Yale Budget Lab Outlines Multibillion Dollar Future for Federal Cannabis

NEW HAVEN – The fiscal argument for federal Cannabis legalization now has an academic backbone. Yale University’s Budget Lab released a comprehensive revenue analysis mapping out what a federal excise tax on Cannabis could realistically generate, and the range of variables that could push that figure considerably higher.

According to the report, federal legalization paired with a potency-based excise tax of $0.00625 per milligram of THC would yield $57.9 billion in new federal revenue over ten years. If all remaining states were also to legalize, the ten-year total climbs to $111.3 billion. Both scenarios assume a January 1, 2027 enactment date.

The proposed rate would add $1.31 to the cost of a gram of Cannabis, roughly a 15% increase in the tax-inclusive price at an average retail price of $8.59 per gram. Researchers structured the levy around THC content rather than retail price, mirroring the design of existing federal excise taxes on alcohol and tobacco.

The Budget Lab frames its projections with explicit caution, noting an “unusual degree of uncertainty” given the “complicated legal context” of the current federal-state patchwork. Central to that uncertainty is how much illicit activity would convert to the regulated market following legalization. Data from Whitney Economics, cited in the report, places the combined U.S. Cannabis market at roughly $100 billion, with an estimated 75% remaining outside the formal sector. California alone seized more than $534 million in illegal Cannabis in 2024 [$609 million worth of illicit Cannabis throughout 2025] – a figure the analysis uses to illustrate the scale of the underground market that federal legalization could pull toward compliance.

The $57.9 billion projection also excludes income and payroll taxes that would flow once Cannabis workers and owner-operators enter the formal tax system. Lifting Section 280E, carrying its own additive fiscal effect, also excluded from the base calculations. The Budget Lab categorizes both among the upside factors the headline figure does not capture, meaning the projection is conservative by design.

The broader policy backdrop adds context. A December 2025 executive order directed the administration to complete Cannabis rescheduling, and on April 23, 2026, the Department of Justice placed FDA-approved Cannabis products and state-licensed medical Cannabis into Schedule III, initiating administrative hearings that commenced June 29. Full congressional legalization remains a separate legislative threshold that rescheduling alone cannot clear.

For scale, a recent Census Bureau report tracked nearly $15 billion in state-level Cannabis tax collections over the past five years, while the Marijuana Policy Project (MPP) puts the cumulative recreational total at more than $28.4 billion across all markets going back to the first regulated sales.

The Yale analysis offers something no advocacy document can – an institution-backed revenue estimate tied to a specific tax mechanism at a moment when federal rescheduling proceedings are active and the political context remains in flux. The $57.9 billion figure [conservative by the report’s own acknowledgment] gives legislators and institutional investors a quantifiable fiscal anchor. For operators in a sector that recorded its first annual revenue decline in 2025, a federal framework that formalizes illicit market conversion and lifts the 280E burden could materially reframe the investment thesis in ways that current pricing compression alone does not yet reflect.