition and legalization.
© NEW FRONTIER DATA, ALL RIGHTS RESERVED
S U B J EC T M AT T E R E X P E R T S
AND POLICY GROUPS
In addition to the above sources, New Frontier
Data’s perspective has been enriched through
extensive discussions with external stakeholders
in the industry, including policy groups, advocacy
organizations, and entities outside the cannabis
industry whose businesses are impacted by the
advancement of cannabis policies.
Market Projection Methodology
New Frontier Data has developed proprietary
models for estimating the size of both the legal
and illicit cannabis markets around the world. The
models are continually refined based on new data
inputs, expansion of legalization into new markets,
changes in market regulations, and other mar-
ket-disrupting events.
The growth models were developed based on
analysis of key inputs including:
• Size and growth of the total
population within each market;
• Size and growth of the adult
population within each market;
• Usage trends of illicit cannabis
use in each market;
• Monthly growth rates of adult-use sales
in active legal adult-use markets;
| NEWFRONTIERDATA.COM | 8
METHODOLOGY

• Size and growth of the tourism population • Monthly growth in expenditures per person
in adult-use markets which track this data;
in markets with adult-use and medical sales;

• Monthly growth of patient populations • Interplay between medical and

adult-use sales in markets where
for each medical market since the
activation of the medical programs; adult-use sales are legal; and

• Number and types of qualifying medical • Analysis of each market’s regulatory

model to identify similarities and
conditions accepted in the jurisdictions
which track patient registration growth; differences in each market’s structure.

• Monthly growth in medical cannabis sales

in the jurisdictions which track this data;

• Monthly growth in medical cannabis

expenditures per patient in the
jurisdictions which track this data;

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 9

BASELINE
ASSUMPTIONS &
DEFINITIONS
There are many assumptions used
in this analysis.
Assumptions:
$ A CURRENT TA X STRUC TURE MODEL :
This is based on the current model where 11
states are legal for adult use, and 33 states are
legal for medical use. The forecast assumes
no changes occurring to the legal markets
between 2018 and 2025. It also assumes that
all existing federal tax policies and state reg-
ulatory policies remain constant from 2018
through 2025.
$ A POTENTIAL MODEL:
$ This is a theoretical model that assumes
full legalization in all 50 states and D.C. It
assumes that cannabis taxation is not subject
to IRS 280e tax policy, and that there is a 15%
sales tax imposed at the federal level.
$ A NATIONAL SALES TA XES:
$ This is defined as a retail sales tax on canna-
bis. This report assumes a 15% national retail
sales tax.
$ A JOBS/EMPLOYMENT:
$ Job estimates are based on an analysis of
employment trends across legal markets. For
the purposes of this report, job estimates are
based on a percentage of the total cannabis
revenues of a given market.
© NEW FRONTIER DATA, ALL RIGHTS RESERVED
$A FUTURE RE VENUE GROW TH:
$ Demand projections take into account pop-
ulation growth estimates, and SAMHSA
usages growth estimates. Spending is held
constant. The revenue opportunities also do
not account for the potential revenues that
could be earned if the current clinical research
into cannabis leads to FDA-approved phar-
maceutical cannabis products.
$A ILLICIT M ARKET:
$ It is assumed that there will always be some
form of gray market or illicit market activity
accounting for 25% of total market demand.
$A SUPPLY CHAIN:
$ The supply chain is def ined as those
“plant-touching” businesses that support
cannabis retail operations (e.g., cultivators,
processors, and wholesalers), but not ancil-
lary businesses such as accounting, security,
consulting, or human resources firms. This
report will assume supply-chain revenues are
50% of retail revenues.
Definitions:
$ D FEDERAL PAYROLL WITHHOLDINGS:
$ Payroll taxes are deducted from wages
earned by employees. Employers match
social security withholdings. In all, there is a
15.9% tax on employee earnings for Social
Security and Medicare. This is before any
federal income taxes and does not include
any state tax withholdings.
$ D FEDERAL BUSINESS TA XES:
$ Federal business tax is that tax owed at the
federal level by businesses operating in the
| NEWFRONTIERDATA.COM | 10
BASELINE ASSUMPTIONS & DEFINITIONS
cannabis space. Taxes are based on taxable
profits (i.e., revenues minus the cost of
goods sold (COGS) and any ordinary and
necessary expenses.
$ D 280E TA X:
$ This IRS tax policy is currently imposed on
businesses conducting federally illicit activi-
ties. It is a federal business tax that allows only
COGS to be deducted from gross revenues,
but not “ordinary and necessary” costs such
as marketing or legal and contract services to
be deducted. This tax policy reduces deduc-
tions and increases the effective tax rate on
federally illicit markets, like cannabis.
$ D CANNABIS USAGE RATES:
$ The Substance Abuse and Mental Health
Administration’s National Survey of Drug
Use and Health data are used to estimate the
number of users in a given state.
$ D POPUL ATION:
$ Population data was taken from the U.S.
Census, as of 2017.
$ D MULTIPLIER EFFEC T:
$ This is an economic term for the ripple effect
that monies spent into an economy will have.
For example, for every $1 spent at a national
park, it drives an additional $6 of economic
activity in the communities near the park.
This is a 6x multiplier. This report conserva-
tively assumes that every $1 of spending on
cannabis drives $2 of economic activity, or a
2x multiplier.
© NEW FRONTIER DATA, ALL RIGHTS RESERVED
Other Notes:
INDUSTRIAL HEMP:
Jobs ad tax data associated with industrial hemp
is not included in this report. Although there are
roughly 16,000 hemp licenses issued for hemp
cultivation, extraction, and distribution, there is
little data on the number of employees required to
support such licenses. Industrial hemp is expected
to be a major driving force in the U.S. market in
2019 and beyond. Future updates will combine
cannabis for adult-use, medical and industrial
(hemp) purposes. Preliminary estimates indicate
that industrial hemp can produce between $10
billion and $20 billion in raw materials for use
in multiple markets. Such raw materials alone
would represent 10% of all the cash crop revenues
(e.g., wheat, corn, soybean, etc.) in the U.S. based
on data from the U.S. Department of Agricul-
ture (USDA). Participation in the hemp market
has surged since the passage of the Farm Bill in
December 2018, which removed hemp from the
controlled substances act list of Schedule 1 drugs.
BIAS:
New Frontier Data is a nonpartisan, nonadvo-
cacy big data analytics firm, providing business
intelligence to business operators, investors, and
policy makers in the cannabis space. New Frontier
Data does not take positions with respect to the
cannabis legalization issue.
| NEWFRONTIERDATA.COM | 11
BASELINE ASSUMPTIONS & DEFINITIONS
Estimating Federal Tax Revenues
Assuming National Legalization:
In order to build a model for the theoretical pro-
jections of cannabis legalization at the federal level,
there are a few assumptions that must be made:
˜ No 280e taxation. This tax policy is
eliminated with Federal legalization;
˜ A 15% federal sales tax on all retail sales;
˜ Does not consider demand elasticity and
the effect that the federal tax will have on
conversion from an illicit market to the legal
system. However, eliminating 280e taxation
would likely increase hiring, while lowering
prices, thereby accelerating the conversion
from an illicit market to a legal one; and
˜ A 25% illicit market. Although illicit
market estimates vary from state to state,
for the purposes of this analysis, we are
assuming that 25% of the total market
remains supported by illicit sources
through the period 2018–2025.
© NEW FRONTIER DATA, ALL RIGHTS RESERVED
Cannabis Demand Forecasts:
There are two aspects of this analysis:
1) Current legal demand from the 11
adult-use states, 33 medical states,
and 14 CBD-only states; and
2) A potential “theoretical” market and
examination of what employment, wages
and tax revenues would be derived via a
system that has full federal legalization. As
noted in the assumptions, for conservatism,
the theoretical model assumes some
residual illicit market activity remains.
By comparing the two forecasts from a business
tax, payroll tax and Federal sale tax perspective,
one can understand the impact that full legaliza-
tion would have on US Federal revenues.
Current Cannabis Forecast:
New Frontier Data forecasts 2019 retail rev-
enues of $13.6 billion, growing to $29.7 billion
by 2025. Legal cannabis demand is projected
to grow 16.2% annually over a 9-year period
between 2018–2025. That is very conservative as
it assumes there being no changes to the current
legal structure (i.e., 11 adult-use states, 33 medi-
cal-use states) and no additional states legalizing
either medical or adult-use programs. In total, it
represents a combined total of $166.7 billion in
both legal adult-use and medical marijuana sales
throughout 2018 to 2025.
| NEWFRONTIERDATA.COM | 12
INTRODUCTION
Cannabis is driving economic growth in
many states, through agricultural development via
cultivation, manufacturing development through
processing or edibles production, and in the retail
sector. Taxes derived from sales, licensing fees,
and business and employment taxes are a rela-
tively new form of revenue streams for states that
are unwilling or unable to increase tax revenues
through other means.
Cannabis has already had an impact on jobs
and taxes in the U.S. economy. With estimated
L EG A L ACC E S S S TAT E S
P E R C E N TA G E O F P O P U L AT I O N
29%
31%
˜ Adult-Use ˜ Medical ˜ Low-THC/High-CBD
Source: New Frontier Data
© NEW FRONTIER DATA, ALL RIGHTS RESERVED
industry-wide revenues of $15.5 billion in 2018,
the cannabis industry represents a formidable
economic driver. In 2019, the cannabis industry
employed more than 340,000 workers in the
legal medical and adult-use sectors themselves.
When the long established illicit market is con-
sidered, the many existing illicit and gray-market
jobs which are neither tracked or taxed represent
further impact should they be converted into the
legal system.
With 11 states allowing adult-use access to can-
nabis, and 33 states permitting medical access,
more than 68% of the U.S. population has access
to legal cannabis in some form.
The number of legal states reforming their canna-
bis laws is expected to grow. Voters are accepting
1%
39%
˜ Not Legal
| NEWFRONTIERDATA.COM | 13
 L EG A L ACC E S S S TAT E S
B Y 201 8 P O P U L AT I O N ( M I L L I O N S )

