Canna-billions: How states are using pot tax revenue

(NewsNation) — The U.S. House of Representatives passed legislation Friday that would legalize marijuana on a federal level — a sign that Congress could be starting to take comprehensive cannabis reform more seriously.

The Marijuana Opportunity Reinvestment and Expungement Act, also known as the MORE Act, would remove marijuana from the list of scheduled substances under the Controlled Substances Act and eliminate criminal penalties for anyone who manufactures, distributes or possesses cannabis. The proposal would also require federal courts to expunge prior marijuana-related convictions and provide funding to communities that have been most harmed by the war on drugs.

The bill is unlikely to become law since it is expected to die in the Senate. That would mirror what happened when a similar House-passed measure removing marijuana from the list of federally controlled substances went nowhere in the Senate two years ago.

The delay continues to frustrate cannabis policy reform groups, who say stalling major legislation has real-world consequences for those being impacted by today’s marijuana laws.

“In 2022, you can still lose your job, you can still lose your children in a custody battle, you can still be in a situation where you can’t apply for a student loan or sign a lease. There are all kinds of negative consequences for millions of people that today are still living under prohibition,” said Toi Hutchinson, the president and CEO of the Marijuana Policy Project, a Washington-based marijuana advocacy group.

National polling shows that the vast majority of Americans support legalizing marijuana in some form. A 2021 Pew Research poll found:

More than 90% of U.S. adults say marijuana should be legal in some capacity
60% say it should be legal for medical and recreational use
31% say it should be legal for medical use only
Less than 10% of respondents said marijuana should not be legal at all

“This is a home run that could easily be done by the United States Congress, both chambers, and we are all anxiously awaiting; also a president, who promised he’d be different on this and hasn’t yet,” said Hutchinson.

states moving forward on their own

So far, 18 states, as well as the District of Columbia, have legalized recreational marijuana and 37 states have legalized the medical use of marijuana.

In January 2014, Colorado became the first state to begin retail sales of recreational marijuana. Since then, the industry has grown rapidly. At present, there are more than 3,000 active marijuana business licenses and 43,000 licensed employees in the state, according to the Colorado Marijuana Enforcement Division.

That growth also means billions of dollars in tax revenue.

"Since legalization of retail marijuana we've seen over $12 billion in sales and over $2 billion in tax revenue," said Shannon Gray, the communication specialist with the Colorado Marijuana Enforcement Division.

Just last year, Colorado made more than $423 million in cannabis tax revenue. Those funds go toward a variety of state programs, including public health campaigns, law enforcement and schools.

But each state distributes its cannabis tax revenue differently. Last fiscal year, Nevada saw more than $1 billion in cannabis retail sales which generated about $160 million in tax revenue for the state. After covering the enforcement and regulatory costs, additional money goes almost exclusively to education in the state.

"In Nevada, cannabis tax revenue goes toward education. It funds some education programs, a large chunk goes to the state education fund and then some other scholarships as well," said Tyler Klimas, the head of Nevada's Cannabis Compliance Board.

So how much are states making from their marijuana sales and how is that money being spent?

California

Legalized recreational marijuana: Nov. 2016

Retail sales began: Jan. 2018

How is it taxed?

Cultivation tax
- $10.08 per ounce for flower
- $3.00 per ounce for leaves
- $1.41 per ounce for fresh cannabis plant
Excise tax
- 15% of retail sales
Sales tax
- 7.25% state, plus local taxes

Tax Revenue Generated: Between the state’s excise tax, cultivation tax and sales tax, cannabis sales generated nearly $1.3 billion in 2021.

How it's used: California's cannabis tax revenue covers the administrative cost of the program and then goes toward youth-focused anti-drug programs, public safety initiatives, research and other state and local programs.

colorado

Legalized recreational marijuana: Dec. 2012

Retail sales began: Jan. 2014

How is it taxed?

Marijuana retail sales tax: 15%
Marijuana wholesale excise tax: 15%
Additional local taxes depend on the municipality

Tax Revenue Generated: Colorado made more than $423 million in cannabis tax revenue in 2021. Last year's tally brought the state's lifetime cannabis tax revenue to more than $2 billion.

How it's used:

Excise tax revenue is credited to the Building Excellent Schools Today (BEST) Fund. The fund is used to renew or replace deteriorating public schools.
Marijuana retail sales tax revenue:
- 90% goes to:
  - Approx. 72% to the Marijuana Tax Cash Fund (used for health care, health education, substance abuse and treatment programs and law enforcement).
  - Approx. 15.5% goes to the state’s General Fund
  - Approx. 12.5% goes to the State Public School Fund
- 10% is allocated to local governments

Illinois

Legalized recreational marijuana: Bill passed the state legislature in May 2019

Retail sales began: Jan. 2020

How is it taxed?

Cultivation Tax:
- 7% on dispensaries selling cannabis
Retail excise taxes:
- 10% on marijuana with THC level of 35% or less
- 20% on cannabis-infused products
- 25% on marijuana with THC above 35%
Sales tax:
- Statewide 6.25% and additional local taxes could apply

Tax Revenue Generated: Illinois brought in $317 million in cannabis tax revenue in the 2021 fiscal year.

How it's used:

35% to the General Revenue Fund
25% on restorative justice and cannabis equity programs
20% to address substance abuse and prevention and mental health concerns
10% to pay state bills
8% to local governments for crime prevention programs
2% to fund public education campaigns

Nevada

Legalized recreational marijuana: Nov. 2016

Retail sales began: July 2017

How is it taxed?

Retail Excise Tax:
- 10% at point of sale
Wholesale Excise Tax:
- 15% of fair market value
Sales Tax:
- 4.6% statewide and additional local taxes could apply

Tax Revenue Generated: Approx. $160 million in fiscal year 2021 after the state surpassed $1 billion in retail sales for the first time since legalization.

How it's used: Tax revenue covers the cost of regulating the state's marijuana industry and all remaining funds go toward education.

Oregon

Legalized recreational marijuana: Nov. 2014

Retail sales began: Oct. 2015

How is it taxed?

State Retail Tax:
- 17% for all recreational marijuana sold
- Additional 3% for some Oregon localities

Tax Revenue Generated: Oregon took in more than $178 million in tax revenue from cannabis sales in fiscal year 2021.

How it's used:

Cannabis tax revenue covers the program's administrative costs as well as enforcement costs. Additional funds are directed to the Drug Treatment and Recovery Service Fund. After that, leftover funds are distributed as follows:

State School Fund: 40%
Oregon Health Authority for mental health treatment: 20%
State Police: 15%
Cities: 10%
Counties: 10%
Oregon Health Authority for alcohol and drug abuse prevention: 5%

Washington

Legalized recreational marijuana: Dec. 2012

Retail sales began: July 2014

How is it taxed?

Excise tax: 37%
General sales tax: Statewide 6.5%, additional local taxes could apply

Tax Revenue Generated: $559.5 million in FY 2021, nearly 20% more than the year prior.

How it's used:

The majority of Washington's marijuana tax revenue goes toward public health programs and the state's general fund. According to the state, the 2021 revenue was distributed as follows:
- Basic Health: $272 million
- General Fund: $191 million
- Washington State Health Care Authority: $54 million
- Local Governments: $15 million
- Washington Liquor and Cannabis Board: $10.4 million
- Department of Health: $9.7 million
- Washington State Patrol: $2.3 million
- Other: $1.8 million