How States Are Spending Cannabis Tax Money

How cannabis is providing a much-needed boost to the economy


If there is one reason why marijuana will eventually become federally legal, it unfortunately has nothing to do with its apparent medicinal qualities. The world, and especially politics, revolves around money. In states where weed has been made legal, especially locations that allow recreational cannabis, their overflowing coffers have been enough to silence plenty of objections.

In 2017, marijuana sales in California were approximately $2.76 billion, and that is BEFORE the state fully legalized the herb. Other notable figures include Colorado’s sales of $1.128 billion, Washington at $975 million, and Oregon at $502 million. States such as New Hampshire ($7.2 million), Minnesota ($9.6 billion), and Delaware ($7.1 million) have less impressive sales figures, but all of these states still benefit from cannabis taxation.

In states where recreational use is legal, the sky’s the limit because of the extra taxes placed on users. In California for example, cultivators have to pay a product tax of $9.25 per ounce of flowers and $2.75 per ounce of leaves. Customers also pay an additional 15% excise tax on top of the market price of the weed, which already has in-built taxes.

In Colorado, there is a 15% excise tax on the sale of weed from cultivators to retailers, who pass the added tax onto consumers. The state also has a 15% sales tax to be paid by customers. In Massachusetts, the excise tax was raised to 10.75% in 2017, after concerns that the initial 3.75% rate was too low.

The black market is still causing a dent in the cannabis tax revenue enjoyed by states. In California, the first quarter 2018 figure of $34 million in tax was way below expectations. It is ultimately hoped that the Golden State will earn $1 billion in tax revenue per annum.

Regardless of the precise amount, we know that state treasuries have extra cash because of marijuana legalization. We don’t even need to go into the money saved in policing and judicial costs. However, what we aren’t necessarily aware of is how our weed tax money is being spent. Let’s take a look at some proposals and programs promised and already offered by certain states.

Alaska

Although sales of weed aren’t expected to top $12 million, the state of Alaska is planning to use weed tax cash on programs to reduce repeat criminal offenders and the state’s general fund.

California

The Golden State will ultimately have more marijuana tax money to collect than any other state, but its gargantuan size means every cent is needed. Here is a glimpse of what the state of California intends to do with its windfall:

  • $3 million to the state Highway Patrol on programs to help officers spot drivers under the influence of weed.
  • $10 million on research into legalization to be conducted in a public university.
  • $2 million on the University of California’s continued medical marijuana research.
  • $10 million on communities disproportionately affected by the War on Drugs; namely the African-American and Latino communities. The amount of money spent on this program will increase annually for five years until it reaches $50 million per annum.

Colorado

In 2016 alone, Colorado earned an extra $150 million in weed tax. The first $40 million has already been set aside to fund schools. The cash is used for various purposes include keeping after-school programs open, repairing decrepit infrastructure, and educating children on the dangers of drug use. The Governor’s office says the money helps the following state departments (among others):

  • Department of Agriculture.
  • Department of Local Affairs.
  • BEST Public-School Fund.
  • Judicial Department.
  • Department of Local Affairs.

Maine

In the state of Maine, you are allowed possession of up to 2.5 ounces of weed. Your marijuana money will enter the state’s general fund. It is set to support education, and some cash should be left over for the Criminal Justice Academy to train police and help them understand the rules surrounding cannabis.

Massachusetts

After the state made marijuana legal for recreational use, a statement from the pro-weed camp said that the money would be used to fund veteran services, strengthen schools, and improve law enforcement.

Michigan

In November 2018, Michigan became the tenth state to legalize recreational marijuana. It is hoped that the state will earn up to $130 million a year in tax revenue. Michigan should also save several million dollars a year in police costs. Although details are not finalized, it has been suggested that 35% of the cash will go to schools, 15% to cities and townships that allow recreational marijuana businesses, and 15% to counties.

The excise tax could also provide $28 million for schools, $28 million for road repairs, and another $24 million for local governments involved in the industry. Although it won’t make much of a dent in Michigan’s annual budget of almost $57 billion, it should help move more money to where it is needed.

Nevada

In Nevada, the main concern appears to surround education. It is believed that the marijuana industry could provide the state with over $1 billion of tax revenue by 2024. As well as being funneled into the state’s general fund, the extra money will be used to support schools and public education. There is also likely to be an investment in the state’s adult-use program.

Oregon

In just two years, 2016 and 2017, Oregon earned a whopping $65 million in weed tax. Up to 40% of the cash has been used to fund public schools. At the beginning of 2018, the state also outlined how it planned to spend the other 60%:

  • 5% goes to the state’s Health Authority for treatment services and also to fund programs to help with substance abuse.
  • 20% for local law enforcement split 50/50 between police in cities and counties.
  • 15% goes to the State police.
  • 20% to fund alcoholism, mental health, and drug services programs.

Vermont

Marijuana was legalized at the beginning of 2018, but the state has not been forthcoming about its plans to spend the money. In February 2018, it was reported that the state transferred $300,000 of weed tax money into a general fund to help reduce the huge $30 million budget gap.

Washington

Washington state has one of the highest tax rates; an incredible 37% on recreational cannabis! The state has spread its income evenly on a variety of notable causes, including, but not limited to, the following:

  • The Washington state basic health plan.
  • Washington State University.
  • The Liquor and Cannabis Board.
  • Research on the long and short-term impact of marijuana.
  • Programs designed to prevent substance abuse involving the Department of Social and Health Services.

Final Thoughts on Marijuana Tax Money

Although it is unlikely that the income raised from cannabis tax will completely change a state’s economy, it is refreshing to learn that states are planning to use the funding to improve schooling and provide law enforcement with a much-needed cash injection.

Several states are contemplating recreational marijuana legalization simply because it promises to add tens of millions, if not hundreds of millions, of dollars to their treasuries. Despite America’s reputation as one of the world’s wealthiest nations, there are large areas of urban decay and crippled educational systems that will benefit immensely from funding made possible by the tax from legal marijuana.