With recreational marijuana now legal in as many as 11 states, the masses believe that each of these states is making huge in terms of tax revenue. However, that isn’t really the case; while some states are performing quite well than expected, others have been a huge letdown owing to a variety of reasons like poor licensing process, unnecessary restrictions, etc.
In this post, we’ll have a look at how much tax revenue these legal weed states are generating and the areas where the governments are utilizing these funds:
Alaska legalized recreational marijuana in 2014 and the sales began 2 years later. Although the state made ‘only’ $1.7 million in taxes in 2017, the figure skyrocketed the following year to $10.7 million.
The latter figure is quite impressive considering the fact that Alaska’s population is roughly 737,000.
Notably, half of the cannabis revenue that Alaska collects goes for the Recidivism Reduction Fund, which caters to behavioral health, substance abuse and domestic violence programs for people released from prison. Notably, according to the official state statistics, 2 out of 3 convicts in Alaska eventually return to prison for new violations, with most of those occurring within 6 months of their initial release.
The fourth state to legalize recreational pot in the US has seen amazing growth in tax revenue since 2015, the year the drug was legalized. The state collected a decent $20 million in 2016, followed by $70 million and $82 million in the next two years. In Oregon, the utilization of taxes collected from recreational weed is as follows:
- 40% is allocated to the state’s school fund
- 20% goes to the local government
- 20% is allocated to mental health, alcoholism and drug services
- 15% is the police’s share
- 5% goes to drug-addiction treatment and prevention
Adding this year’s figures, Oregon’s total recreational weed tax comes down to $211 million.
With earnings of just $5.2 million in taxes until now, The Bay State is quite far behind the expected revenue target that it had set for $63 million in June 2018, suggests data from Statista.
The nearly $57 million shortfall can be blamed on the states’ bans on dispensaries in more than 50% of Massachusetts municipalities, and a snail-slow licensing process.
In The Evergreen State, legal pot sales began in 2013 and since then the state government has collected over $586 million in taxes. Considering the recent study which found that Washington is the top cannabis consumer in the world — even ahead of the likes of Amsterdam — the said figure shouldn’t come as a surprise.
Notably, the majority of this revenue comes from a 37% retail tax.
Most of the taxes go toward improving and expanding the state’s healthcare system; the remaining monies are allocated to the State’s General Fund (31%) and substance abuse treatment (10%).
The Silver State shocked enthusiasts and experts alike when it amassed more than 140% — roughly $68 million — than what was predicted in its first year of sales (2017).
This year, however, the state has already made $72 million in recreational weed taxes.
Nevada levies a tax of 15% on wholesale transactions – a portion of which goes toward schools – and 10% on retail sales.
Tax experts had a lot of expectations from the California marijuana market, so much so that the goal was set for $1 billion in 2018. However, only a third of the target was achieved (roughly $345 million).
California, like Massachusetts, has been a victim of a slow-as-a-snail licensing process and bans put by local towns around. Furthermore, the eternal illicit market in California has played spoilsport with the government’s plan.
The black market menace, however, has now got the state government on its toes. As a result, California has launched a large-scale ‘Get #WeedWise’ ad campaign to not only educate consumers about the ill-effects of unregulated cannabis but also warn the illicit groups about the consequences.
With over $1 billion earned in the last 5 years, Colorado is the leader of the pack. Reportedly, the state collected $267 million in tax revenue in 2018 and an additional $112 million as of June 1, 2019.
As far as the distribution of tax revenue is concerned, Amendment 64 sets the first $40 million for building new Colorado schools. Once this is done, the municipalities are free to divide their funds between law enforcement, regulation and general funds.
Here’s a list of the total marijuana tax revenue earned by the above-mentioned seven states since legalization:
- Alaska: $12 million
- Oregon: $211 million
- Massachusetts: $5.2 million
- Washington: $586 million
- Nevada: $210 million
- California: $345 million
- Colorado: $1 billion