Adult-Use 93

Medical 128

Low THC / High CBD 101

Not Legal 5

0 30 60 90 120 150

POPUL ATION IN MILLIONS

Source: New Frontier Data

D O YO U T H I N K T H E U S E O F M A R I J UA N A S H O U L D B E M A D E L EG A L , O R N OT ?

80%

66%
70%
58%
60% 64%
50%
60%
50%

36%
40% 44%
31%
28%
30% 25%
23%

20% 12% 25%

10% 16%

0%
1969 1974 1979 1984 1989 1994 1999 2004 2009 2014 2019

˜ Yes, Legal

Source: Gallup: news.gallup.com/poll/258149/medical-aid-top-reason-why-legal-marijuana-favored

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 14

 INTRODUCTION
and incorporating cannabis products into their
lifestyles, and a majority of voters are in favor of
some form of legalization. Based on a Gallup poll
published on June 12, 2019, 64% of those sur-
veyed favored full legalization, an increase from
44% in 2009.
As support for full legalization has grown nation-
ally, so too has public acceptance and participation
in legal regulated markets. While legalization has
been passed in states with the highest margins of
support and the smoothest lawmaking processes,
the pace of legal reform is forecasted to slow as
the debate shifts to states where support margins
are narrower and the legislative process more
complex. In these new markets, the debate can
transmogrify from that of a moral cause to an
economic one.
Based on a Gallup
poll published on
June 12, 2019, 64% of those
surveyed favored full
legalization, an increase
from 44% in 2009."
© NEW FRONTIER DATA, ALL RIGHTS RESERVED
What are the potential economic advantages to
be gained from legal cannabis? Can it represent
jobs creation? To what extent can additional jobs
and taxes contribute to the U.S. economy? This
report addresses those subjects, and compares
the differences between the current economic
contributions to those of a theoretical model
that assumes all 50 states having deployed a legal
adult-use cannabis market. It examines how many
potential jobs there are associated with the can-
nabis industry, along with the amount of related
business taxes, payroll taxes, and potential federal
excise taxes had federal legalization been in effect.
It also examines the current federal tax policy, and
how much additional taxes cannabis businesses
pay through the current IRS tax code 280e.
In all, fully legal cannabis represents significant and
positive potential impacts on national and state
economies; however, it should not be interpreted
as a panacea to address the growing federal debt,
or solve federal deficit spending.
| NEWFRONTIERDATA.COM | 15
TOTAL U.S.
FORECASTED
DEMAND
The overall economic impact assess-
ment is based on how large the U.S. cannabis
market is forecasted to become. In New Frontier
Data’s recent U.S. Cannabis Report: 2019 Industry
Outlook, the total legal forecast for U.S. cannabis
is $10.3 billion in 2018, reaching $13.6 billion in
2019, and growing to $29.7 billion in 2025. That
pace represents 31.7% growth from 2018 to
2019, and is based on the current federal legal
status. For simplicity, it assumes that all states
permitting medical access continue doing so, and
that no more states either approve medical use
or transition to full adult-use access.
As of September 2019, in the United States,
there were an estimated 24.9 million regular
users (defined as having consumed cannabis
in the previous month) and 13.5 million casual

