Adult-use cannabis tax revenues in the U.S. declined slightly from 2021 to 2022 from $3.867 billion to $3.775 billion, according to a Marijuana Policy Project (MPP) report. It marks the first time the overall revenues have decreased since the first states legalized cannabis for adult use in 2014.
The decrease is likely due to falling tax revenues in the six states “with the most mature legalization laws.” States with more recent adult-use legalization programs generated more tax revenue in 2022 than in 2021, the report says.
“Reasons for declining tax revenue include the widespread availability of intoxicating synthetic cannabinoids made from hemp, which are largely unregulated and not subjected to cannabis excise taxes; lower prices in several states due to oversupply; sales beginning in additional states — reducing demand from visitors in more mature states; consumers having less disposable income due to inflation; and — in California — the state reducing the tax rate to make legal cannabis more competitive. Cannabis businesses also face significant challenges due to ongoing federal prohibition, which drives up costs of rent, banking, and almost everything else, and results in an enormous federal tax burden. Those burdens do not apply to intoxicating cannabinoids derived from hemp.” — MPP, “Cannabis Tax Revenue in States that Regulate Cannabis for Adult Use”
Andrew Livingston, Vicente LLP director of economics and research, added that the COVID-19 pandemic also played a role in the decreased revenues as cannabis sales spiked during pandemic-related lockdown orders.
“People could not spend their money going to concerts, going out to dinner, or vacation travel. So many people increased their consumption of consumer packaged goods,” Livingston said in the report. “Cannabis was a product that could still be purchased and made the difficulty of staying at home for months on end watching TV shows and movies a bit more enjoyable.”
In all, since 2014, adult-use cannabis tax revenues have topped $15.115 billion.
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