US: States surpass $15B in tax revenue from legal, adult-use cannabis sales

On May 1st, the Marijuana Policy Project released a new report on tax revenue generated from state-legal, adult-use cannabis.

As of the end of 2022, states have reported a combined total of more than $15.1 billion in tax revenue from legal, adult-use cannabis sales since 2014 when sales began in Colorado and Washington. In 2022 alone, legalization states generated more than $3.77 billion in cannabis tax revenue from adult-use sales.

“States that have made the decision to legalize and regulate cannabis are benefiting from hundreds of millions in tax revenue each year. These new streams of revenue are helping to fund crucial social services and programs across the country, such as education, alcohol and drug treatment, veterans’ services, job training, and reinvestment in communities that have been disproportionately affected by the war on cannabis. The states that lag behind will not only be doing a disservice to their constituents — they will also be leaving money on the table,” said Toi Hutchinson, President and CEO of the Marijuana Policy Project.

Although cannabis sales have continued to generate billions in annual tax revenue, 2022 marked the first year with a decrease in tax revenues compared to the prior year. Even as new states came online, there was a slight decrease in total state cannabis tax revenue — from over $3.86 billion in 2021 compared to $3.77 billion in 2022. Prior to 2022, every legalization state had seen annual increases in cannabis tax revenue. However, six states with the most mature legalization laws experienced decreases in cannabis tax revenue over the past year, while newer legalization states generated more cannabis tax revenue in 2022 than in 2021. It is important to note that while '22 figures were down from '21 in more mature markets, they were still higher than any year pre-COVID for each state.

As Vicente LLP Director of Economics and Research Andrew Livingston explained, 2022’s revenue decreases were “due to a multitude of factors,” and that one of them is likely COVID-related. “While 2022 cannabis taxes are lower in some established markets than they were in 2021, it's important to know how COVID-19 and pandemic initiated lockdown orders increased cannabis demand. People could not spend their money going to concerts, going out to dinner, or vacation travel. So many people increased their consumption of consumer packaged goods. Cannabis was a product that could still be purchased and made the difficulty of staying at home for months on end watching TV shows and movies a bit more enjoyable.”

MPP’s tax revenue report includes each legalization state’s adult-use cannabis tax structure, population, and year-by-year adult-use cannabis tax revenue. The full report is available at LINK.

Twenty-two states have passed laws to legalize cannabis possession for adults 21 and older. All but two of them — Maryland and Virginia — have also legalized, regulated, and taxed cannabis sales. (However, Maryland Gov. Wes Moore is expected to sign a bill to legalize and regulate sales.) Several other states are building strong momentum to legalize adult-use cannabis in 2023, including Minnesota, New Hampshire, and Ohio.