U. S . L EG A L C A N N A B I S M A R K E T G R O W T H

$70
$64.3
2018 2019 2020 2021 2022 2023 2024 $57.3
2025
$60

$50

$40
MARKET SIZE, $USD BILLIONS

$29.7
$30
$27.2
$25.5
$23.2
$20.2
$20
$17.0
$13.6 $14.8 $16.6
$12.8 $14.0
$10.3 $11.1
$10 $9.3
$7.6
$5.9
$4.4 $6.0 $7.7 $9.1 $10.4 $11.5 $12.3 $13.1
$0
2018 2019 2020 2021 2022 2023 2024 2025

˜ Legal Adult-Use Market ˜ Legal Medical Market o Illicit Market

Source: New Frontier Data

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 16

 U. S . C A N N A B I S U S ER S P ER Y E A R
( TOTA L U S E I N 201 9)

50

42.3 43.0
40.8 41.5
39.2 40.0
40 37.5 38.4
37.1
34.7
33.3
31.7
29.9
30 28.2

20

10
MILLIONS

0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

˜ U.S. Past Month ˜ U.S. Past Year o U.S. Total

Sources: U.S. Census, New Frontier Data

users (defined as those using less frequently than

in the previous month). Those combined 38.4
million users are purchasing from both legal and 38.4 million users are
illicit markets.
purchasing from both
Concerning regulatory and tax perspectives, legal and illicit markets."
the more consumers who transition to the legal
market, the more jobs and taxes are derived from
that demand. Getting existing consumers to par-
ticipate in the legal market is a fundamental issue
facing each state to consider in reforming their
cannabis-access laws.

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 17

THE CURRENT
MODEL Current Structure Current Structure
Federal Business Total Business
Revenue Revenues
Projections (Including
(2018 - 2025) Supply Chain)
$U S D B ILLI O N S
TAX REV ENUES 2018 $15.51
IN A LEG A L 2019 $20.42
PATC HWOR K 2020 $25.47
NAT I O N 2021 $30.36
2022 $34.85
2023 $38.32
The total revenue of the total cannabis
2024 $40.84
industry (retail and the supply chain) is estimated
2025 $44.59
to be $20.4 billion in 2019, growing to $44.6
billion by 2025. TOTAL $250.36

C U R R EN T S T R U C T U R E TOTA L B U S I N E S S R E V EN U E S
( 201 8 - 2025)

$50
$44.59
$40.84
$40 $38.32
$34.85

$30.36
$30
$25.47

$20.42
$20
$15.51
$USD BILLIONS

$10

$0
2018 2019 2020 2021 2022 2023 2024 2025

Source: New Frontier Data

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 18

 THE CURRENT MODEL

Jobs
Estimated Jobs in
Much discussion about economic impacts from Current Cannabis
Structure Associated with
cannabis centers around job creation. New Employment Total Revenue
Frontier Data estimates there to be more than (Current Structure)
340,000 jobs supporting $20.4 billion in can-
2018 258,437
nabis revenue in 2019. With no changes to the
2019 340,344
existing regulatory status, organic job growth
within existing markets is forecast to reach 2020 424,533

743,000 jobs by 2025. 2021 505,979

2022 580,826
2023 638,649
2024 680,621
2025 743,196

U. S . E S T I M AT ED L EG A L C A N N A B I S E M P LOYM EN T
( 201 9-2025)

800
743

700 681
639
600 581

506
500
425
400
340
300 258

200
THOUSANDS

100

0
2018 2019 2020 2021 2022 2023 2024 2025

˜ Estimated Jobs in Cannabis Associated with Total Revenue (Current Structure)

Source: New Frontier Data

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 19

 THE CURRENT MODEL

Payroll Taxes
Total Wages
Current Structure
In addition to the number of jobs necessary to Based on Average
Employment Cannabis Wages
support total revenues associated with the cannabis and Payroll Tax of $36,400
Withholdings
ecosystem, there is an economic benefit associated Per Year
with business wages and payroll taxes. Through $U S D B ILLI O N S
wages alone, legal cannabis will support over $12.3 2018 $9.41
billion in 2019. That is forecasted to grow to over 2019 $12.39
$27 billion by 2025 (including under relatively con- 2020 $15.45
servative scenarios of cannabis reform).
2021 $18.42
2022 $21.14
Wages in excess of $12 billion will undoubtedly have
2023 $23.25
a stimulative effect on the 2019 U.S. economy.
They lead to further economic activity, and create 2024 $24.77

ripples of effect in multiple sectors. In addition 2025 $27.05

to such stimulative effects in the economy, the TOTAL $151.88
federal government will earn payroll deductions
from those wages.

C U R R EN T C A N N A B I S I N D U S T R Y WAG E S

30
27.05
25.77
25
23.25
21.14
20
18.42

15.45
15
12.39
$USD BILLIONS

10 9.41

0
2018 2019 2020 2021 2022 2023 2024 2025

˜ Total Wages Based on Average of $36,400 per Year

Source: New Frontier Data

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 20

 THE CURRENT MODEL

At a minimum, the federal government will gen-

erate payroll withholdings (used to fund Social Current Structure Total Federal
Security and Medicare) amounting to 15.9% of Employment Payroll
and Payroll Tax Withholdings
wages. Those would result in $24.2 billion in payroll Withholdings (2018 - 2025)
taxes collected between 2018 and 2025.
$U S D B ILLI O N S
2018 $1.50
Though there are executive-level and highly tech-
2019 $1.97
nical positions requiring advanced degrees, most
jobs within cannabis are relatively unskilled positions 2020 $2.46
averaging between approximately $12.50 to $15.00 2021 $2.93
per hour. When combined with all jobs including 2022 $3.36
management, the average wage in the cannabis 2023 $3.70
industry is roughly $17.50 per hour, or $36,400 per 2024 $3.94
year. With more than 340,000 persons employed
2025 $4.30
in the U.S. legal cannabis market, the U.S. federal
government is forecasted to collect nearly $2.0 TOTAL $24.12
billion in 2019, growing to $4.3 billion by 2025.

C U R R EN T TOTA L C A N N A B I S F ED ER A L PAY R O L L W I T H H O L D I N G S
( 201 8 - 2025)

$5

$4.30

$4 $3.94
$3.70
$3.36

$3 $2.93

$2.46

$1.97
$2
$1.50
$USD BILLIONS

$1

$0
2018 2019 2020 2021 2022 2023 2024 2025

Source: New Frontier Data

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 21

THE CURRENT MODEL

Business Taxes The estimated total legal cannabis business

Another significant stream for federal revenues
comes in the form of business taxes. Cannabis
businesses are taxed heavily, much more so than
other businesses that are not involved in the can-
nabis industry. As a result, while there is good
revenue for the federal coffers, there is also a
policy dilemma associated with taxing too heavily
and not creating incentives (through normal tax-
ation) to participate in the legal system.
revenue, including the supply chain, can be con-
sidered conservative given that it assumes no
changes occurring to the number of legal adult-use
and medical states. In that conservative scenario,
the cannabis industry (not including ancillary busi-
nesses) is forecasted to pay $1.9 billion in business
taxes in 2019, growing to $4.1 billion by 2025.
In total, from 2018 through 2025, the cannabis
industry is forecasted to generate nearly $22.8
billion in business taxes.

