One of the key drivers of cannabis legalization is tax revenue. States that adopt medical and recreational marijuana programs tend to experience an influx of tax revenue. Colorado is a prime example. The state has collected $1.6 billion in marijuana sales taxes and fee revenue from 2015 to 2021. Now, the U.S. is catching up and nationwide cannabis tax revenue has exceeded $10 billion.
In some places, marijuana taxes are even higher than taxes collected from alcohol. Here are the details.
Cannabis sale growth slowed in 2021, but capital is up.
After a record-high year for marijuana sales in 2020, sales growth slumped last year. In 2020, marijuana sales in California, Colorado, Nevada, Oregon, and Washington jumped 39.2 percent.
In the second pandemic year, 2021, year-over-year sales growth in the same states was much lower at 15.9 percent.
Still, five states—Alabama, Connecticut, New Mexico, New York, and Virginia—opened new markets in 2021. Meanwhile, cannabis companies raised more than $12.7 billion in capital over the course of the year, which was is a 60-percent jump from just three years prior.
The increased tax revenue that comes from this should put a smiley face on lawmakers’ demeanors (cue the Anna Faris movie reference).
The tax revenue from cannabis surpassed $10 billion.
A Marijuana Policy Project (MPP) report says that U.S. states have generated a collective $10.4 billion in tax revenue. Some states have yet to report sales data from the last 1–3 months of 2021. However, the $10.4 billion reported accounts for all sales since 2014, when Colorado and Washington first started cannabis sales.
Cannabis sales are projected to keep growing over the next few years as states start or pursue new medical and recreational programs.
Karen O’Keefe, the director of state policies at the MPP, said, “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. This is in stark contrast to prohibition, which costs taxpayers billions of dollars each year to enforce.”
Marijuana excise taxes exceeded alcohol in Massachusetts.
In Massachusetts, where cannabis is recreationally legal, cannabis excise taxes exceeded alcohol excise taxes in 2021.
Massachusetts levies excise taxes on both marijuana and alcohol at a rate of 10.75 percent. This is in addition to a state sales tax of 6.25 percent and a local tax of 3 percent.
Halfway through the state’s fiscal year in December 2021, the marijuana excise tax revenue hit $74.2 million. At the same time, alcohol excise tax revenue hit $51.3 million.
This is the first time alcohol excise taxes fell below cannabis in Massachusetts and it’s a big difference. Plus, excise taxes are only about half of the taxes collected on cannabis sales. So, you can imagine how much of a difference cannabis sales are making in the state.
Legal marijuana sales are expected to keep growing steadily in the U.S. Experts project $25.1 billion in sales in 2025—up from about $14.9 billion in 2021. Naturally, tax revenue is poised to follow suit.