Over the past decade, since the establishment of the first regulated adult-use cannabis markets in the United States, cannabis tax revenues have emerged as a significant source of income for state governments nationwide.
A recent study by the Marijuana Policy Project, a nonprofit advocacy group, reveals the financial gains states have enjoyed from legal cannabis. As of the first quarter of 2024, 24 states that impose taxes on adult-use cannabis have amassed a total of $20 billion in tax revenues.
In 2023, tax income from legal cannabis surged to over $4 billion across the country, marking a record high as the industry continues to expand, according to data compiled by MPP.
“The financial advantages of cannabis legalization for state governments, as well as social services and programs, are tremendous,” stated MPP. “Tax and sales revenues in many regulated cannabis markets have surpassed initial projections.”
States in the West, where adult-use markets were first established, lead in revenue generation. Since 2014, Colorado has accumulated $2.4 billion in cannabis-related tax revenues. Similarly, Washington state has garnered over $4.1 billion from cannabis taxes and fees during this period.
The report also highlights that newer adult-use markets in the Midwest and Northeast are claiming larger slices of the revenue pie. In 2023, Illinois earned more than $550 million from cannabis taxes, while Michigan exceeded $470 million.
“Cities and towns have benefitted significantly from new revenues through local adult-use cannabis taxes,” the report indicated.
Many states have allocated portions of the cannabis tax revenues specifically for social equity and community reinvestment initiatives, aiming to address the harms caused by decades of cannabis criminalization. For instance, Illinois dedicates 25% of its cannabis tax revenue to services that assist underserved populations.
Lawmakers in various states also channel marijuana tax funds to enhance public services and infrastructure. For example, in 2023, Nevada allocated over $147 million of its cannabis revenues to support the public education system, as per the report.
This financial growth has further motivated additional states to establish legal adult-use cannabis markets. Delaware and Ohio are set to be the next states joining this trend.
Despite concerns from legalization critics about administrative expenses and possible impacts on youth consumption, the report observes that legal state markets have reduced dangerous illegal sales and allowed law enforcement to concentrate on more severe crimes, with youth consumption rates remaining unchanged.
“In states where cannabis is legalized, there is clarity about the sellers, sales locations, and purchasers, which contrasts the uncertain and often illegal circumstances under which drug cartels operate,” the report concluded.
CHECK THIS: Marijuana Policy Project Report Examines 8 Years of Cannabis Tax Revenue