Overall, including the supply chain, cannabis busi-
nesses are forecasted to generate $20.4 billion in
legal revenue in 2019 and steadily increase that to
$44.6 billion by 2025.
In sum, by combining the payroll taxes and busi-
ness taxes, the cannabis industry would generate
$46.9 billion in revenues for the federal govern-
ment from 2018 through 2025 (growing from
$2.9 billion in 2018, to $3.8 billion in 2019 and
eventually $8.4 billion by 2025).

Current Structure Current Structure Current Structure Total Current

Federal Business Total Business Federal Business Structure
Tax Revenue Revenues Tax Revenue Estimated Federal
Projections (Including Projections Tax Revenue
(2018 - 2025) Supply Chain) (2018 - 2025)
$U S D B ILLI O N S $U S D B ILLI O N S

2018 $15.51 2018 $1.41

2019 $20.42 2019 $1.86
2020 $25.47 2020 $2.32
2021 $30.36 2021 $2.76
2022 $34.85 2022 $3.17
2023 $38.32 2023 $3.49
2024 $40.84 2024 $3.72
2025 $44.59 2025 $4.06

TOTAL $250.36 TOTAL $22.78

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 22

 C U R R EN T TA X S T R U C T U R E S U M M A R Y
$USD BILLIONS

Total Current
Current Tax Federal Federal Retail
Total Current Federal Payroll Structure
Structure Business Tax Sales Tax
Legal Business Tax Withholdings Combined
Summary Revenues Revenues at 15%
Revenues (15.9% total) Federal Tax
(2018 - 2025) (w/ 280e) of Retail Sales Revenues

2018 $15.51 $1.41 $1.50 $0 $2.91

2019 $20.42 $1.86 $1.97 $0 $3.83

2020 $25.47 $2.32 $2.46 $0 $4.77

2021 $30.36 $2.76 $2.93 $0 $5.69

2022 $34.85 $3.17 $3.36 $0 $6.53

2023 $38.32 $3.49 $3.70 $0 $7.18

2024 $40.84 $3.72 $3.94 $0 $7.66

2025 $44.59 $4.06 $4.30 $0 $8.36

Total $250.36 $22.78 $24.12 $0 $46.93

Source: New Frontier Data

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 23

CURRENT ISSUE:
BANKING

With an estimated $20.4 billion
in business revenues projected in 2019, a major
issue confronting the cannabis industry is the
lack of banking and other financial services. While
some small banks offer basic checking and savings
account services, cannabis businesses cannot
get access to traditional financial services such
as bridge loans, construction financing, or cred-
it-card processing. As a result, most businesses
are run on a cash-only basis.
The lack of banking is also a public-safety issue,
where violent crimes are committed on cannabis
businesses holding cash on their property.
Banking-reform legislation has been proposed in
2019 in both the U.S. House of Representatives
and the U.S. Senate, though significant differ-
ences remain between the two chambers, and
passage of a bill remains in jeopardy before the
end of the 2020 presidential election.

While the issue of taxation has been addressed

in this report, there are other issues — such as
tax avoidance and underreporting — which have
implications for the federal revenues earned.
Banking reforms that enable normal banking
services would add a level of transparency into
business operations that would reduce the amount
of tax avoidance.

Cannabis businesses
cannot get access to
traditional financial services
such as bridge loans,
construction financing, or
credit-card processing."

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 24

CURRENT ISSUE:
IMPACTS OF IRS
TAX CODE 280e
The IRS Tax Code 280e differentiates
cannabis businesses (or businesses involved in
illegal activities) from traditional businesses. The
tax code limits the types of deductions that illicit
businesses can take, thereby increasing the overall
effective tax rates for those businesses.
Legal cannabis businesses are currently subject to
such provisions in the tax code, (i.e., 280e), and
E X A M P L E S O F 280 e I M PAC T
( R E TA I L O N LY )
thus subsequently pay higher taxes than other,
“normal” businesses. Those taxes significantly
increase the costs of running a cannabis business,
while limiting profits and job creation. They also slow
conversion of consumers from an illicit market to a
legal one by artificially keeping prices higher than
they otherwise would be (rendering the legal market
less competitive against the illicit market). Though
the question becomes why the U.S. government
would decline tax revenue, the amount of such
revenue projects to be significantly lower relative
to the amount of jobs and economic growth to be
generated from 280e reform.
Overall, during the period from 2018–2025,
cannabis businesses on average pay $1.53 billion
more per year in business taxes than do traditional,
“normal” businesses.

T O T A L S 2 0 1 8 -2 0 2 5
$USD BILLIONS For perspective, were the $12.3 billion used to
expand businesses and hire more workers, it would
Category Normal Business 280e Business
translate to an estimated 204,457 jobs in the legal
Retail Revenue $166.90 $166.90
cannabis space. Currently, banking and tax reform
remain the two top issues for cannabis policy-re-
Cost of Goods Sold $83.45 $83.45
form efforts in the U.S. Congress.

Gross Margin 50% 50%

Ordinary and TOTA L U. S . C A N N A B I S

$50.07 $0
Necessary Expenses I N D U S T R Y CO M PA R I S O N
( N O R M A L V S . 28 0 e TA X R E V E N U E S )
Real Profit w/o 280e $33.38 $33.38
$USD BILLIONS
Taxable Profit $33.38 $83.45
Normal 280e Comment
Business Business
Federal Tax (21%) $7.01 $17.52
Total Cannabis Total Revenue
Business $250.36 $250.36 from Entire
Revenues Cannabis Supply
Net Margin 16% 10% (2018 - 2025) Chain
Total Federal
Average Effect Total Business $10.51 $22.78 Cannabis
Tax Rate 21.0% 52.5% Tax Generation Business Taxes
Paid
Delta between $0 $10.51
Normal and 280e Delta Between Delta between
Normal Normal and
& 280e $0 $12.27 280e – Avg. =
Net Profit $26.37 $15.86 (including
supply chain) $1.53B/Year

Source: New Frontier Data

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 25

THE
THEORETICAL Under that theoretical scenario, revenues would
MODEL be generated from all 50 states, and jobs would
be converted from the illicit market to the legal
market (except for 25% of the demand). Those
jobs would generate wages, and federal taxes would
be deducted from same. Businesses would also be
ECONOMIC taxed on their profits, and businesses would not be
I M PA C T O F F U L L subjected to IRS code 280e, thereby increasing
L E G A L I Z AT I O N their margins. An additional tax revenue stream for
the federal government would exist in the form of
a federal cannabis excise tax of 15% imposed on
New Frontier Data has modeled the economic all retail sales.
impact that full federal legalization would have
assuming it were fully in effect today. The model The basis for the theoretical jobs and tax model
also conservatively assumes that a 25% residual is the overall demand where cannabis is legal in all
illicit market remained. 50 states. Based on New Frontier Data’s 2019

