Cannabis Watch: Cannabis state tax revenue tops $10 billion from legal sales

Sales taxes collected by states with legal cannabis programs totaled $10.4 billion as of December since the adult use market launched in 2014 in Colorado and Washington State, according to a study by The Marijuana Policy Project.

A report released Thursday by the pro-industry group said the $10.4 billion figure includes more than $3 billion in sales tax reported in 2021, thus far.

“States that have legalized cannabis for adults are reaping significant economic benefits,” said Karen O’Keefe, director of state policies at the Marijuana Policy Project.

The tax revenue helps fund education, school construction, early literacy, public libraries, behavioral health, alcohol and drug treatment, veterans’ services, conservation, job training, conviction expungement expenses, and community reinvestment.

“In many instances that revenue is being distributed to much needed public services and programs, including reinvesting in communities that were devastated by the war on drugs,” O’Keefe said. “This is in stark contrast to [cannabis] prohibition, which costs taxpayers billions of dollars each year to enforce.”

Some examples include $471.9 million toward improving the public education system in Colorado and more than $100 million in California for community and non profit groups that help people impacted by drug laws.

In Illinois, cannabis tax revenue has outpaced revenue from liquor taxes. According to data from the state, adult use cannabis generated about $193 million in tax revenue from July through the end of November, compared to about $141.3 million over the same period for liquor sales taxes, which include levies on beer, wine and spirits.

Illinois currently channels 20% of adult use cannabis tax revenue for mental health services as well as 25% of the funds to its Recover, Reinvest and Renew program to support local groups working to benefit disadvantaged communities.

Tommy Mancuso, president and founder of the BAD Investment Co., which invests in cannabis stocks through its B.A.D. ETF BAD, -0.03%, said the tax revenue from legal cannabis is creating an indirect boost for the industry.

When other states see the tax revenue being generated, they may be more likely to approve legal cannabis businesses, which in turn, will grow the size of the business on a state-by-state basis, he said

While states such as Colorado, Washington State and California led the way for legal adult use cannabis sales, many other states such as New Jersey, New York, Michigan, Montana and Oklahoma continue to ramp up their adult use or medical programs.

Illinois has been struggling with unfunded pension liabilities and other fiscal woes.

“Cannabis and gaming are the two avenue for states to increase revenues,” Mancuso said.

Tax revenue from cannabis may also get fueled by a greater variety of products such as cannabis-infused drinks as well as edibles, along with wider consumer acceptance of such products, he said. As more states launch their programs, it could create an eventual tipping point for legalization on the federal level, he said.

For this and other reasons, Mancuso said he’s set aside 10% of the B.A.D. ETF for cannabis stocks such as Canopy Growth CGC, -0.82%, Aurora Cannabis ACB, +2.09%, Tilray Inc. TLRY, +13.32% and Cronos Group Inc. CRON, -0.51%.

“We think there’s room for growth in the cannabis space,” he said. “It’s still in the early innings. Even though cannabis stocks have been under pressure, we wanted to include them because of the positive long-term outlook.”

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