The Alaska exhibit at the 1964-1965 World's Fair (Flickr user Janice Waltzer/CC).

The state of Alaska stands to gain $23 million in annual tax revenues from a fully ramped-up legal marijuana market, according to a report released this week by the Marijuana Policy Groupa research organization that does not take a stance on marijuana legalization issues. If Alaska voters approve a legalization measure on the ballot next week, the report estimates that total sales in a legal marijuana market would climb from $56 million in 2016 to $107 million in 2020.


Marijuana Policy Group

The report, by the same nonpartisan group of academics and private researchers that provided marijuana market estimates to Colorado upon legalization in that state, aims to apply lessons learned from Colorado to Alaska's situation. "Previous studies incorrectly assume that all demand will quickly shift to regulated markets," the group wrote in a release. "In our experience, such assumptions are naïve."

Initial estimates of marijuana tax revenue in Colorado were considerably higher than actual revenues, although in subsequent months demand for legal marijuana has grown and revenues are now considerably higher than the latest Colorado Department of Revenue projections.

Based on data from the National Survey on Drug Use and Health, the report estimates that there are 103,000 marijuana users aged 21+ in Alaska, representing at least one-fifth of the state's adult population. It says 72,000 of them use marijuana monthly or more, and 22,000 use marijuana at a near-daily rate. Surveys and government reports consistently show marijuana use in Alaska among the highest in the nation, due partly to the quasi-legal status of marijuana in the state.

Marijuana Policy Group
Marijuana Policy Group

As in Colorado, the bulk of the marijuana demand comes from the heaviest users. Twenty-one percent of the state's marijuana users use on a near-daily basis, but this group accounts for fully two-thirds of the overall demand. The report estimates that these heavy users will be the last group to widely adopt a move to the legal market from the black market.

"For these users, the budget share for marijuana is large," the authors write. "Because they are regular consumers, it makes sense to shop carefully in order to find low-cost marijuana." With a $50 per ounce tax on marijuana as specified in the ballot measure, it will take several years for prices on the legal market to fall close enough to black market prices for a substantial share of the heavy users to migrate.

It's worth noting that as in Colorado, the expected revenues from marijuana represent just a small fraction of the state's total budget. The latest polling on the ballot question is contradictory, with one recent poll showing a 10-point majority in favor of legalization, while another shows a 10-point majority opposing it.

MPG received no payment for the Alaska study. The group undertook it partly because current Alaska policy forbids the state from performing such research on its own.