State revenue from marijuana is hazy at best

…Now that 10 states and the District of Columbia have legalized recreational marijuana, officials are grappling with projecting collections from a new sin tax. Forecasting revenue from a product that was illegal just a few years ago, and remains so under federal law and in most states, presents a unique challenge for state budget planning. For example, in Nevada’s first six months of collecting marijuana taxes, revenue came in 40 percent higher than budget officials expected, but in neighboring California revenue was 45 percent below projections in the first six months of collecting marijuana taxes.

And with more states considering legalizing marijuana, forecasting and budgeting difficulties for revenue from recreational marijuana taxes are likely to become widespread. These challenges have consequences: If tax collections come in below forecasted amounts, for example, programs that are funded by these dollars could suffer.

The Yellow Brick Road may be paved with nothing more than yellow bricks instead of the gold forecast by libertarian optimism. Don’t spend it before you get it, folks!

9 thoughts on “State revenue from marijuana is hazy at best

  1. nicknielsensc says:

    Isn’t that kind of like me including my lottery jackpot winnings in my household budget? Planners and legislators may be better off considering the revenue from the so-called “sin” taxes as found money and not obligating it in advance.

  2. Buddy says:

    “How red tape and black market weed are buzzkills for California’s legal marijuana industry : When voters legalized marijuana three years ago, advocates said illegal operations would be pushed out and the state would make hundreds of millions in tax revenue. So far, those dreams have not panned out.” (CBS News 8/2/20)

      • p/s says:

        “Seven people were fatally shot early Monday morning at a rural Southern California home that the authorities said housed a large-scale illegal marijuana-growing operation.”

        “Temecula California: 7 people shot to death at illegal marijuana grow house in Inland Empire” ” California may have created a legal market for marijuana in 2018, but its black market remains robust; growers who raise and harvest their crop illegally can evade expensive licensing fees and other regulatory costs, undercutting their above-board competition.
        Violence, law enforcement officials say, is an omnipresent threat with illegal grows. Illicit harvests bring in huge quantities of cash to operators who typically are blocked from using banks or relying on law enforcement for protection. The killings this week add to seven other homicide cases linked to illegal marijuana operations that Riverside County detectives have investigated this year, the sheriff said.”
        (2/9/13): “Laotians top growers of pot on California farmland”
        “…Lt. Richard Ko, head of marijuana eradication for the county sheriff’s office, said the incentive for growers is great: high grade marijuana can bring up to $2,500 per pound locally and $4,000 per pound out of state. Each plant can produce three to 10 lbs — and plants grown on prime farmland with good soil and irrigation tend to be big.
        A farmer could reap millions of dollars per acre growing pot, Ko said, compared to a few hundred dollars per acre growing vegetables. “There’s a lot of money to be made in farming marijuana.”

  3. 4therecord says:

    “In what they call the largest study ever done, researchers found using marijuana while pregnant may increase the risk that a child will develop autism.
    “Women who used cannabis during pregnancy were 1.5 times more likely to have a child with autism,” said study author Dr. Darine El-Chaâr, a maternal fetal medicine specialist and clinical investigator at Ottawa Hospital Research Institute in Canada.
    “These are not reassuring findings. We highly discourage use of cannabis during pregnancy and breastfeeding,” she said.”
    Past studies have shown the use of marijuana during pregnancy is linked to low birth weight, impulsivity, hyperactivity, attention issues and other cognitive and behavioral issue in children, according to the US Centers for Disease Control and Prevention.
    The study, published Monday in the journal Nature, reviewed data from every birth in Ontario, Canada, between 2007 and 2012, well before recreational marijuana was legalized in Canada in 2017.
    Journal Nature: “Maternal cannabis use in pregnancy and child neurodevelopmental outcomes” (8/10/20)

  4. Roach says:

    “A federal court has ruled that California regulators must comply with a Drug Enforcement Administration (DEA) subpoena demanding information about marijuana businesses.”
    “The DEA initially asked for unredacted documents concerning three licensed cannabis distributors and people associated with the businesses last year. But when officials with the California Bureau of Cannabis Control didn’t turn them over, the federal agency issued the subpoena in January. The state declined to comply, prompting the feds to take the dispute to court.”
    United States District Court, Southern District of California response to the DEA and California cannabis case (Case 3:20-cv-01375-BEN-LL Filed 08/31/20)

  5. Update says:

    (1/14/21): “The U.S. Census Bureau has announced that it plans to begin collecting data on marijuana tax revenue generated by state governments around the country.”
    “The federal agency tracks state tax data as part of quarterly reports it issues to provide benchmark financial indicators and inform economic research. Moving forward, it intends for those documents to include cannabis tax data, it said in a notice set to be published in the Federal Register on Friday.
    Legalization advocates said the federal move will help to further legitimize the marijuana industry.”

  6. Prop 215 says:

    California’s legal weed industry can’t compete with illicit market : Local government opposition, high taxes and competition from unlicensed businesses are complicating the state’s push to build a thriving legal market.
    “Rather than make cannabis a Main Street fixture, California’s strict regulations have led most industry operators to close shop, flee the state or sell in the state’s illegal market that approaches $8 billion annually, twice the volume of legal sales.”

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