Recreational marijuana sales generate millions in taxes in states where the plant product is made legal. Moody’s Investor Services, however, has published a report which shows that excise taxes taken from marijuana and ancillary products make up a measly two percent of the total revenue of Colorado state in 2017. In Washington state, the numbers are even lower at 1.2 percent. The two states pioneered marijuana legalization for recreational use in 2012.
The brand new money made for both the states represent a considerable income boost. Colorado sucked up $223 million revenues in 2017. The number is 10 times the amount of money it generated during first-year legal sales. Washington state also witnessed fivefold increase in pot sales. It reached $314 million spanning 2017. Growth now will surely slow down as industries mature and thus have insufficient room for further growth in future. Neighboring states will also be competitors, as young industries in Alaska and Oregon mature. New states like Nevada and California will also bring legal regimes online. Tax revenues will go down.
Opponents of pot legalization and even a few supporters say that states must not be dependent on sales of marijuana to increase their coffers. The logic behind these that adopting such a strategy means the state is indirectly encouraging the rise of marijuana user numbers.
States which have legalized pot spend their extra money in positive ways. When voters in Colorado consented to legalize pot, half of the total tax revenues were allocated to enforcement and regulation of the industry rules. Only about a third of total revenues Washington state collects goes to the general fund of the state. A measly five percent of the total revenue Colorado makes goes into a general fund. Rest goes into funding public education and local governments. States which have legalized marijuana have put punishing excise taxes on it.
Grayson Nichols, the vice president of Moody’s, as a part of the analyst note, termed the marijuana linked tax revenue as “marginally credit positive”. He, however, doubted as to if the industry will generate a quantum of revenue to plug the future budget holes. He pointed out that even states like Colorado, which have mature industries, and California like larger states, the revenue will continue to be a small part of yearly general fund revenue. Not many opportunities exist for any noticeable market expansion.