States with legal pot have collected more than $1.6 billion since the newest sin taxes went into effect in 2014, with the money paying for everything from public schools to mental health services to programs that deter convicts from re-offending.
But that revenue could see explosive growth now that President Trump has signaled a more agreeable stance toward legal-weed states, striking a deal with Republican Sen. Cory Gardner this month to respect Colorado’s marijuana operations. Trump also agreed to back a legislative fix for the “states’ rights issue,” Gardner said.
The agreement comes at a time when taxes related to California weed sales, which became fully legal early this year, are poised to quickly surpass all other states.
In an exclusive analysis for the USA TODAY Network, Beau Whitney, a senior economist with Washington, D.C.-based cannabis analytics firm New Frontier Data, forecasts collections in California could exceed $2.1 billion through 2020, based on a 15 percent state excise tax.
For perspective, it takes about $1 billion a year to run the city of Sacramento. The New Frontier analysis doesn’t count a mishmash of city, county or cultivation taxes.
Even so, analysts with credit-rating firm Fitch Ratings warn effective tax rates as high as 45 percent in California are likely to push pot sales back onto the black market and cut legal tax revenue.
Analysts say mainstay revenue such as income, property and sales taxes still dwarf marijuana taxes in local and state government budgets.
However, “every dollar is important,” said Stephen Walsh, a director with the U.S. Public Finance group at Fitch. “It’s very difficult for governments to raise taxes.”
Cannabis taxes represent a welcome infusion of all-new money, he said.
Nine states and the District of Columbia have decided to legalize recreational marijuana. Cannabis consumers are willing to trade high tax rates — from 20% in Oregon to as much as 45 percent in California — for the freedom to partake in the small network of states.
Were the federal government to OK sales throughout the nation, New Frontier analysts forecast that through 2025, weed could bring in about $100 billion in fresh