Most states that have legalized marijuana for recreational consumption now take in more tax revenue from pot sales than from alcohol sales, according to a new analysis.
The report, from the Institute on Taxation and Economic Policy, found the 11 states where marijuana is legal pulled in just shy of $3 billion in excise taxes on pot in 2021, compared with about $2.5 billion they made on alcohol excise taxes or liquor store profits.
California’s fast-growing legal marijuana market generated $832 million in excise taxes, about twice as much as from alcohol sales. Marijuana revenues in Colorado generated $396 million for the state, almost eight times as much as alcohol taxes.
Marijuana taxes eclipsed alcohol taxes in Illinois, Massachusetts, Washington, Arizona and Nevada, as well. Alcohol still counts for more state revenue than marijuana in Michigan, where pot sales have only recently come online, as well as Oregon, Maine and Alaska.
“This is still a small part of state budgets, but it’s a very quickly growing area. There aren’t many revenue sources that grow year over year. This has been a several-year trend now,” said Carl Davis, one of the authors of the ITEP study. “The early states, what you see is revenue start low and grow very, very quickly.”
In the two states with the most established legal marijuana markets, Colorado and Washington — where voters approved legalization schemes in 2012 — tax revenues from marijuana eclipse even tobacco tax revenue, the most lucrative of the so-called sin taxes states levy.
For now, in most of the rest of the legalization states, tobacco taxes remain paramount. Tobacco excise taxes account for more than double the pot tax revenues in California, Illinois, Michigan, Massachusetts, Oregon, Arizona, Maine and Alaska.
Davis said he expected other states to see marijuana eclipse tobacco as a source of tax revenue in the coming years. Most states already tax tobacco products at much higher rates than marijuana, and smoking rates have declined for decades.
To Read The Rest Of This Article By Reid Wilson on The Hill
Published: April 25, 2022
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