B U S I N E S S R E V EN U E CO M PA R I S O N

$100 $96 $96 $98

$92 $94
$90
$87
$84
$80

$60

$45
$41
$40 $38
$35
$30
$USD BILLIONS

$25
$20
$20 $16

$0
2018 2019 2020 2021 2022 2023 2024 2025

˜ Current Structure Total Business Revenues ˜ Total Estimated Potential Market Revenue

Source: New Frontier Data

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 26

 THE THEORETICAL MODEL

forecast for both illicit and legal markets and Jobs

accounting for a residual 25% illicit market, the
total revenue for the entire U.S. supply chain is
$87.4 billion. With natural growth in consumers,
that total industry-wide revenue would increase to
$98.0 billion by 2025. For comparison, the 2019
estimate of $87.4 billion is $66.9 billion higher
than the current legal business revenues ($20.4
billion) for the same period.
It is the large difference between the current
legal market and the theoretical market under full
federal legalization that is driving so much inter-
est by investors into the U.S. cannabis market.
Investors see the market potential while poli-
cy-makers see the job creation and source of new
tax revenues.
Jobs in the cannabis industry have existed for gen-
erations. Until recently, most of them jobs existed
in the illicit market where employees were paid
in cash and did not pay taxes. In 2019, projected
jobs associated with existing legal cannabis market
include 340,000 workers. Full federal legalization
would transfer the illicit jobs into the legal (and
taxable) domain. Under the theoretical model
and assuming full federal legalization was in place
today, there would be 1.46 million legal tax-paying
jobs. That would grow to more than 1.63 million
jobs, even accounting for a lingering illicit market.
In a fully legal market, based on the industry’s
estimated size in 2019, cannabis-related jobs as

E S T I M AT ED J O B S I N C A N N A B I S A S S O C I AT ED W I T H TOTA L R E V EN U E
(C U R R E N T S T R U C T U R E )

2,000

1,605 1,633
1,568 1,593
1,499 1,532
1,500 1,456
1,399

1,000

743
639 681
581
506
500
THOUSANDS

425
340
258

0
2018 2019 2020 2021 2022 2023 2024 2025

˜ Estimated Jobs in Cannabis Associated with ˜ Projected Cannabis Employment

Total Revenue (Current Structure) (Full Federal Legalization)

Source: New Frontier Data

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 27

 THE THEORETICAL MODEL

a whole (1.46 million) would be roughly the same The employment potential is significant, particu-
size as the 2018 U.S. military (1.47 million) and larly in a period of slower global economic growth.
would employ more workers than are working as Job creation is a major policy-related focus in
either nursing assistants (1.45 million), elementary periods of slow growth.
school teachers (1.41 million), cooks (1.34 million)
or law enforcement workers (1.21 million) overall
(i.e., more than twice as many employed police
and sheriff patrol officers (661,000).

E M P LOYM EN T B Y M A J O R I N D U S T R Y 2018

Office & Administrative Support Occupations 23.0

Sales & Related Occupations 15.7
Food Preparation & Serving Related Occupations 13.7
Transportation & Material Moving Occupations 10.8
Management Occupations 10.2
Education, Training & Library Occupations 9.6
Production Occupations 9.5
Healthcare Practitioners & Technical Occupations 9.1
Business & Financial Operations Occupations 8.6
Construction & Extraction Occupations 7.2
Personal Care & Service Occupations 7.1
Installation, Maintenance & Repair Occupations 6.1
Building / Grounds Cleaning & Maintenance Occupations 5.8
Computer & Mathematical Occupations 4.7
Healthcare Support Occupations 4.3
Protective Service Occupations 3.6
Arts, Design, Rntertainment, Sports & Media Occupations 2.9
Community & Social Service Occupations 2.7
Architecture & Engineering Occupations 2.7
Cannabis (Theoretical Model) 1.5
Legal Occupations 1.3
Life, Physical & Social Science Occupations 1.3
Farming, Fishing & Forestry Occupations 1.1

THOUSANDS
0 5 10 15 20 25

Source: Bureau of Labor Statistics (BLS 2018): bls.gov/oes/tables.htm

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 28

THE THEORETICAL MODEL

Payroll Taxes
Projected Wages Though executive-level jobs and technical jobs
Full Federal (Based on Average
Legal Model requiring advanced degrees can pay in excess of
Cannabis Wages
(Theoretical of $36,400 $100,000 annually, most cannabis jobs are rela-
Potential Model) Annually)
tively unskilled. Average combined wages for the
$U S D B ILLI O N S
industry are roughly $17.50 per hour. With 1.46
2018 $50.91
million workers estimated in the theoretical model
2019 $52.99 for 2019, that equates to total projected wages
2020 $54.55 of $53.0 billion. By 2025, under that theoretical
2021 $55.77 scenario, total wages for the cannabis industry
2022 $57.10 would increase to $59.5 billion.
2023 $57.99
Payroll taxes will be deducted from cannabis
2024 $58.42
workers who transition into the legal regulatory
2025 $59.46
system. At 15.9% of those earnings, employee
TOTAL $447.18 wages would contribute $8.4 billion in 2019, and
theoretically contribute $9.5 billion by 2025.
Under full federal legalization, employee with-
holdings would average $8.9 billion annually.

Full Federal Total Federal With questions concerning the viability of the
Legal Model Payroll
(Theoretical Withholdings Social Security and Medicare systems, there is
Potential Model) (2018 - 2025) currently a policy discussion at the federal level
$U S D B ILLI O N S regarding how to reduce costs while increasing
2018 $8.09
revenues. While representing a small percentage
relative to the overall budget, cannabis payroll
2019 $8.43
withholdings could potentially be an additional
2020 $8.67
source of revenue for such programs, pending a
2021 $8.87 more permanent solution to shore up the budget-
2022 $9.10 ary gaps in the system.
2023 $9.22
2024 $9.29
2025 $9.45

TOTAL $71.10

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 29

 B U S I N E S S TA X R E V EN U E S CO M PA R I S O N

$5

$4.02 $4.04 $4.06 $4.12

$3.95
$4 $3.86
$3.78 $3.72
$3.67
$3.52 $3.49
$3.17
$3
$2.76

$2.32

$2 $1.86
$USD BILLIONS

$1.41

$1

$0
2018 2019 2020 2021 2022 2023 2024 2025

˜ Total Current Structure Estimated ˜ Total Potential Federal

Business Tax Revenue Business Tax Revenue
Source: New Frontier Data

Business Taxes

Under a fully legal model, businesses would not

be subjected to IRS tax code 280e, but instead
be taxed like all other businesses, at 21%. Given
the size of the overall market, that would poten-
tially result in a large increase in tax revenues for
the federal treasury. Under the current system,
2019 cannabis federal business tax revenues are
forecasted to reach $1.9 billion, or (under the
theoretical model) double to $3.7 billion.

