A newly updated analysis estimates that Ohio could receive up to $403.6 in tax revenue annually from the sale of adult-use marijuana if voters approve legalization measures, which could appear on November’s ballot.
Researchers at Ohio State University have published a paper that assesses the economic impact of legalizing cannabis in the state. The researchers provide tax revenue estimates based on an examination of similar state markets for the first year of sales.
The analysis looks at marijuana sales trends from Michigan, because it has a similar demographic and its tax structure is very similar to what Ohio would implement if legalization was approved. It also examines sales in Colorado and Washington State, as well as Nevada, Illinois, Oregon and Washington State between 2018-2023.
This is the second version of the report. It has been updated to include two more years of cannabis sales on legal markets. The authors stated that they had decided to revisit their earlier estimates, given that Ohio voters are likely to vote on legalization this year.
Researchers found that Ohio could generate anywhere between $276.2 and $403.6 million annually in cannabis tax dollars after the fifth year of sales. The lower estimate was the same as last year, but the end estimate grew by almost $30 million due to the addition of six years of data.
Researchers used three different pricing models to analyze the potential revenue. They showed the potential revenue if Ohio products were taxed the same as Michigan or 10 percent higher.
The authors stated that “even though these projections are subjected to various assumptions, tax revenue experiences in other states support claims of Ohio being likely to generate hundreds and millions of dollars in tax revenue from a mature market for adult-use marijuana.” In FY 2021, Ohio’s casinos generated gross tax revenue of over $300,000,000. It is therefore possible that the tax returns from cannabis sales in Ohio could be comparable to those currently collected by Ohio’s gross casino tax.
The paper states that “the amount of taxes collected in Ohio will depend on the type of tax structure and levels adopted by the state if adult-use marijuana is legalized.” The Michigan tax structure and the Ohio tax structure that was proposed by the citizen-initiated legislation reflect some of the lowest rates in all the states which have legalized adult-use cannabis.
The analysis argues that it’s possible for the legislature to move towards imposing a higher tax rate on marijuana products. This “might result in higher overall tax revenue,” according to the analysis. Higher taxes may lead to more expensive products. This could make it harder to fight the illegal cannabis trade, and ultimately result in lower tax revenues.
concludes that “tax revenue estimates for new markets can be useful for policymakers and the public when considering reforms for adult-use cannabis.” Our analysis shows that a mature adult use cannabis market in Ohio could generate hundreds of millions of dollars annually in cannabis tax revenue, regardless the tax structure adopted. The amount of tax revenues collected would still likely represent a small portion of Ohio’s annual budget of $60+ billion.
The paper highlights that revenue from adult-use cannabis increases rapidly in the first few years after legalization, but then tends to drop as the state markets mature and prices fall.
Four of the five states that were examined and had established cannabis markets experienced a decline in cannabis tax revenues from 2021-2022. This ranged from -3 percent (Nevada) to -14 % (Colorado). Michigan and Illinois had the opposite pattern, with revenue increasing by 81 and 47 percent respectively.
The new analysis in Ohio projects cannabis sales to reach $218.4 millions in the second legal year, and then climb up to $305.7 million the third year, $366.9 in the fourth, and finally $403.6 million the fifth.
In 2023, sales of cannabis in several states that have legalized the drug have been consistently high.
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Michigan marijuana sales , for example, reached a monthly record of approximately $277 million during July. sales in July surpassed the previous record of set in June by over $16 million.
In July , four Northeastern states – Connecticut (Maine, Massachusetts, Rhode Island) and each also hit new records in cannabis sales.
Illinois retailers sold 140 million dollars worth of recreational marijuana products during July, the highest sales total of the year. This is the second highest monthly amount for Illinois since the adult-use marijuana market was launched in 2020.
Maryland’s legal cannabis sales reached a record high of $87.4 Million during July, the month following the launch of the recreational market, according to state data. The state generated over $10,000,000 of combined medical and recreational sales in the first weekend after adult-use cannabis sales began.
Since the adult-use marijuana market was opened in Missouri in February, Missouri retailers have sold about $4 million of marijuana each day in average. The state also saw a record $121.2 in cannabis sales in June.
They are confident the initiative to legalize cannabis will be on the ballot in Ohio. They came up 679 signatures short after turning in hundreds of thousands petitions last week, but managed to collect thousands more during a 10 day curing period which they believe will make up the difference. The campaign is waiting for confirmation from the secretary’s office to see if they succeeded.
In a USA TODAY Network/Suffolk University survey published in July, it was found that about 59 percent (59%) of Ohioans supported the legalization of possession and sale of cannabis by adults over 21. Only 35 percent of respondents are against.
In May bipartisan Ohio legislators submitted a bill legalizing marijuana, giving the legislature a second chance to lead the reform. It has not yet advanced, but now it is up to the voters to decide.
Ohioans made it clear during recent elections that they are ready for a change in policy. More than 30 localities in Ohio have decriminalized marijuana through local ballots.
In November of last year, voters in five other cities also approved local marijuana decriminalization initiatives. voters in Helena also enacted reform during the May primary election.
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