Published on May 25, 2021
By Kyle Jaeger
States that have legalized marijuana for adult use have collectively generated nearly $8 billion in tax revenue from cannabis since legal sales first began in 2014, according to a new report from the Marijuana Policy Project (MPP).
The analysis examined the tax structure and revenue streams of all 18 states that have legalized recreational cannabis, though sales have not launched yet in seven of those states. Overall, it shows that establishing regulated marijuana markets gives states a steady and generally growing source of revenue that can support various programs and services.
Last year alone, the adult-use states collected $2.7 billion in taxes from cannabis sales. And as more markets come online and others mature, that’s expected to continue to grow.
For example, California took in more than $1 billion in tax revenue from recreational marijuana in 2020—a 62 percent increase from 2019.
Illinois has consistently been breaking monthly cannabis sales records since its program started in January 2020, and if the trend keeps up, it could create upwards of $1 billion in tax revenue this year. For the first time, marijuana taxes outpaced those derived from alcohol in the state last quarter.
The report does not factor in local tax revenue that individual municipalities may impose on cannabis sales, like in Denver where residents pay an additional 5.5 percent tax that has generated hundreds of thousands of dollars for the city.
“Legalizing cannabis for adults has proven to be a wise investment,” Jared Moffat, state campaigns manager at MPP, said in a press release. “Not only are states seeing the benefits of a regulated market and far fewer cannabis-related arrests—they’re benefitting in a direct, economic way, too.”
MPP also broke down different ways that adult-use states are using those tax dollars.
In Colorado, $404.5 million in marijuana tax revenue has supported the state’s public school system. Oregon invests 40 percent of its cannabis revenue to public education, as well as 25 percent to fund mental health and treatment programs. And in California, $100 million in cannabis tax dollars have gone to community groups to help people most impacted by punitive drug laws.
“Before legalization, money from cannabis sales flowed through an underground market that endangered public safety and disrupted communities. But now, we see all across the country that revenue from the legal cannabis industry is supporting schools, health care, and a range of other beneficial public programs,” Moffat said. “It’s no wonder that residents in legalization states overwhelmingly see legalization as a success.”
Reform advocates aren’t the only ones interested in seeing how states are approaching the tax side of marijuana legalization. The U.S. Census Bureau also has plans to begin collecting and compiling data on revenue that states generate from legal cannabis.