Billions of Dollars in Tax Revenue from Cannabis
In the last few years, cannabis has gone from being an illegal drug to a legitimate business in many states. With legalization comes regulation and taxation - which can be very lucrative for governments who are looking to increase revenue. In this article, we'll take a look at some of the latest findings on how much tax revenue is generated by legal cannabis sales in America's major cities and what happens when you smoke weed with edibles.
The recently published research by New Frontier Data estimates that Americans spent $17 billion on cannabis in 2017. That's more than the combined revenue from alcohol ($15 billion) and tobacco ($16 billion). The report also found a correlation between marijuana use, binge drinking and smoking cessation rates - which could indicate an increase of public health issues if legalizing the sale of cannabis does not go as planned.
And if you're wondering how the legalization of marijuana in each state might affect your pocketbook, take a look at this map from Forbes. The article offers an interactive graphic showing what states are most likely to be affected by potential federal tax changes: Colorado is estimated to lose $250 million; California could see losses of over $500 million.
In Colorado, according to the study, there is a 15 percent tax on wholesale and a 15 percent tax rate on special retail marijuana sales. Businesses are also subject to a state flat rate of $0.09 per dry-weight ounce for marijuana flowers, and a flat rate of $0.32 per dry-weight ounce on all other parts of the plant (leaves, stems, roots).
The report estimates that if the United States were to legalize cannabis nationally in 2020 then the government would generate an additional $200 million in revenue from federal taxes.
States that have legalized the sale and use of marijuana to adults are seeing billions of dollars in fresh tax revenue from cannabis sales, according to a new study.
The recently published research found that as of this month, “states reported a combined total of $7.9 billion in tax revenue from legal adult-use marijuana sales,” while “cities and towns have also generated hundreds of thousands of dollars in new revenue from local adult-use cannabis taxes.”
The reported figure includes the states of Colorado and Washington, where voters passed legalization measures in 2012 and where sales began in 2014.
In Colorado, special retail (neither of which apply to sales of medical cannabis in the state) is taxed at a 15% rate. Cannabis has contributed over $1.5 billion in tax revenue to Colorado since 2014, with “$400 million” of that total dedicated to improving public schools. The estimated tax revenue does not include the additional local sales taxes, which have generated significant revenues in places like Denver. The city has already generated a total of more than $210 million as of last month.
One Longmont dispensary, Green Tree Medicinals Longmont | Medical and Recreational Dispensary, is already poised for federal regulation, saying that they have already prepared financial projections and plotted a course for the future when federal taxation takes effect.
In Washington, where there is a 37% imposed on retail since July 2015 and a 6.5% sales tax. Analysis of tax revenue figures show that the Washington state has made $2,568,728,290 in taxes related to cannabis from July 2015 through March 2021, and that total does not include the estimated $167 million generated between July 2014 and March 2021.
“Until July 2015, taxes were quite high — 25% at three points of transfer — making it hard to compete with illegal sales. In addition to changing the tax rate to 37% in 2015, the legislature created a medical endorsement program to which adult-use stores could apply to join,” the report detailed the revenue from cannabis. “In the 2019 and 2020 fiscal years, state officials reported that revenue from the 37% cannabis retail tax outpaced alcohol tax revenue, despite the fact that many more adults consume alcohol than cannabis.4 For every $1 billion in revenue collected from the cannabis sales tax, nearly $600 million is funneled into public health initiatives, including a fund that provides health insurance for low-income families.”
Oregon’s first adult-use marijuana sales began in 2016 and the state has already generated $540,071,765. Research shows that in Alaska, state revenue from marijuana is estimated at $78 million since 2016. The record year came in 2020, when taxes topped $27 million.
“Eighteen states have enacted laws legalizing, taxing, and regulating cannabis for adults 21 and older. Eight of the laws passed in 2020 or 2021, and in seven of those states, licensing and tax collections have not yet begun,” said the report, with a note about “each state’s adult-use cannabis tax structure, population, and revenue from legalization.”
“It does not include medical cannabis tax revenue, application and licensing fees paid by cannabis businesses, additional income taxes generated by workers in the cannabis industry, or corporate taxes paid to the federal government,” noted the report.
You can expect to see billions in tax revenue coming from cannabis legal protections, estimates show.
This study will not be a surprise to people who believe that marijuana can help the economy.
A study by the government found that legalizing marijuana in Texas would bring in more money than before. The study said it would be over 500 million dollars a year.
“A regulated cannabis market would be an economic boon for the Lone Star State,” said the report from Vicente Sederberg LLP. “Hundreds of millions of dollars in new tax revenue and tens of thousands of new jobs would be especially helpful in overcoming the losses stemming from the COVID-19 pandemic. Texas is leaving an enormous amount of money on the table by keeping cannabis illegal.”
Green Tree Medicinals Longmont | Medical and Recreational Dispensary
12626 North 107th Street, Longmont, CO 80504