Marijuana taxes: how some states spend their funds

(NewsNation) — All across the country, the once-widely-criminalized drug is becoming more and more a mainstream part of American life. Twenty states, plus the District of Columbia, have legalized the use of recreational marijuana and more than three dozen states, territories, and D.C. allow for the use of medical marijuana.

One of the reasons why an increasing number of state governments are legalizing marijuana is to tax its sales, opening up an additional stream of revenue.

“One of the big talking points, one of the big focal points was, ‘Hey, we’ll shift the market from illegal to legal and that will create jobs, create tax revenues.’ And in fact, many of the early campaigns… really tried to sell the tax revenue towards what might be viewed as the swing voter,” Douglas Berman, a researcher at Ohio State University who has spent years studying marijuana legalization.

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But getting that taxation right can be tricky.

“There’s kind of a Goldilocks challenge here, how do you set the taxes at the right level to maximize state revenue but not push people back into the illicit market or give them no reason to go into the legal marketplace?” he said.

Here is how a few states that have legalized marijuana are spending the revenue.

Colorado

Colorado voters legalized marijuana through a ballot amendment they passed in 2012, joining Washington as the first states to legalize the recreational use of marijuana.

The state levies a 15% sales tax and a 15% excise tax on marijuana. These help the state bring in hundreds of millions every year to fund government operations.

Melissa Dworkin, a spokesperson for the governor’s office, said the state expects about $365 million in revenue. Of that, $38 million will be put into the state’s general fund, where it can be used for any number of state services.

The rest is allocated for specific programs, and the largest portion set aside for a grant fund for schools called BEST. The funds are intended to help construct additional schools and provide infrastructure improvements to existing ones.

(Courtesy of the Colorado Governor’s Office)

Alaska

Alaska’s voters legalized recreational marijuana in a 2014 ballot measure. A few years later in in fiscal year 2021, the state brought in around $30 million in tax revenue from marijuana.

One thing that makes the state’s marijuana laws unique is how it spends the revenue it raises from the $50-per-ounce tax — the state has the highest marijuana taxes in the nation.

Half of the revenues generated from marijuana sales go to programs designed to reduce recidivism, while the other half go to the general fund and drug education programs.

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Education programs at places like the local Boys & Girls Clubs receive funding to keep kids away from drugs, including marijuana, according to local media.

In fiscal year 2020, the state Department of Corrections received $11.5 million to fund things like substance abuse programs and a community residential center.

FILE – In this Jan. 18, 2017 photo marijuana is displayed for sale at a shop in Juneau, Alaska. Alaska regulators approved rules for onsite consumption of marijuana at specially designated shops on Thursday, Dec. 20, 2018, a significant step for the cannabis industry after years of debate. (AP Photo/Mark Thiessen, File)

Montana

Montana voters approved a ballot referendum to legalize marijuana in 2020. Fourteen months after legalizing, the state brought in almost $54 million in revenue — drawn from a 20% sales tax on recreational marijuana and a 4% tax on medical marijuana.

The state, which is known for its public parks and land, spends a significant portion of its marijuana tax revenue on nature.

Twenty percent is allocated to improve wildlife conservation efforts through the Department of Fish, Wildlife, and Parks. Additional funds go towards other conservation efforts, law enforcement, veterans, drug treatment and the general fund.

Maesa Story, a worker at Montana Advanced Caregivers, packs a joint with marijuana at the Billings, Mont. medical marijuana dispensary on Nov. 11, 2020. Recreational marijuana initiatives passed in four states this year, from liberal New Jersey to conservative Montana and South Dakota. The results prove how broadly accepted marijuana has become throughout the country and across party lines. (AP Photo/Matthew Brown)

State lawmakers are currently debating whether to allocate more towards wildlife conservation efforts or to distribute more funds toward substance abuse programming.