Over the past few years, there has been a lot of talk about the legalization of marijuana and how it would affect our economy. Some numbers point to the reduction of government costs on prison sentences, while others point to taxation and additional revenue streams. Some people think that the federal government is wasting resources by keeping the drug at a Schedule I level, and prosecuting those caught with it. Other people think that legalizing it would be like baking the economy and letting it rise.
According to Forbes, the IRS has been at the forefront of the crackdown on medicinal marijuana dispensaries, but not because they’ve been baking their books; they’ve actually been paying their taxes. It’s because of a federal targeting effort to shut down the industry.
Even state and local governments disagree with the attack, though. The legalization of marijuana can open up the possibility to regulate it. That regulation implies the opportunity to tax the drug, and it also makes law enforcement easier. The localization of the growing process can help to weed out drug dealers, gangs and cartels as well.
If the economy can benefit from it, the government can save and make money from it, and consumers can enjoy it, it might be high time to end the prohibition on marijuana. Maybe we should let the industry catch fire legally and let it blaze.
On the other hand, the legalization of marijuana may make it more difficult for prisons to meet their prisoner quota.
Business Section: Investing Idea
The prison cost argument is a large one for marijuana legalization, so how would prison stocks be affected?
Interestingly, the argument goes both ways, since many are private institutions reliant of a certain level of crime to remain profitable. Meanwhile, lesser crime would benefit the taxpayers.
Below are a couple of prison stocks that might see some movement if the legalization were to happen. How do you think they would respond?
Read more on Marijuana reform here.
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1. Corrections Corporation of America (CXW, Earnings, Analysts, Financials): Operates privatized correctional and detention facilities in the United States. The Company specializes in owning, operating, and managing prisons and other correctional facilities and providing inmate residential and prisoner transportation services for governmental agencies. Its facilities offer a range of rehabilitation and educational programs, including basic education, religious services, life skills and employment training, and substance abuse treatment. Market cap at $3.14B.
2. The GEO Group, Inc. (GEO, Earnings, Analysts, Financials): Provides government-outsourced services specializing in the management of correctional, detention, and mental health and residential treatment facilities in the United States, Australia, South Africa, and the United Kingdom. It operates a range of correctional and detention facilities, including maximum, medium and minimum security prisons, immigration detention centers, minimum security detention centers, mental health, residential treatment and community-based, re-entry facilities. It offers counseling, education and/or treatment to inmates with alcohol and drug abuse problems at most of the domestic facilities, which it manages. It also provides secure transportation services for offender and detainee populations as contracted. Market cap at $1.27B.
(Written by Danny Guttridge)
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