MPP Article – Report: Cannabis Tax Revenue in States that Regulate Cannabis for Adult Use

Their introduction

Legalizing cannabis for adults has been a wise investment. Since 2014 when sales began in Colorado and Washington, legalization policies have provided states a new revenue stream to bolster budgets and fund important services and programs. Through the first quarter of 2024, states have reported a combined total of more than $20 billion in tax revenue from legal, adult-use cannabis sales. In 2023 alone, legalization states generated more than $4 billion in cannabis tax revenue from adult-use sales, which is the most revenue generated by cannabis sales in a single year. In addition to revenue generated for statewide budgets, cities, and towns have also generated hundreds of thousands of dollars in new revenue from local adult-use cannabis taxes.

Twenty-four states have legalized cannabis possession for adults 21 and older. All but one of them — Virginia — have also legalized, regulated, and taxed cannabis sales. In two legalization states — Delaware and Ohio — sales have not begun yet.

In many states with legal, adult-use cannabis sales, tax revenues are allocated for social services and programs. This includes funding education, school construction, early literacy, public libraries, bullying prevention, behavioral health, alcohol and drug treatment, veterans’ services, conservation, job training, conviction expungement expenses, and reinvestment in communities that have been disproportionately affected by the war on cannabis, among many others.

This document reviews each legalization state’s adult-use cannabis tax structure, population, and year-by-year adult-use cannabis tax revenue. States are listed in chronological order, based on when state-legal cannabis sales began, with the most mature markets first. These figures include cannabis excise taxes and states’ standard sales taxes that are applied to cannabis. They do not include medical cannabis tax revenue, application and licensing fees paid by cannabis businesses, additional income taxes generated by workers in the cannabis industry, or taxes paid to the federal government.