It’s been a promising start for the newly legal states that joined pot pioneers in Colorado, Oregon, DC, Washington, and Alaska by passing measures to legalize marijuana in November. Last year, Colorado’s cannabis industry brought in more than $270 million in the first quarter of 2016 alone. We exceeded preliminary estimates, and so did Washington. Now it’s California, Maine, Massachusetts, Arizona and Nevada’s time to shine. As of November, those are the next five states to open up the doors of a recreational marijuana market.
A new analysis from the Tax Foundation found nationwide legalization of marijuana could generate up to $28 billion in tax revenues (federal, state, and local). According to the report, that is:
- $7 billion in federal revenue
- $5.5 billion from business taxes
- $1.5 billion from income, plus payroll taxes
To break that down further, here’s look at the potential prosperity dispensaries can help unlock in each state.
Arizona’s Proposition 205 is a welcome accompaniment to the approved medical marijuana bill passed back in 1996. The 15 percent tax on retail sales, business licensing and state and local taxes will bolster the current tax revenue up to $82 million per year by 2020. That amount will go 50-50 to local jurisdictions for their education and public health programs.
California first approved medical marijuana in 1996 but rejected recreational twice, once in 1972 and again in 2010. The newly successful Proposition 64 ushers the state into the recreational market with an imposed 15 percent tax on retail marijuana sales. They will also tax at the processing and cultivation level, to the tune of $9.25 per ounce on flowers and $2.75 for every ounce. Then comes the state and local sales taxes. The Tax Foundation estimates tax revenues in California will reach $646 million or more, and California has some impressive plans for all that money. The first $25 million raised will go to health and law enforcement related to cannabis legalization, and youth drug education and treatment. A further 40 percent of future revenue will be evenly split between environmental programs, and programs to reduce the incidents of driving under the influence.
Maine Question 1 was passed in November to expand on the medical marijuana bill passed in 1999. With an imposed 10 percent tax on retail sales, the state is estimating $10.7 million per year in tax revenues. Of that, 98 percent will enter a state general fund, with the remaining 2 percent going to local governments.
Massachusetts Question 4 to expand the medical marijuana program that was opened up in 2012. Question 4 proposes a 3.75 percent tax on all cannabis retail sales, plus a state sales tax of 6.25 percent. What will they do with the $50 million per year that those taxes will bring? Some of it will go toward regulating their new market, and the rest will enter a state general fund.
Nevada passed Question 2 in November after rejecting a medical marijuana bill in 2000 and another recreational bill in 2002. The bill proposed a 15 percent tax on wholesale marijuana sales, plus licensing fees, and retail-level state and local sales taxes. The expected revenue from this could be $48 million per year or more, conservatively speaking. Nevada plans to pour that revenue into administration, regulation, and some education funds.
To compare with the states mentioned, Colorado collected $63 million in tax revenue, plus $13 million in licenses and fees during 2014, the pilot year for totally legal adult cannabis use in the state. For more information on how Colorado spends it’s cannabis tax revenue, the Cannabist—a subsidiary of The Denver Post—wrote this piece that breaks the spending down.