U.S. States Collected $3.7 Billion In Tax Revenue in 2021
- So far, 18 U.S. states have legalized the adult recreational use of marijuana. This is even though marijuana remains illegal under federal drug laws.
- A recent report claims that states that have legalized marijuana for adult use collectively generated more than $3.7 billion in tax revenue in 2021.
- Cannabis sales taxes have surpassed alcohol taxes in several states that have legalized marijuana.
- Continue reading to see where all that money is going.
Marijuana Policy Project
A recent report by Marijuana Policy Project claims that in the 18 states where marijuana has been legalized, the combined tax revenue from marijuana sales surpassed $3.7 billion in 2021. That’s a 34% increase over the year prior. All totaled, marijuana tax revenue between 2014 and March 2022 is more than $11 billion.
Leading the pack was California which collected more than $1 billion in marijuana sales tax in 2021. That’s up more than 50% from the prior fiscal year. Washington State is in second place at $630 million. And Illinois pulled in more than $400 million. Michigan collected more than $200 million and Colorado rounded out the top five generating nearly $178 million in marijuana taxes.
Toi Hutchinson, president and CEO of MPP, commented on the report:
“The legalization and regulation of cannabis for adults has generated billions of dollars in tax revenue, funded important services and programs at the state level, and created thousands of jobs across the country. Meanwhile, the states that lag behind continue to waste government resources on enforcing archaic cannabis laws that harm far too many Americans.”
It’s also important to point out that eight of the 18 states only legalized marijuana in 2020 or 2021. Furthermore, six of the states have not yet begun collecting sales tax.
These figures don’t include states where only medical marijuana has been legalized. This also does not include income taxes or corporate taxes paid by the cannabis industry to either state governments or the federal government, nor does it take into account the vast sums of money spent enforcing marijuana laws.
“In 2022, you can still lose your job, you can still lose your children in a custody battle, you can still be in a situation where you can’t apply for a student loan or sign a lease. There are all kinds of negative consequences for millions of people that today are still living under prohibition.” ~ Marijuana Policy Project
Sales taxes from marijuana surpassed alcohol
Another report by the Institute on Taxation and Economic Policy claims that marijuana sales taxes have surpassed that of alcohol in 11 U.S. states where marijuana has been legalized including Illinois, Massachusetts, Washington, Arizona, and, amazingly, Nevada.
- Combined, the 11 states collected $2.9 billion in cannabis taxes in 2021 compared to about $2.4 billion from alcohol.
- Moreover, the combined $3 billion in tax revenue is a 33% increase over 2020.
- In Colorado, $396 million in cannabis taxes were collected in 2021 while only $53 million in alcohol taxes were collected. And in California, the state saw $832 million in tax revenue, more than twice as much as from alcohol.
- Massachusetts said in January that the state took in $51.3 million from alcohol taxes and $74.2 million from cannabis halfway through its fiscal year.
- In Illinois, the state collected about $100 million more from adult-use marijuana than alcohol over the course of 2021.
Also, Arizona recently reported that with marijuana now legalized, liquor taxes are down 26.4% compared to 2021. Moreover, marijuana tax revenues are also slowly catching up to tobacco taxes according to the report.
Where’s all that marijuana tax money going?
Some of the programs on which marijuana tax revenues are being spent include:
- Michigan announced last month that the state will be dividing nearly $150 million in marijuana tax revenue between cities, schools, and a transportation fund.
- Illinois has allotted cannabis tax revenue to mental health services and local organizations “developing programs that benefit disadvantaged communities,” including $3.5 million into efforts to reduce violence.
- In June 2021, California awarded about $29 million in grants for projects related to social justice initiatives.
- Colorado earmarked $500 million in cannabis taxes for its public school systems.
- California uses marijuana tax revenue to fund drug education programs aimed at young people.
- Oregon applies its revenue to schools, police, and mental health treatment.
- Illinois dedicates 20% of its cannabis tax revenue to initiatives related to substance abuse and mental health.
- Washington has allotted a portion of its marijuana tax revenue to support public health programs and local governments.
- In Missouri, after operating expenses for the medical marijuana program are covered, the rest goes to the Veterans Commission for veterans’ services.
What effect might federal legalization have on marijuana taxes?
If the federal government were to end the federal prohibition of marijuana, prices at dispensaries nationwide would probably fall. While a federal cannabis tax would be a windfall for the federal government, in states that collect cannabis taxes at the cash register, there would likely be a drop in cannabis taxes.
Could it happen? The U.S. House of Representatives recently passed the Marijuana Opportunity Reinvestment and Expungement Act, a bill that would remove marijuana from the DEA’s list of controlled substances. Although the majority of Americans are in favor of ending prohibition, the chances of the bill passing the Senate are slim.
A recent poll showed that 69% of Americans are in favor of ending prohibition while a staggering 92% said they were in favor of medical marijuana. Also, 58% of Americans agree that marijuana is less harmful than alcohol.
Paul Armentano, deputy director of NORML, had this to say about the survey:
“Voters support legalizing marijuana regardless of political party affiliation. At a time when national politics remain acutely polarized, elected officials ought to come together in a bipartisan manner to repeal the failed policy of cannabis prohibition. It is one of the few policy reforms that voters on the right and on the left can all agree upon.”
With this kind of support, advocates expect efforts to legalize marijuana in the U.S. to continue and eventually succeed.
Medical Marijuana Links:
Sources and additional reading:
- Cannabis Tax Revenue in States that Regulate Cannabis for Adult Use
- Pot Taxes Giving Some States a Revenue High
- Cannabis Taxes Outraised Alcohol by 20 Percent in States with Legal Sales Last Year
- Cannabis News Week: Cannabis ‘Sin Tax’ Revenue Greater Than Alcohol
- Arizona cannabis sales generate 3x the tax revenue of alcohol and tobacco combined
- How Do States Use Marijuana Tax Money?
- Canna-billions: How states are using pot tax revenue
- Seven In Ten Americans Back Marijuana Legalization, With Majorities Embracing Pro-Reform Politicians, Two New Polls Find