Cannabis stocks surge on legalization hopes — Here’s why

Legalization
Vivien Azer, Cowen and Company, joins ‘Power Lunch’ to discuss the surge in cannabis stocks as investors anticipate legalization if there is a Biden presidency. Subscribe to CNBC PRO for access to investor and analyst insights on cannabis and more: https://cnb.cx/2BT2E7y

Things may go green in four states this fall, as voters will decide on legalizing and taxing marijuana.

Arizona, Montana, New Jersey and South Dakota all have measures up for a vote to legalize and levy recreational marijuana.

Thus far, 11 states have legalized recreational pot: Alaska, California, Colorado, Illinois, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont and Washington state.

Levying legal weed is looking attractive at a time when states are anxious to boost their coffers.

Jurisdictions often slap an excise tax, along with a state general sales tax, on pot sales.

Just don’t count on legalized marijuana to singlehandedly save state budgets.

That’s because the amount of revenue they can collect will depend on the structure of the tax and the ease of obtaining a license for growing and selling the product, according to Ulrik Boesen, senior policy analyst at the Tax Foundation.

“You can have a good tax system, but if your regulatory system isn’t effective, you won’t see the revenue,” he said.

Boesen pointed to Oregon as an example of a state that’s been relatively successful at legalizing and levying marijuana.

“Oregon has a low tax rate and a flexible licensing system, so there are a lot of growers and retailers,” Boesen said. The Beaver State applies a 17% excise tax on the retail price of pot, generating $102 million in tax revenue during the 2019 fiscal year.

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