The Marijuana Policy Project (MPP) unveiled a study on May 1 containing data on cannabis tax revenues generated by states that have legalized the substance. The report reveals that, between 2014 and the close of 2022, states amassed over $15.1 billion in tax revenue.
MPP President and CEO Toi Hutchinson highlighted the substantial benefits enjoyed by states that have legalized cannabis sales. “States opting to legalize and regulate cannabis reap the rewards of hundreds of millions in tax revenue each year,” Hutchinson said in a press statement. “These newfound revenue streams are financing essential social services and initiatives nationwide, including education, substance abuse treatment, veterans’ services, job training, and reinvestment in communities disproportionately affected by the war on cannabis. States that delay will not only let down their residents—they will also miss out on valuable income.”
In 2022 alone, tax revenues surpassed $3.77 billion, marking the first year that overall state cannabis tax revenues fell compared to 2021, which saw $3.86 billion. Despite a reduction in tax revenue from established cannabis states and an increase from newer ones, MPP points out that the figures are impacted by pandemic-related sales comparisons. “It’s crucial to recognize that while 2022 numbers were lower than 2021 in more mature markets, they remained higher than any pre-COVID year for each state.”
MPP referenced Vicente LLP Director of Economics and Research Andrew Livingston, who expounded on the surge in cannabis demand during the pandemic. “Although 2022 cannabis taxes are down in some established markets compared to 2021, it’s crucial to understand how COVID-19 and ensuing lockdown measures boosted cannabis demand,” Livingston said. “People couldn’t spend money on concerts, dining out, or vacations. As a result, many increased their consumption of consumer packaged goods. Cannabis was a product that could still be bought and made the challenge of staying home for months, watching TV shows and movies, somewhat more bearable.”
MPP’s tax revenue analysis provides individual 2022 tax revenue figures for 16 states. Among the highest amounts were California ($1,074,560,287), Illinois ($562,119,019), Washington ($529,443,420), Michigan ($326,049,074), and Colorado ($305,034,034). At the lower end were states such as Rhode Island ($579,439), Vermont ($2,363,000), New Jersey ($20,139,655), Maine ($25,329,534), New Mexico ($36,684,235), and Montana ($41,989,466).
The study also offers a year-by-year summary of total tax revenue collected. In 2014, tax revenue reached $68,503,980, and 2018 marked the first year that cannabis tax revenue exceeded a billion dollars at $1,308,693,928. Amid the pandemic, tax revenue skyrocketed to $2,814,837,199 in 2020, $3,866,974,690 in 2021, and dipped slightly to $3,774,783,548 in 2022.
Although cannabis tax revenue is at a record high, the issue of taxes has long been a worry for consumers and business owners. Most recently, on April 17, Oregon Rep. Earl Blumenauer introduced the Small Business Tax Equity Act, legislation that would enable cannabis businesses to comply with state laws by creating an exemption to Internal Revenue Code Section 280e.
“State-legal cannabis businesses are denied equal treatment under 280E. They cannot fully deduct the cost of doing business, which means they pay two or three times as much as a comparable non-cannabis business,” Blumenauer stated. “This egregiously unfair treatment encourages people to take shortcuts.
