The Marijuana Policy Project (MPP) released a report on May 1 with data regarding cannabis tax revenue generated by states with legalization. Between 2014 and the end of 2022, the report shows that states had collected over $15.1 billion in tax revenue.
According to MPP President and CEO Toi Hutchinson, states with legalization are seeing great benefits from cannabis sales. “States that have made the decision to legalize and regulate cannabis are benefiting from hundreds of millions in tax revenue each year,” Hutchinson said in a press release. “These new streams of revenue are helping to fund crucial social services and programs across the country, such as education, alcohol and drug treatment, veterans’ services, job training, and reinvestment in communities that have been disproportionately affected by the war on cannabis. The states that lag behind will not only be doing a disservice to their constituents—they will also be leaving money on the table.”
Tax revenue from 2022 alone showed more than $3.77 billion collected, which was actually the first year that total state cannabis tax revenues decreased in comparison to 2021 with $3.86 billion. Even with seeing mature cannabis states collecting a decreased amount in cannabis tax revenue and newer states collecting an increased amount, MPP notes that the numbers are influenced by sales comparisons from the pandemic. “It is important to note that while ’22 figures were down from ’21 in more mature markets, they were still higher than any year pre-COVID for each state.”
MPP cited Vicente LLP Director of Economics and Research Andrew Livingston, who elaborated on the demand of cannabis during the pandemic. “While 2022 cannabis taxes are lower in some established markets than they were in 2021, it’s important to know how COVID-19 and pandemic initiated lockdown orders increased cannabis demand,” Livingston stated. “People could not spend their money going to concerts, going out to dinner, or vacation travel. So many people increased their consumption of consumer packaged goods. Cannabis was a product that could still be purchased and made the difficulty of staying at home for months on end watching TV shows and movies a bit more enjoyable.”
MPP’s tax revenue report shows the individual 2022 tax revenue for 16 states. Among the highest amounts included California ($1,074,560,287), Illinois ($562,119,019), Washington ($529,443,420), Michigan ($326,049,074), and Colorado ($305,034,034). On the lower end were states including Rhode Island ($579,439), Vermont ($2,363,000), New Jersey ($20,139,655), Maine ($25,329,534), New Mexico ($36,684,235), Montana ($41,989,466).
The report also includes a year-by-year total of collected tax revenue as well. In 2014, tax revenue reached $68,503,980 and 2018 was the first year that cannabis tax revenue passed the million mark at $1,308,693,928. During the pandemic, tax revenue soared to $2,814,837,199 in 2020, $3,866,974,690 in 2021, and dipped slightly to $3,774,783,548 in 2022.
While cannabis tax revenue is at an all-time high, the topic of taxes has long been a concern for consumers and business owners. Most recently on April 17, Oregon Rep. Earl Blumenauer introduced legislation called the Small Business Tax Equity Act which would allow cannabis businesses to remain in compliance with state law by creating an exception 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 similar non-cannabis business,” Blumenauer said. “This grotesquely unfair treatment incentivizes people to cut corners. If Congress wants to get serious about supporting small businesses and ending the illicit cannabis market, it is commonsense that we allow legal cannabis operations to deduct business expenses, just like any other industry.”