States that have legalized recreational cannabis collected over $15 billion in tax revenues between 2014 and 2022, according to a report by the Marijuana Policy Project (MPP). However, experts note a decrease in tax revenues in 2022 owing to the impact of COVID-19. Despite this recent drop, new markets are expected to mature in the coming years, and tax revenues are expected to increase.
According to a new report released Monday by the Marijuana Policy Project (MPP), from 2014 to 2022, states that legalized cannabis for recreational use collected a total of more than $15 billion in tax revenues from adult-use cannabis sales.
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Covid Dealt a Hit to Cannabis Tax Revenues
However, while legalized states received about $3.8 billion in cannabis taxes in 2022, this was the first year that revenues were lower than the previous year. Experts attribute this to a “multitude of factors,” such as COVID-19-related policies and current trends.
In 2022, tax revenues were nearly $100 million lower than in 2021, although last year, more states, such as New Jersey and New Mexico, launched their recreational markets, which in theory, should lead to higher tax revenues.
States where cannabis legalization is relatively new saw higher tax revenues, but the six states with the most established markets saw declines that offset those gains.
State-by-State Cannabis Tax Revenues
State-by-state cannabis tax revenues over the years
Here is a breakdown of tax revenues for each state in 2022 and for the country as a whole year by year, according to a report published by the Marijuana Policy Project:
Table with tax revenues from 2014-2022 for all states:
Tax Revenues Bring Benefits to States
Toi Hutchinson, president and CEO of MPP, said that states that have implemented legalization “benefit from hundreds of millions of dollars in tax revenue each year.” These new revenue streams help fund important social services and programs across the country, such as education, treatment for alcoholism and drug addiction, support for veterans, job training, and reinvestment in communities that have been disproportionately affected by the war on drugs. “States that fall behind not only harm their citizens but also lose potential revenue,” – Hutchinson added.
The new report only considers revenue from recreational cannabis and does not take into account sales conducted through separate medical cannabis programs in each state.
Growing Tax Revenues in the Future
As new markets mature – and with states such as Delaware and Maryland also about to launch legal cannabis markets following the recent end of prohibition – tax revenues are expected to grow in the coming years.
States that have yet to legalize adult-use cannabis are seeing record cannabis sales as more businesses get licenses and consumers move into the regulated sector.
In March, for example, cannabis sales in Michigan reached a record high, with nearly $250 million in combined recreational and medical cannabis purchases, according to state regulators.
Also in March, the state of Connecticut reported a record $22 million from combined recreational and medical cannabis sales.
In Missouri, cannabis sales reached a record $126 million that same month, the second month since adult-use cannabis stores opened after voters approved legalization on the November ballot.
New Mexico’s governor recently marked the first anniversary of the adult-use cannabis market in his state, boasting more than $300 million in sales since last April and thousands of jobs created by the cannabis industry.
In Arizona, total adult-use cannabis sales reached $1.4 billion in 2022.
In Massachusetts, the recreational market officially surpassed $4 billion in sales in January after launching in 2018.
On the other hand, a Wisconsin senator recently released a legislative analysis that showed how much money in tax revenues her state lost to Illinois last year when Wisconsin residents with an unregulated market crossed the line and spent more than $121 million on cannabis.
Despite a decline in adult-use cannabis tax revenues in 2022, revenues are expected to increase in the future as new markets mature, and more states end prohibition. In the meantime, states that have legalized cannabis continue to reap financial benefits that help support various social programs and services. States that have not yet decided to legalize risk losing potential revenue and opportunities to improve the lives of their citizens.
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