State Coffers Reap The Benefits Of Legalizing Cannabis

A report released by the Marijuana Policy Project shows that states that have legalized marijuana have taken in more than $10 billion in cannabis tax revenue since 2014. Those tax dollars are funding various programs. The $10 billion doesn’t include taxes from numerous other states with legal, medical marijuana sales.

Legalized cannabis has been a boon for many state budgets. During the fiscal year 2020-2021, California officials estimate the state collected approximately $817 million in adult-use marijuana tax revenue – a 55% increase over the revenue from the previous fiscal year. In Illinois, cannabis tax dollars generated almost $100 million more revenue from adult-use marijuana sales than from alcohol in 2021. In many cases, that newfound tax income from the state’s bong toking patrons goes toward needed public services and programs. States can reinvest in communities devastated by the “War On Drugs.”

The report highlights where some of this tax windfall is going in several states: 

• Alaska – half the revenue from adult-use cannabis sales goes to the Recidivism Reduction Fund, which supports reentry programs for incarcerated individuals.
• California – more than $100 million is distributed to local nonprofit organizations and community groups benefiting people adversely impacted by punitive drug laws and the effects of the “War On Drugs.” 
• Colorado – More than $470 million of cannabis tax revenue supports the state’s public school system.
• Illinois – 20% of the adult-use marijuana tax revenue goes to mental health services, as well as local organizations “developing programs that benefit disadvantaged communities.” State officials put $3.5 million in cannabis-generated funds to reduce violence through street intervention programs. 25% of the funds are directed to the Recover, Reinvest, and Renew Program, developing programs that benefit disadvantaged communities.
• Michigan – approximately $11.6 million in cannabis tax funds will be sent to the School Aid Fund for K-12 education.
• Washington – $600 million out of every $1 billion in cannabis sales tax revenue is invested into public health initiatives, including a fund providing health insurance for low-income families.

“This is in stark contrast to prohibition, which costs taxpayers billions of dollars each year to enforce,” said Karen O’Keefe, director of state policies at Marijuana Policy Project.

After an extended pandemic-driven economic downturn, the tax windfall couldn’t come at a better time. 

“We’ll have some long-lasting consequences of the pandemic, and [states] need to make money up somewhere,” said Mikhail Foux, head of municipal strategy at Barclays. 

While marijuana tax revenue might not be a panacea for state and local governments, it’s clear that its reaping benefits far beyond anything anyone anticipated when Colorado and Washington first legalized recreational-use marijuana in 2012.