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Border Economics: How Tennessee's Neighbors Are Profiting from Legal Cannabis While Tennessee Pays to Enforce Prohibition

 


Border Economics: How Tennessee's Neighbors Are Profiting from Legal Cannabis While Tennessee Pays to Enforce Prohibition

A Comparative Analysis of Cannabis Tax Revenue in Surrounding States

While Illinois collected nearly $500 million in cannabis tax revenue in 2024, Tennessee spent millions arresting and incarcerating people for marijuana possession. Both states have similar populations. One is funding schools and community programs; the other is funding jails.

This is the story of an economic choice — and what Tennessee is giving up by maintaining prohibition while its neighbors capitalize on legalization.

The Numbers: What Tennessee's Neighbors Are Earning

Illinois: The Border State Boom

Just across Tennessee's northwestern border, Illinois has built one of the nation's most successful cannabis markets since legalizing recreational use in 2020.

2024 Performance:

  • Total cannabis sales: $2 billion
  • Tax revenue generated: nearly $500 million
  • Products sold: over 56.3 million items

Since legalization, Illinois has generated more than $2 billion in cumulative cannabis tax revenue, funding education, community reinvestment, substance abuse treatment, and veterans’ services.

Missouri: The Show-Me State Shows Results

Missouri shares Tennessee’s demographics and political leanings — but chose a different path.

2024 Performance:

  • Total marijuana sales: $1.46 billion
  • Total tax revenue: $244.93 million
  • Employment: Over 21,800 cannabis industry jobs

Missouri exceeded four-year projections in just two years. Revenue is split between veterans’ services, substance abuse prevention, and the public defender system.

Arkansas: Medical Market, Real Revenue

Even without recreational legalization, Arkansas demonstrates the economic potential of cannabis reform.

2024 Performance:

  • Total medical sales: $275.9 million
  • State tax revenue: $31+ million
  • Active patients: ~109,000

Most revenue funds cancer research through the University of Arkansas for Medical Sciences.

Virginia: The Complicated Case

Virginia legalized possession but not retail sales, creating a $2.4 billion black market with minimal tax revenue.

Analysts estimate a regulated adult-use market could generate hundreds of millions annually — revenue currently lost to illegal markets.

Tennessee's Enforcement Costs: The Other Side of the Ledger

Tennessee recorded more than 11,000 marijuana possession arrests in 2024.

  • Up to one year in jail for first-time possession
  • 37% of all drug arrests were marijuana-related
  • Black Tennesseans arrested 3.2× more often than white residents

These arrests come with direct costs (policing, courts, incarceration) and indirect costs (lost productivity, long-term economic harm).

The Opportunity Cost: What Could Tennessee Buy?

Conservative estimates suggest legalization could generate $130–150 million annually.

That could fund:

  • Tuition for 12,500 community college students
  • Highway repairs and infrastructure
  • Rural healthcare expansion
  • Addiction treatment programs
  • Veterans’ services

The Geographic Reality: Tennessee as an Island

Six of Tennessee’s eight border states have comprehensive medical cannabis laws. One — Missouri — has full recreational legalization.

Tennessee is now a regional outlier.

Cross-Border Commerce: Where Do Tennesseans Go?

  • Illinois: 19% of cannabis sales from out-of-state consumers
  • Missouri: Border dispensaries thriving
  • Medical states: Temporary residency loopholes

Tennesseans already spend cannabis dollars — just not at home.

The Economic Multiplier Effect

Legal cannabis markets generate:

  • Tens of thousands of jobs
  • Ancillary business growth
  • Commercial real estate development
  • Tourism spending

Comparing Tax Structures: Lessons for Tennessee

  • Illinois: High tax, high revenue, some market leakage
  • Missouri: Moderate tax, strong growth
  • Arkansas: Medical-only, steady revenue

A moderate tax model (10–15%) could optimize revenue while minimizing black market activity.

The Social Equity Argument

Neighboring states have paired legalization with expungement and reinvestment.

  • Illinois reinvests 30% of revenue in impacted communities
  • Missouri expunged 130,000 nonviolent convictions

Tennessee continues to enforce laws with disproportionate racial impact.

What the Data Shows: Legalization Works

  • Fewer arrests
  • Stable youth usage
  • Improved public safety
  • Billions in economic activity

Conclusion: The Choice Before Tennessee

Option A: Prohibition — arrests, costs, zero revenue.

Option B: Regulation — revenue, jobs, safety, reform.

The border economics are simple:
One side of the line funds schools. The other side funds jails.

This article is for educational purposes only and reflects publicly available data as of 2025.

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