Cannabis legalization advocates often tout the plant’s potential to boost state coffers. Among the case studies they cite are Illinois, which reported $52 million in marijuana tax revenue for the first half of 2020; Colorado, which collected more than $244 million from January to August; and California, which is expected to bring in $479 million in pot tax revenue for the year.
With so many businesses struggling throughout 2020 due to the COVID-19 pandemic, it makes sense to legalize weed to address dwindling government funds — right?
Wrong, according to a new study from Anderson Economic Group.
Indeed, the coronavirus pandemic has taken a toll on state budgets across the country, sending local leaders and lawmakers scrambling to find solutions and supplement revenues. But “legalizing recreational cannabis is not a panacea for the immediate shortfalls most states are facing,” AEG’s Andrew Miller and Kaitlin Lynch wrote in a report published Tuesday.
‘Significant Time Lag’
Today, 33 states allow medicinal marijuana use, and they generate tax revenue in their own right. Yet there is often a significant time lag between legalization and the first actual cannabis sales.
“It can take a year or more for states to establish regulatory agencies and for cannabis cultivators and dispensaries to obtain licenses and set up shop,” Miller wrote in the report. “States don’t begin collecting cannabis tax revenue until that process is complete.”
To illustrate this, AEG spotlighted 11 states that allow legal recreational use: Colorado, Washington, Alaska, Oregon, California, Maine, Massachusetts, Nevada, Vermont, Michigan and Illinois. In each market, see chart below:
Nevada had the shortest wait — eight months — from legalization to the “market open date.”
Maine had the longest wait: 47 months.
AEG also went a step further to explain how cannabis tax dollars make up just a small slice of overall revenue. See graph below: