Illinois gets more tax revenue from marijuana than any state but California, pulling in $562 million last year.
Michigan, which has a lower tax rate and pot prices but higher overall sales than Illinois, took in $326 million in taxes to rank No. 4, according to data compiled by the Marijuana Policy Project.
Michigan’s tax receipts grew 55% last year, compared with 10% for Illinois. But Michigan is unlikely to close the tax gap much more, says Beau Whitney, founder of Whitney Economics, a research and analytics firm in Portland, Ore.
Because it’s much easier to get a license to grow or sell marijuana in Michigan, sales have soared but prices have cratered because of oversupply. Some Michigan cannabis companies are in receivership.
Illinois was slow to get new licenses distributed after the state legalized recreational marijuana sales in 2019. Only now are new operators getting into the business. It also charges some of the highest taxes in the country at nearly 40% when local taxes are included, compared with 10% for Michigan.
Whitney estimates that 75% of Michigan marijuana users had been converted to the legal market as of 2022, up from just 55% in 2021. In Illinois, meanwhile, just 48% of users have joined the legal market.
“Illinois has greater upside,” Whitney says of the marijuana market. “In Michigan, their growth rates will slow and eventually level off. In three to five years, it will be dependent on population growth.
“In Illinois the growth rate will be predicated on lowering prices and generating greater access. It’s critical that they open more stores and increase the supply in the market.”
Whitney estimates Illinois’ combined medical and recreational sales will increase about 21% this year to $2.3 billion, while Michigan grows about 4% to $2.5 billion.