Cannabis Regulation and Revenue Act of 2025 — Fiscal Analysis

Net Federal Profit (steady state, Year 3+): +$5.5B to +$7.4B annually

Executive summary

Direct federal revenues: $5.4–$7.2B annually from the 10% wholesale excise tax, scaling with market maturation.
Secondary federal revenues: $1.1–$1.6B annually from corporate and payroll taxes due to normalization (banking access, accounting compliance).
Federal program costs: $1.0–$1.4B annually for HHS public health, research set‑asides, CROB oversight, DOT grants, and expungement implementation.
Net federal impact: +$5.5–$7.4B per year, plus long‑run savings from criminal justice reforms and black‑market displacement.
State/local impacts: Net‑positive due to added excise/sales taxes, reduced enforcement/incarceration costs, and rural health investments.

Market size: $54–$72B annual legal wholesale value (retail ~$90–$120B), reflecting national legalization with interstate commerce.
Taxable base: 90% of legal wholesale captured in year 3 due to improved compliance and banking access.
Tax rate: 10% federal wholesale excise (statutory), with 2–4% average state excise layered at retail.
Behavioral response: 10–20% price decline versus current illicit/fragmented markets due to supply chain efficiency and competition.
Transition timeline: Phase‑in over 24–36 months; full compliance by year 3 as ATFC rules, DOT standards, and FDA labeling stabilize.

Component	Low case	Base case	High case
Excise (10% of wholesale)	$5.4B	$6.5B	$7.2B
Corporate income tax (C‑corps)	$450M	$600M	$750M
Payroll/FICA from sector employment	$650M	$800M	$900M
Total annual federal revenues	$6.5B	$7.9B	$8.9B

HHS prevention & treatment: 10% of excise inflows ($540–$720M annually).
NIH/CDC research set‑aside: 5% of excise inflows ($270–$360M annually).
CROB oversight & public dashboards: $40–$60M annually for audits, reporting, and tech infrastructure.
DOT impaired driving grants: $80–$120M annually for state roadside testing and education.
DOJ expungement & resentencing: $80–$140M one‑time surge (years 1–3), then ~$25–$50M steady‑state.
USDA/EPA standards & enforcement: $30–$50M annually for sustainable cultivation and pesticide oversight.

Total annual federal program costs: ~$1.0–$1.4B (years 3+), higher in transition years due to expungement surge.

Year 1–2 (transition): +$3.8–$5.5B as compliance ramps and one‑time expungement costs occur.
Year 3+ (steady state): +$5.5–$7.4B annually; upside if market expands faster or corporate normalization accelerates.

Allocation bucket	Share of excise	Annual dollars (base case)	Downstream impact
Deficit reduction / general fund	40%	$2.6B	Direct fiscal consolidation; reduces borrowing needs.
Public health & addiction treatment	30%	$2.0B	Prevention, treatment capacity, education campaigns.
Rural healthcare infrastructure	20%	$1.3B	Clinics, mobile units, workforce retention in rural regions.
Veterans’ healthcare	10%	$650M	Dementia care, mental health services, access improvements.

Federal incarceration & supervision: $150–$300M annual savings after resentencing and expungement cycle completes.
Federal enforcement & prosecution: $100–$200M annual savings from reduced cannabis‑only cases.
State & local savings (non‑federal): Often larger than federal; reduced arrests, court time, detention, and probation caseloads.

Employment: 200k–300k direct jobs (cultivation, processing, retail, logistics); 120k–180k indirect jobs (construction, compliance, testing).
Wage base: $12–$18B sector payroll; increases FICA and individual income tax receipts.
Price normalization: Legal supply and competition compress retail margins; consumer surplus rises; black‑market share declines.

Variable	Low case	Base case	High case	Net federal (annual)
Wholesale market size	$54B	$65B	$72B	$5.5B → $7.4B
Compliance capture (year 3)	80%	90%	95%	$5.0B → $7.8B
Secondary tax elasticity	$1.1B	$1.4B	$1.7B	$5.3B → $7.7B
Program cost overruns	$1.6B	$1.2B	$1.0B	$4.9B → $7.9B

Top‑down market sizing: Legal retail estimates converted to wholesale using typical 40–45% margin structures; interstate commerce increases scale and reduces unit costs.
Excise capture: Applied statutory 10% wholesale rate to compliant volumes; ramp modeled over 3 years with banking/ATFC rulemaking.
Secondary revenues: Corporate and payroll tax estimates based on sector payroll, profitability normalization, and improved GAAP compliance.
Program costs: Parameterized by statutory set‑asides (HHS 10%, NIH/CDC 5%), agency build‑outs (CROB, DOT, DOJ), and USDA/EPA rule enforcement.
Savings: Justice system savings estimated from reduced prosecutions/incarceration post‑expungement and decline in cannabis‑only enforcement.
Sensitivity: Stress‑tested wholesale size, compliance capture, secondary taxes, and cost overruns to reflect uncertainty in early years.

Net fiscal effect: Material federal surplus with built‑in healthcare, rural, and veterans’ funding; strong transparency and review guardrails minimize risk of drift or capture.
Policy trade‑offs: Keeping the excise moderate and reviewing rates every five years protects against black‑market resurgence while sustaining public health funding.