Massachusetts recently revealed that it generated more tax revenue from the cannabis industry than its alcohol sector. The state made $74 million in 2020-2021, which is quite significant compared to the $55 million realized from the alcohol industry. The generated revenues were only from the excise taxes on products and didn’t include the sales tax. Massachusetts has legalized medicinal and recreational marijuana, permitting anyone 21 years and above to possess or consume cannabis.
Since the legalization of recreational cannabis in November 2018, operators in the state have managed to attain more than $2.5 billion through selling cannabis accessories and other marijuana products. The generated revenue supports various projects in the state, including improving the living conditions of residents living in disadvantaged communities.
The current tax rate is 3% for local tax, 6.25% standard sales tax, and a state-mandated excise tax of 10.95%. Apart from the $74 million generated from excise tax, the cannabis sector had over $200 million produced in other taxes during the same fiscal year. An influx of marijuana users largely contributed to the high value during the pandemic in 2020. Vivien Azer, a senior Wall Street research analyst, noted that the shift in attitudes towards the cannabis plant contributed to the growth in the industry.
States that have legalized recreational cannabis have recorded significant economic growth and increased employment opportunities. In general, the boom has been reflected not only in cannabis dispensaries but also in large organizations. The sector has witnessed a surge in Mergers and Acquisitions (M&A) of large corporations in recent times. The unveiling of Grand Cannabis Co, a joint venture between Copperstate Farms Management and Health Lifestyle Brands LLC, is an example of the numerous M&As that have become quite common in the industry. The cannabis sector in the U.S. is expected to reach $45.8 billion in 2025.
Considering that the sector’s growth is happening despite federal restrictions, the industry will reach its full potential once cannabis becomes legal at the federal level. Still, the reforms that are happening at the state level, particularly regarding adult-use cannabis, play a significant role in the sector. According to Marijuana Policy Project, the states that have legalized adult-use cannabis reported a combined tax revenue of at least $10 billion since it was legalized in 2014.
Although relatively new, the marijuana industry has rapidly grown to outperform various sectors. States such as California and Colorado, which legalized adult-use cannabis over five years ago, have made billion in taxes. Regulators in these states have supported various meaningful projects from the generated revenue. Similarly, Illinois made the headlines recently after it generated high returns from its cannabis sector. The state collected approximately $100 million in recreational marijuana tax revenue. Regulators allocated the money towards mental health services and elevating the lives of residents who come from disadvantaged communities.
Most regulators channel a good portion of the marijuana revenue to developing communities. For instance, cannabis tax revenue in California funded $28 million in grants. This benefited 59 non-profit groups in the state, which helped reverse the negative impacts of the war on drugs in the affected communities. California generated $817 million from marijuana tax revenue in 2020-2021. This is an increase of 54% compared to the previous fiscal year.
Colorado is yet another state making strides in the marijuana sector. The state has generated over $1 billion in marijuana revenue since operating. Almost half of the revenue has been allocated to Colorado’s public school sector. Last year, the cannabis tax revenue in the state surpassed $400 million, a colossal figure.
While the revenue earned from the cannabis industry has outperformed that of alcohol in Massachusetts, it’s important to note that marijuana products are currently subjected to higher taxes. The disparity in taxes has caused various lawmakers to seek measures to help even the playing field. Thus, various marijuana organizations have instituted changes in the way the cannabis industry is being regulated.
The organization, Regulate Marijuana Like Alcohol, seeks to transform cannabis laws in Ohio. One of its primary goals is to motivate legislatures to legalize and regulate adult-use cannabis in the state, similar to how its alcohol sector operates.
The cannabis sector has grown immensely over the past few years. Even though the industry has shown significant potential with record-breaking tax revenue, various states and federal laws have capped its ability to grow. Nevertheless, the future still looks bright for the marijuana industry as multiple legislators and organizations are fighting for reforms in the sector.