Warning to States: Marijuana Tax 'Windfalls' May Just Be Blowing Smoke – Crime Report

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Advocates of marijuana legalization have long argued that cannabis sales and commercial production represent a potential windfall for hard-hit state treasuries, but a new study warns policymakers against raising their hopes too high.

Revenue from “sin taxes” – on items like cigarettes, liquor, or gambling – has always been difficult to predict, and the marijuana “market” presents special difficulties for policymakers who are hoping to match the cash bonanza already reaped in some states that have approved recreational marijuana, according to a new study from Pew Charitable Trusts.

“In Washington, marijuana accounted for more revenue ($361 million) than liquor ($314 million) or cigarettes ($357 million) in fiscal year 2018,” notes the report, entitled Forecasts Hazy for State Marijuana Revenue.

“In Alaska, revenue spiked from $2 million to $11 million in a single year.”

But similar bounties may not be forthcoming for all 11 states and Washington, DC where voters have approved legalization so far. Forecasters expect the rapid growth in existing high-volume states to slow, and no one is quite sure how to measure the potential revenues over time.

The challenges of revenue forecasting create a unique obstacle for the effected states’ budget planning. If forecasting isn’t done correctly, there are heavy consequences, the study said.

“If tax collections come in below forecasted amounts…programs that are funded by these dollars could suffer,” said Pew.

For example, in Nevada’s first six months of collecting marijuana taxes, revenue came in 40 percent higher than budget officials expected; but in California revenue was 45 percent below projections in the first six months of collecting marijuana taxes.

Programs funded by the money collected from marijuana taxes differ from state to state.

However, many states have released ambitious plans to funnel marijuana revenue toward education programs,

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