A healthy $7.9 billion in new tax revenue has been generated by the adult-use cannabis market in the United States. 

This is according to a recent analysis carried out by the Marijuana Policy Project (MPP) into the economic impact(s) that state-authorized sales of cannabis products have had on the financial system.

“As of May 2021, states reported a combined total of $7.9 billion in tax revenue from legal, adult-use [cannabis] sales,” reads an excerpt from the MPP report into cannabis tax revenue in the U.S.

“In addition to revenue generated for statewide budgets, cities and towns have also generated hundreds of thousands of dollars in new revenue from local adult-use cannabis taxes.”

Legal cannabis market’s influence on tax revenue: Sweeping legislation offers a new revenue stream

Since legal cannabis sales kick-started in Colorado and Washington in 2014 – both states passed legalization in 2012 – adult-use tax revenue policies have provided an abundant budget-amplifying revenue stream. Moreover, tax revenue creates a valuable nest egg that helps to support essential local programs and services.

“Legalizing [cannabis] for adults has been a wise investment,” wrote the authors of the MPP report into the legal cannabis market’s influence on tax revenue. 

The use of cannabis tax revenue depends on the state in which it is accrued. However, in most cases, states and local governments will utilize the funds to afford legalization-associated administrative costs, law enforcement, education, drug treatment programs, public safety, local governments, and expungement and resentencing efforts.

So far, 36 states and four territories have legalized cannabis for medical purposes, whereas 17 states, two territories and the District of Columbia have legalized the green plant for recreational purposes.

Legal cannabis market’s influence on tax revenue: Numerous U.S. states are analyzed in report

The MPP’s report into cannabis tax revenue in the U.S. highlights a handful of well-established markets: Alaska, California, Colorado, Illinois, Maine, Massachusetts, Michigan, Nevada, Oregon, and Washington.

For every state in which sales revenue data was available, estimated tax revenues appear to have soared year-over-year (YoY) since legalization was enacted. 

In order to assess each cannabis market’s impact on tax revenue, MPP analysts reviewed the adult-use cannabis tax structure, revenue earned through legalization and population in each featured state.

It’s important to note that the findings do not include medical cannabis tax revenue, nor does the report highlight additional income taxes generated by industry workers, federal government-focused corporate taxes, and application and licensing fees funded by cannabis businesses.

Colorado stands out as a promising state for generating cannabis sales tax revenue 

An initiative to regulate cannabis for adults was passed in Colorado back in November 2012. Less than two years later, on January 1, 2014, the state made U.S. history as the first to launch a legal adult-use sales market. Many existing medical cannabis businesses transitioned to serve the recreational market.

With an adult-use cannabis market that is resilient, diverse and ever-expanding, it comes as no surprise that Colorado had generated a whopping $404.5 million in cannabis tax revenue to enhance the state’s public school system as of April 2021.

A 15 percent wholesale excise tax and a 15 percent special retail tax applies to adult-use cannabis sales in Colorado; these taxes are not applied to medical sales.

You can see a full overview of each state’s cannabis tax revenues by clicking here.