For the first time in the U.S., adult-use cannabis tax revenue declined across legal states in 2022.
According to a new report from the Marijuana Policy Project, cannabis sales tax generated a healthy $3.77 billion in 2022, but that was slightly below 2021’s tax revenue of $3.86 billion.
Still, as of the end of 2022, states reported a combined total of more than $15.1 billion in tax revenue from legal, adult-use cannabis sales since 2014 when sales began in Colorado and Washington. The report stated that even as new states came online, the big states took a beating, which offset contributions from the newbies.
“These new streams of revenue are helping to fund crucial social services and programs across the country, such as education, alcohol and drug treatment, veterans’ services, job training, and reinvestment in communities that have been disproportionately affected by the war on cannabis. The states that lag behind will not only be doing a disservice to their constituents — they will also be leaving money on the table,” said Toi Hutchinson, president and CEO of the Marijuana Policy Project.
The old guard accounted for most of the collected revenue, with the top five states including:
- California: $1,074,560,287
- Illinois: $562,119,019
- Washington: $529,443,420
- Michigan: $326,049,074
- Colorado: $305,034,034
The report noted that California brought in a total of just over $1 billion in cannabis taxes in 2022, significantly lower than the nearly $1.3 billion in 2021, and lower than the $1.1 billion in 2020.
That drop in taxes is directly correlated to the drop in sales. Sales fell by 8% last year, from $5.7 billion in 2021 to $5.3 billion in 2022.
“In addition to the persisting illicit market and plummeting wholesale prices, extreme delays in local licensing have been cited as a cause for the decline,” the report said.
Like many other states, Washington saw steady annual growth in cannabis tax revenue until 2022. In 2021, the state generated more than $630 million in excise and sales taxes from cannabis. In 2022, those figures dropped to less than $530 million. On a positive note, Washington’s 2022 cannabis tax revenue exceeded prepandemic proceeds with a 10% increase over 2019.
Newcomer Michigan made a big splash by clocking in at number four on the list of top five. Sales didn’t start until December 2019, and some municipalities were slow to opt in and establish regulations, including Detroit, which didn’t issue its first licenses until December 2022. Still, tax revenues increased by more than 51% over 2021. Plus, the state continues to add more localities, which bodes well for more tax revenues.
2023 could also be setting the stage for increased tax windfalls as states like Minnesota, New Hampshire, and Ohio consider adult-use legalization.