Cannabis Tax Revenue Hits $15 Billion as States Experience a Dip in 2022: Factors Linked to COVID and Trends
In a groundbreaking report published by the Marijuana Policy Project (MPP) on Monday, it has been revealed that states collectively generated over $15 billion in tax revenue from adult-use marijuana between 2014 and 2022. However, experts point to a variety of factors, including COVID-related policies and evolving trends, as the cause behind the first decline in revenue experienced in 2022. This decline, amounting to nearly $100 million less compared to 2021, is particularly noteworthy considering the introduction of recreational markets in states like New Jersey and New Mexico. The emergence of newer cannabis legalization states did contribute to higher tax revenue levels, but the decline in six states with well-established markets offset those gains.
State-by-State Totals for 2022
- Alaska: $28,649,408
- Arizona: $223,863,799
- California: $1,074,560,287
- Colorado: $305,034,034
- Illinois: $562,119,019
- Maine: $25,329,534
- Massachusetts: $250,710,415
- Michigan: $326,049,074
- Montana: $41,989,466
- Nevada: $196,952,338
- New Jersey: $20,139,655
- New Mexico: $36,684,235
- Rhode Island: $579,439
- Oregon: $150,316,424
- Washington: $529,443,420
- Vermont: $2,363,000
National Year-by-Year Totals
- 2014: $68,503,980
- 2015: $264,211,871
- 2016: $530,521,110
- 2017: $736,534,982
- 2018: $1,308,693,928
- 2019: $1,749,459,667
- 2020: $2,814,837,199
- 2021: $3,866,974,690
- 2022: $3,774,783,548
Andrew Livingston, Director of Economics and Research at Vicente LLP, highlighted the various reasons behind the overall decline in 2022. He emphasized that the COVID-19 pandemic and related lockdown orders significantly increased the demand for cannabis. With limited options for entertainment, people turned to consumer packaged goods, and cannabis proved to be a popular choice for enhancing the experience of staying at home for extended periods. Despite the decline in tax revenue in some established markets, Livingston pointed out the positive impact of increased cannabis consumption during the pandemic.
Toi Hutchinson, President, and CEO of MPP, underlined the benefits of cannabis legalization states, stating that they are reaping the rewards of hundreds of millions in tax revenue annually. These additional revenue streams are instrumental in supporting essential social services and programs nationwide, such as education, drug treatment, veteran services, job training, and reinvestment in communities disproportionately affected by the historical war on cannabis. Hutchinson stressed that states lagging behind not only neglect their constituents but also miss out on potential financial gains.
It’s important to note that the report solely focuses on recreational marijuana revenue and does not encompass sales from states’ separate medical cannabis programs.
With newer markets continuing to mature and states like Delaware and Maryland preparing to launch their own cannabis industries after recently ending prohibition, it is expected that the coming years will witness an influx of tax dollars. States with nascent markets continue to observe record-breaking marijuana sales as more businesses obtain licenses and consumers transition to the regulated industry.
For instance, Michigan experienced a record-breaking month in March, with combined recreational and medical cannabis purchases totaling nearly $250 million, according to state regulators. Similarly, Connecticut reported a record $22 million in combined recreational and medical marijuana sales for the same month. Missouri witnessed sales of $126 million, reaching a record high in the second month since adult-use shops opened in the state. New Mexico’s governor celebrated the one-year anniversary of the state’s adult-use marijuana market, highlighting over $300 million in sales since April of the previous year and the creation of numerous jobs in the cannabis industry.
In Arizona, adult-use cannabis purchases reached a staggering $1.4 billion by the end of 2022. Massachusetts also achieved a significant milestone as the state’s recreational market surpassed $4 billion in sales in January 2018, just a few years after its launch.
On the flip side, a prominent Wisconsin senator recently released a legislative analysis that revealed the significant amount of money the state lost to neighboring Illinois last year. Wisconsin residents, lacking a regulated market, crossed the border and spent over $121 million on marijuana.
In conclusion, despite the temporary dip in 2022 cannabis tax revenue, the overall landscape remains promising as more states embrace legalization. The substantial financial benefits derived from the regulated cannabis industry underscore its potential for funding vital social programs and services across the country. As states continue to refine their markets and others embark on the journey of cannabis legalization, the expectation is that tax revenues will rise, benefiting both the states and their constituents.