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 30

 THE THEORETICAL MODEL

Federal Excise Tax (15%)
Given that adult-use and medical cannabis are
illegal at the federal level, there are currently no
federal excise tax revenues derived from such
taxation of cannabis sales (note: cannabis for
industrial purposes [i.e., hemp] was removed from
the Controlled Substances Act as a result of the
2018 Farm Bill). As a result, federal tax revenues
associated with the sales of adult-use and medical
cannabis would represent an entirely new revenue
stream for the federal treasury.
Several bills have been introduced to Congress
that would tax cannabis sales at the federal level
once full federal legalization occurs. In some
bills, federal cannabis sales taxes would gradually
increase from 0% to 25%, while others seek to
impose a substantially higher sales tax. Under
a legal cannabis framework, a federal cannabis
excise tax would be inevitable; however, given the
wide range of tax proposals, a 15% excise tax is
assumed and modeled in this analysis.
Based on addressing the illicit market and transi-
tioning retail businesses from it, retail sales would
be projected to be $58.24 billion in 2019, growing
to $65.34 billion by 2025.

TOTA L L EG A L R E TA I L M A R K E T R E V EN U E
( THEORE TIC AL MODEL )

$68

$66 $65.3
$64.2
$64 $63.7
$62.7
$62 $61.3

$60.0
$60
$58.2
$58

$56.0
$56
$USD BILLIONS

$54

$52

$50
2018 2019 2020 2021 2022 2023 2024 2025

Source: New Frontier Data

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 31

 THE THEORETICAL MODEL

The $58.24 billion in retail sales would theoreti-

cally result in potential tax revenue of $8.7 billion Federal Sales Federal Sales Tax
in 2019, growing to $9.8 billion by 2025. Over Tax Revenue of Retail Sales
(Theoretical
the eight-year period between 2018–2025, it (15%)
Model)
would theoretically generate $73.7 billion in sales $U S D B ILLI O N S
tax revenues.
2018 $8.39
2019 $8.74
In sum, the potential theoretical tax revenues
2020 $8.99
derived under a full legalization model (even with
a residual 25% illicit market) would generate sig- 2021 $9.19

nificant tax revenues for the federal government. 2022 $9.41

On average, from 2018–2025, there would be 2023 $9.56
an average of $22.0 billion per year for a total of 2024 $9.63
$175.8 billion in total business, employment, and 2025 $9.80
sales tax revenues.
TOTAL $73.71

P OT EN T I A L T H EO R E T I C A L M O D EL O F TOTA L F ED ER A L TA X R E V EN U E S
$USD BILLIONS

Potential Total Potential Legal

Theoretical Model Federal Business Federal Payroll Federal Retail Total
Business Revenues
of Total Federal Tax Revenue Deductions Sales Tax at (15% Contribution to
Including Supply Chain
Tax Revenues (No 280e) (15.9% total) of Retail Sales) U.S. Treasury
(2018 - 2025)
(2018 - 2025)

2018 $83.92 $3.52 $8.09 $8.39 $20.01

2019 $87.35 $3.67 $8.43 $8.74 $20.83

2020 $89.92 $3.78 $8.67 $8.99 $21.44

2021 $91.93 $3.86 $8.87 $9.19 $21.92

2022 $94.09 $3.95 $9.10 $9.41 $22.44

2023 $95.60 $4.02 $9.22 $9.56 $22.80

2024 $96.30 $4.04 $9.29 $9.63 $22.96

2025 $98.00 $4.12 $9.45 $9.80 $23.37

Total $737.12 $30.96 $71.10 $73.71 $175.77

Source: New Frontier Data

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 32

DIFFERENCES
BETWEEN businesses pay significantly higher taxes now than

CURRENT & they would under a full federal legalization sce-

nario, the impact of full federal legalization is less

THEORETICAL significant from a business tax perspective (+ $8.2

billion) than on the basis of a payroll tax (+ $46.9
MODEL billion) or excise tax (+ $73.7 billion).

ASSUMING FULL The impact of a fully regulated system likewise

F E D E R A L L E G A L I Z AT I O N
The difference between the potential
theoretical model and the current model articu-
lates the upside potential in the market not only
for employment but for federal taxes. Given that
appears in potential jobs associated with full
legalization. While total elimination of the illicit
market would result in an industry with an esti-
mated 2.0 million jobs, even when accounting
for a residual illicit market, cannabis theoretically
represents a larger employment sector gen-
erating between 1.46 and 1.63 million jobs (an
average of 1.0 million jobs annually more than
the current legal structure).

D I F F ER EN C E S B E T W EEN F ED ER A L R E V EN U E S & C U R R EN T S TAT U S R E V EN U E S

$USD BILLIONS

Differences Delta Total

Between Federal Delta Federal Delta Federal Delta Federal
Business Revenue Additional
Revenues & Business Tax Payroll Sales Tax
(Projected vs. Federal
Current Status Revenues Deductions Revenues
Current) Revenues
Revenues

2018 $68.40 $2.11 $66.60 $8.39 $17.10

2019 $66.93 $1.81 $6.46 $8.74 $17.00

2020 $64.45 $1.46 $6.22 $8.99 $16.67

2021 $61.57 $1.10 $5.94 $9.19 $16.23

2022 $59.24 $0.78 $5.71 $9.41 $15.90

2023 $57.28 $0.53 $5.53 $9.56 $15.61

2024 $55.47 $0.33 $5.35 $9.63 $15.31

2025 $53.42 $0.59 $5.15 $9.80 $15.01

Total $486.76 $8.18 $46.95 $73.71 $128.84

Source: New Frontier Data

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 33

 J O B S : R E TA I L A N D S U P P LY C H A I N

JOBS
Retail + 2018 2019 2020 2021 2022 2023 2024 2025
Supply Chain

Current Legal 258,437 340,344 424,533 505,979 580,826 638,649 680,621 743,196
System

Theoretical
Federally Legal 1,398,592 1,455,894 1,498,697 1,532,153 1,568,121 1,593,277 1,605,059 1,633,483
Model*)

Job Potential
(Assuming No Illicit 1,864,789 1,941,193 1,997,624 2,041,309 2,088,679 2,121,663 2,136,788 2,174,083
Market Remaining)

Source: New Frontier Data

S U M M A R Y O F T H E D I F F ER EN C E S B E T W EEN A T H EO R E T I C A L M O D EL
A N D T H E C U R R EN T S T R U C T U R E ($U S D B I L L I O N S )

