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Revenue Generation

How Much Are States Making In Marijuana Tax Revenue?

Marijuana taxes collected by states has exceeded expectations, giving cash-strapped governments help as the pandemic continues to drastically reduce tax collections
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Cash-strapped governments around the country have found a silver lining in the pandemic-caused loss of tax revenue. Legalized marijuana has provided millions to state and local governments - in some cases, millions more than anticipated.

The ability to raise tax dollars has been a selling point for marijuana legalization from the beginning. Long before the state legislature approved adult-use sales, Illinois politicians hoped marijuana could help the state pay off some of its massive debt. Other states, such as Colorado, have used sales tax dollars to fund schools and public improvement projects and programs.

You can now hear those same arguments from lawmakers in a long list of states that include Connecticut, Delaware, Maryland, Minnesota, New Mexico, New York, Pennsylvania, Rhode Island, Texas, Virginia, and Wisconsin.

RELATED: New York Just Legalized Recreational Marijuana Use


It’s easy to see why states without legalization want to legalize it, and soon.

Legal cannabis states have made millions in marijuana sales taxes. For example, a study by the Cato Institute found that Colorado now takes in about $20 million a month in all marijuana-related taxes, while California takes in about $50 million a month.

The non-profit Tax Foundation recently put together a list of what states made in fiscal year 2020 through marijuana-related excise taxes alone. The following numbers come from that study.

Illinois, which started sales in 2020, took in about $200 million from all marijuana-related taxes and fees in 2020. The state is using 10% of that money to pay off its backlog of unpaid bills. They also are making about $31 million available as social equity grants. Illinois officials have said the revenue is higher than expected. Colorado has also been setting records in cannabis sales.

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What States Could Be Making

The Tax Foundation also looked at what states could make from an excise tax on marijuana if they chose to make cannabis legal. Some of the highest totals for potential revenue included these states.

In New York, where the government has made a deal to legalize adult-use marijuana, state officials expect legalization to create a $4.2 billion industry that brings about $350 million in tax revenue annually.

As noted by the Cato Institute, despite years of debate about legal marijuana, one thing that has become certain: Marijuana legalization has a significant impact by increasing state tax revenue. The institute also noted that sales tax figures have exceeded expectations in states like Colorado and Washington, which could repeat itself in other states.

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