Student presentation exploring tax revenues raised and revenues spent after marijuana reform

As long-time readers know of this blog should know, students in my Marijuana Law, Policy & Reform seminar "take over" the second half of my class through presentations on the research topics of their choice.  Before their presentations, students are expected to provide in this space some background on their topic and links to some readings or relevant materials.  The first of our presentations take place next week and will be looking at state tax issues.  Here is how my student has described his topic along with background readings he has provided for  classmates (and the rest of us):

Marijuana is business.  Marijuana is revenue.  Even though recreational marijuana has only been legal for a handful of years, the United States Bureau of Economic Activity has been tracking illegal market activity in relation to generally legal market activity.   This required the BEA to attempt to track how drugs such as marijuana was impacting the economic activity within the United States.  The outcome?  The National nominal gross domestic product was raised by 0.2 percentage points.

It is clear that marijuana has had an effect on the national economy even though it is illegal.  The question now turns to; how have states who have legalized recreational use made their money through marijuana?  How much tax revenue are these states bringing in?  And, how is that money being spent in those states?

Many Americans wonder how their tax money is being spent on a day-to-day basis.  Where does the sales tax go when I go to the grocery store?  Where does twenty percent of my income go every paycheck?  Where does the tax money go after I spend money at an adult use dispensary?  Questions one and two are hard to answer.  Question three, on the other hand, is actually very easy to find out.  Many states have set up stringent tax structures relating to their adult use industry.  This may be laid out initially in their statutory plan, or the states may wait and see how much they actual earn to see how they should dispense those funds.

Either way, almost every state has a very strict dispense program.  Each state uses their marijuana tax revenue differently. Many states add some of the revenue to their general state fund.  Many divide the revenue between counties and municipalities who have a dispensary in their jurisdiction.  Many use the tax revenue for social justice programs.  A few give the money to public schools.  A few more give the money to their Department of Health for drug misuse education and programs. One is using the money to offset the now decades long decrease in tobacco tax revenue.

Marijuana has been a very profitable industry for those states who have legalized adult recreational use.  The amount of data on how states have shifted on the national pre- and post-legalization is very small. It is quite hard to see how well states are doing compared to how they could have been.  Despite this, many states have found that the illegal drug trade is not going away, so they might as well profit on the activity.  Alaska Reported more than 3% of their state revenue for fiscal year 2021 was from cannabis sales.  Colorado, Nevada, Oregon, and Washington also reported at least 1% of their total state revenue was from cannabis sales.  What does this mean? Marijuana IS BUSINESS. The question that remains, and is quite hard to answer, states who have yet to legalize recreational use have obviously seen these profits . . . how have they not legalized?

Interesting websites and articles for background

The Motley Fool, "Marijuana Tax Revenue: A State-by-State Breakdown"

Urban Institute, "State and Local Backgrounders: Cannabis Taxes"

Bureau of Economic Analysis, "Tracking Marijuana in the National Accounts"