Comparison Between Projected and Theoretical Current

Current Taxation Structures Full Federal Difference
Structure
2018-2025 Legalization

Total Business Revenue $737.12 $250.36 $486.76

(Projected Vs. Current - 2018 - 2025)

Federal Business Tax Revenues $30.96 $22.78 $8.18

Federal Payroll Withholdings $71.10 $24.15 $46.95

Federal Sales Tax Revenues $73.71 $0 $73.71

Total Additional Federal Revenues $0 $0 $128.84

Employment Estimates

2018 1,398,592 258,437 1,140,155

2025 1,633,483 743,196 890,287

Source: New Frontier Data

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 34

KEY TAKEAWAYS,
O B S E R VAT I O N S &
P O L I C Y I M P L I C AT I O N S
• U.S. deficits are ballooning, and the federal
government will need new revenue sources.
• Consumers already spend money in the
unregulated market, so there would be no
diversionary effect from other consumer
sectors due to activation of a legal industry.
• Cannabis
spending is, for many
consumers, a fixed expenditure, making it
is less vulnerable to economic disruption
than other discretionary spending.
• Even assuming resolution of the banking
challenges and 280e, the ability to capture
tax revenues forecasted in this report
would require full national legalization.
• Final decisions about federal taxation of
cannabis, and specifically on a federal
sales tax, can significantly impact the
conversion of consumers from unregulated
markets to legal alternatives. As such,
understanding demand elasticity and
evolving consumer behavior in legal markets
will be key to developing an effective
federal cannabis taxation framework.
© NEW FRONTIER DATA, ALL RIGHTS RESERVED
By the Numbers:
• Cannabis in its current legal form is
contributing significantly to the U.S.
economy. In 2019 it represents:
˜ 340,000 jobs;
˜ $12.4 billion in wages;
$2.0 billion in payroll taxes; and
˜
˜ $1.9 billion in business tax revenues.
• With conservative growth estimates,
by 2025, the contribution
would be even larger:
˜ 743,000 jobs;
˜ $27.1 billion in wages;
˜ $4.3 billion in payroll taxes; and
˜ $4.1 billion in business tax revenues.
• Full federal legalization would
potentially increase tax revenues
via increase payroll taxes, business
taxes, and federal excise taxes.
˜ From 2018–2025, an addition
$128.8 billion in potential federal
tax revenues could be contrib-
uted to the federal treasury.
• Banking and other financial services impact
potential public safety and tax collection:
˜ The Safe Banking Act represents an
| NEWFRONTIERDATA.COM | 35
K E Y TA K E AWAY S

important step in providing normal

banking services and increased trans-
parency for the legal cannabis industry.
• The 280e tax code is reducing the
economic and job potential of the market:
˜ While cannabis businesses will pay an
estimated $12.3 billion in excess taxes
relative to businesses not subject to
the tax code, the reduction of tax rev-
enues associated with the elimination
of 280e would be more than offset by
increased employment, payroll taxes,
and increased business taxes associated
with increased business revenues.
• Regarding federal excise taxes:
˜ While a federal excise tax of 15%
would be a significant revenue gen-
erator for the federal government,
federal policy-makers should balance
the allure of federal tax revenues
with potential impacts on state rev-
enues and transitioning businesses
from illicit markets to legal markets. If
taxes are too high, transitioning from
illicit to legal markets will be slower.
• The cannabis industry is a robust
contributor to jobs and economic growth.

˜ Reform of the tax code would

also immediately increase busi-
ness valuations, resulting in
increased business investments.

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 36

CONCLUSION
The cannabis industry is already a robust
driver of economic opportunity. Operators, inves-
tors, and policy-makers all realize the potential of
the newly legalized and emerging industry. While
cannabis jobs have been around for generations,
key policy decisions must be made in order to
incentivize those operating in the illicit space to
transition into the legal one.
This report is intended to examine the “what-if”
scenario of a fully regulated market, assuming it
were currently in full operation. By comparing the
differences between the theoretical market and
the current one, the reader is able to assess the
potential of the market regarding jobs, wages, and
tax revenues.
© NEW FRONTIER DATA, ALL RIGHTS RESERVED
With a $128.8 billion difference between the two
scenarios, many questions will need to be dis-
cussed about which policies need to be addressed
in order to most fully realize the market’s poten-
tial. While New Frontier Data maintains an
agnostic and objective perspective about the
legality of cannabis, we strongly recommend
that more data-driven analysis be performed to
address and answer the many questions which
this analysis presents.
| NEWFRONTIERDATA.COM | 37
APPENDIX 1
S TAT E D ATA : J O B C R E AT I O N U N D E R T H E C U R R E N T
S TAT E-B A S E D L E G A L I Z AT I O N M O D E L
TOTA L J O B S A N D J O B P OT EN T I A L B Y S TAT E

The current legal structure of 33 medical states and 11 fully adult-use states provides a source of many jobs in the U.S. economy.
The chart below summarizes the approximate number of cannabis-related jobs by state (including retail, cultivation, processing,
manufacturing, testing, wholesale, and distribution segments).

Current Jobs 2018 2019 2020 2021 2022 2023 2024 2025
by State
Alaska 1,961 2,359 3,139 3,718 4,157 4,402 4,492 4,561
Arizona 16,840 19,212 20,633 21,936 23,188 24,386 25,533 26,627
Arkansas 0 333 817 1,288 1,859 2,531 3,081 3,465
California 62,901 73,256 79,025 82,708 89,453 100,641 112,019 123,567
Colorado 38,790 42,461 45,537 46,778 47,846 48,762 49,525 50,132
Connecticut 2,380 3,290 3,857 4,389 4,903 5,398 5,875 6,318
D.C. 678 812 875 928 3,444 5,080 6,478 5,720
Delaware 526 825 1,101 1,310 1,513 1,709 1,897 2,079
Florida 7,320 16,917 28,146 41,826 56,807 67,221 76,586 85,626
Hawaii 1,254 1,809 2,414 3,090 3,695 4,005 4,294 4,572
Illinois 3,321 5,792 13,546 29,407 40,554 49,961 57,204 63,406
Louisiana 0 53 242 390 572 787 1,001 1,134
Maine 588 2,271 5,823 7,485 8,747 10,017 11,210 11,689
Maryland 2,738 6,505 10,374 12,511 13,608 14,663 15,679 16,654
Massachusetts 4,693 15,584 21,192 26,271 31,668 37,612 42,923 45,561
Michigan 17,861 19,232 25,115 35,493 41,470 35,872 25,118 43,981
Minnesota 628 1,068 1,435 1,705 1,964 2,215 2,456 2,689
Missouri 0 0 431 1,408 2,478 3,812 5,413 6,859
Montana 2,619 3,194 3,340 3,470 3,594 3,713 3,826 3,933
Nevada 13,510 16,700 19,147 21,071 23,316 24,485 24,723 24,892
New Hampshire 386 600 862 1,088 1,257 1,420 1,578 1,729
New Jersey 2,612 4,567 6,162 7,705 9,195 10,632 12,017 13,349
New Mexico 3,045 4,069 4,403 4,651 4,636 4,574 4,502 4,419
New York 1,720 3,356 5,357 7,140 8,615 10,041 11,417 12,745
North Dakota 0 20 68 135 215 308 418 554
Ohio 0 1,334 3,339 6,059 9,421 13,295 16,188 18,675
Oklahoma 0 7,522 14,338 17,757 21,439 25,149 26,536 27,250
Oregon 17,855 19,257 22,747 25,312 25,990 26,125 26,164 26,412
Pennsylvania 1,926 7,419 13,959 19,673 24,080 27,249 28,586 29,869
Rhode Island 788 867 947 1,028 1,110 1,192 1,275 1,358
Utah 0 0 0 0 643 1,079 1,619 2,266
Vermont 544 508 491 474 459 443 428 413
Washington 50,952 59,148 65,075 66,756 67,384 67,695 67,684 67,343
West Virginia 0 0 596 1,017 1,546 2,176 2,879 3,349

