News, Politics

Which States Scored Over a Billion in Cannabis Tax Revenue in 2020?

February 18, 2021 03:30 pm ET
Which States Scored Over a Billion in Cannabis Tax Revenue in 2020?

One of the biggest drivers of cannabis legalization has been the allure of tax revenue. While there are many reasons cannabis ought to be legalized, such as the medical benefits and the harm wrought upon marginalized communities by the War on Drugs, the practical benefits of tax revenue have helped to move the needle when it comes to legislators who might not have otherwise gotten on board. And tax revenue is important, not just as a way of encouraging states to pass progressive cannabis legislation, but for the benefits it can offer as well. For example, Illinois is using cannabis tax revenue to combat the effects of the War on Drugs. California is spending the money on infrastructure, and on social programs whose overall goal is to benefit all its citizens. And in Oregon, the city of Portland has used cannabis taxes to fund its police department.

But, this begs the question, which states have earned the most in cannabis tax revenue? You’d be surprised to learn that a few states have topped a billion! Do note that cannabis is legal for both medical and recreational use in these states, which is part of the reason they’ve been able to use the income to put together such strong and useful programs. Could other states stand to see the same success that cannabis taxes are offering to states that have legalized? Let’s take a look at some of the numbers and see which states are performing the best when it comes to tax revenue.

Washington Makes Bank in Cannabis Tax Revenue

Washington is the standard-bearer when it comes to cannabis tax revenue. The state legalized adult-use cannabis in 2012, and sales began in 2014. They began by charging a 25% tax rate before eventually increasing that rate to 37%. For the past four years, Washington has reliably earned more than $400 million in cannabis tax revenue, and as of 2020, its combined total since legalizing in 2012 is over $2 billion. States wondering whether they have the opportunity to earn money with a legalized cannabis program have only to look at Washington’s success to see their answer.

Colorado Sees Over $1.3B

Like Washington, Colorado legalized early—in 2012, with sales formally beginning in 2014. Unlike Washington, however, Colorado had a medical cannabis program firmly in place when recreational cannabis sales began. Early on, Colorado was taking in considerably more in tax revenue than Washington was. That shifted, however, as Washington found their footing, primarily because of Colorado’s lower tax rates. Although Colorado is well known as one of the very first adopters of legalized cannabis, they bring in less in tax revenue than Washington does—just under $300 million in 2020. However, it’s nothing to sneeze at—their combined revenue since legalizing is still over $1.3 billion.

California’s Numbers are Astounding

California is a special case. The first adult-use stores in the state didn’t open until 2018, so unlike Washington and Colorado, they’ve only got three years of tax revenue on the books. But the numbers are absolutely huge. In 2020, the state brought in almost $800 million in tax revenue. And with only three years of sales, their total is already higher than Colorado’s, at $1.8 billion combined since legalization. Of course, if one thinks about this, the reason is obvious. California’s population is more than five times that of Colorado. So it’s not fair to compare the two of them directly.

But states like Texas, which are closer to California in size, should be taking a hard look at these numbers. Texas hasn’t yet legalized recreational cannabis and its medical program is severely lacking, but seeing how much California was able to boost its economy in just one year has got to be intriguing. Hopefully, we’ll see the success these states are having to encourage other states to legalize and tap the resource of cannabis tax revenue for themselves.

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