Legalizing Marijuana: Impacts on Prison Systems and the Economy

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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 of 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 a boon to the economy.

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 ideas
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 on a certain level of crime to remain profitable. Meanwhile, less crime would benefit the taxpayers and federally run prisons, which are already maxed out.

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? (Click here to access free, interactive tools to analyze these ideas.)

1. Corrections Corporation of America (NYS: CXW) : 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. It has a market cap of $3.14 billion.

2. GEO Group (NYS: GEO) : 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 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. It has a market cap of $1.27 billion.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


 

At the time this article was published Kapitall's Danny Guttridge does not own any of the shares mentioned above. Data sourced from Finviz. Motley Fool newsletter services have recommended buying shares of Corrections Corporation of America. The Motley Fool has a disclosure policy.
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