Grand Total 258,437 340,344 424,533 505,979 580,826 638,649 680,621 743,196

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 38

APPENDIX 2
S TAT E D ATA : J O B C R E AT I O N U N D E R
F U L L F E D E R A L L E G A L I Z AT I O N
TOTA L J O B P OT EN T I A L B Y S TAT E

Assuming federal legalization was in place today, the chart below represents an approximation of the total potential jobs in cannabis.
(Assumes 25% residual illicit market, includes retail, cultivation, processing, manufacturing, testing, wholesale and distribution.)

Jobs Potential 2018 2019 2020 2021 2022 2023 2024 2025
Alabama 13,953 14,132 14,328 14,509 14,678 14,836 14,986 15,129
Alaska 4,775 4,520 4,545 4,385 4,256 4,310 4,253 4,176
Arizona 28,402 29,329 30,085 30,771 31,408 31,999 32,546 33,051
Arkansas 10,594 10,733 11,114 11,468 11,876 12,341 12,700 12,921
California 182,246 198,625 211,723 216,456 218,213 223,555 228,462 232,960
Colorado 38,415 38,792 40,407 40,831 41,024 41,007 40,782 40,350
Connecticut 18,921 19,367 19,680 19,941 20,167 20,362 20,529 20,667
D.C. 10,919 11,380 11,872 12,339 11,651 11,856 11,770 9,956
Delaware 4,630 4,817 5,015 5,158 5,291 5,415 5,531 5,640
Florida 78,315 85,544 95,278 104,507 113,179 118,951 123,902 128,587
Georgia 32,329 34,775 35,570 36,333 37,072 37,791 38,496 39,188
Hawaii 5,144 5,396 5,696 6,057 6,362 6,444 6,508 6,564
Idaho 5,132 5,294 5,513 5,725 5,932 6,134 6,334 6,531
Illinois 61,425 66,631 64,448 64,949 68,270 69,953 69,167 66,728
Indiana 27,569 28,446 29,497 30,478 31,401 32,277 33,112 33,912
Iowa 11,060 11,192 11,230 11,269 11,310 11,352 11,395 11,439
Kansas 10,160 11,183 11,728 12,237 12,717 13,172 13,606 14,021
Kentucky 14,734 15,038 15,481 15,891 16,275 16,636 16,979 17,307
Louisiana 16,964 17,310 18,037 18,690 19,332 19,968 20,577 21,103
Maine 9,367 9,854 11,146 11,570 11,570 11,468 11,219 10,993
Maryland 33,899 36,877 39,603 41,628 43,407 45,084 46,671 48,174
Massachusetts 47,248 47,461 48,812 47,926 46,344 45,033 44,170 44,828
Michigan 66,574 70,993 62,566 56,946 58,150 50,168 37,607 46,603
Minnesota 20,694 21,265 21,842 22,316 22,757 23,172 23,564 23,935
Mississippi 8,434 8,529 8,607 8,678 8,742 8,800 8,855 8,905
Missouri 26,262 27,460 28,575 29,866 31,111 32,425 33,970 35,400
Montana 6,263 6,531 6,677 6,810 6,933 7,048 7,156 7,257
Nebraska 6,263 6,416 6,626 6,823 7,010 7,189 7,362 7,529
Nevada 19,747 21,688 22,646 22,578 22,361 22,163 22,005 21,759
New Hampshire 9,110 9,552 9,961 10,318 10,612 10,886 11,141 11,380
New Jersey 33,284 33,967 34,785 35,509 36,150 36,714 37,208 37,638
New Mexico 9,347 9,454 9,732 9,967 9,992 9,971 9,933 9,879
New York 90,427 91,276 91,797 92,030 91,931 91,714 91,391 90,974
North Carolina 39,226 40,137 41,327 42,464 43,558 44,620 45,655 46,670
North Dakota 2,706 2,765 2,845 2,922 3,010 3,109 3,203 3,280
Ohio 44,593 44,694 45,428 46,560 48,129 50,043 51,190 52,005
Oklahoma 13,002 10,995 11,666 14,077 16,707 19,378 20,328 20,795
Oregon 26,508 25,027 24,957 24,478 24,300 23,860 23,315 22,950
Pennsylvania 54,605 54,927 56,778 59,711 63,107 65,490 66,427 67,262
Rhode Island 7,131 7,180 7,247 7,307 7,361 7,410 7,454 7,494
South Carolina 15,233 15,699 15,892 16,087 16,285 16,486 16,690 16,897
South Dakota 3,259 3,334 3,442 3,546 3,644 3,739 3,831 3,921
Tennessee 25,454 26,163 27,184 28,151 29,074 29,963 30,822 31,657
Texas 74,132 76,936 79,373 81,754 84,094 86,409 88,708 90,999
Utah 7,398 7,631 7,921 8,204 8,354 8,720 9,163 9,684
Vermont 6,256 6,398 6,543 6,644 6,760 6,916 7,061 7,198
Virginia 32,316 33,515 34,328 35,093 35,821 36,518 37,190 37,841
Washington 52,364 54,464 56,618 57,130 56,788 56,147 55,206 53,961
West Virginia 6,905 6,995 6,947 7,145 7,404 7,730 8,100 8,288
Wisconsin 22,858 23,145 23,489 23,807 24,103 24,381 24,644 24,894
Wyoming 2,041 2,063 2,092 2,117 2,141 2,163 2,183 2,202
Grand Total 1,398,592 1,455,894 1,498,697 1,532,153 1,568,121 1,593,277 1,605,059 1,633,483

© NEW FRONTIER DATA, ALL RIGHTS RESERVED | NEWFRONTIERDATA.COM | 39

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