Paul L. Caron

Monday, November 30, 2009

Projected Revenues From Marijuana Tax

Marijuana There has been much commentary on the revenue that could be raised by legalizing and taxing marijuana:

CNN has published a 50-state ranking of the potential tax revenues that could be raised by legalizing and taxing marijuana, based on state-by-state marijuana consumption, from Jeffrey Miron (Harvard University, Department of Economics), Budgetary Implications of Marijuana Prohibition.  The study projects $778.2 million from taxing marijuana; here are the Top 20 states:

  1. California ($105.4 million)
  2. New York ($65.5 million)
  3. Florida ($48.2 million)
  4. Texas ($46.6 million)
  5. Ohio ($34.8 million)
  6. Michigan ($32.4 million)
  7. Illinois ($31.6 million)
  8. Pennsylvania ($30.5 million)
  9. Washington ($22.0 million)
  10. Virginia ($20.9 million)
  11. North Carolina ($20.6 million)
  12. Georgia ($19.3 million)
  13. New Jersey ($19.3 million)
  14. Massachusetts ($18.4 million)
  15. Indiana ($17.8 million)
  16. Colorado ($17.6 million)
  17. Missouri ($15.6 million)
  18. Minnesota ($14.3 million)
  19. Oregon ($14.1 million)
  20. Maryland ($13.9 million)
(Hat Tip:  The Tax Lawyer's Blog.)

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What are the assumed tax rate? Is that tax rate realistic? NYC taxes cigerattes at a very high rate. If a similar tax was applied to pot, what would the revenue be?

Posted by: minipax | Dec 1, 2009 7:57:52 AM

The tax figures need to reflect that some states may benefit if they legalize while thier neighbors don't. For example, one could imagine if NY legalized while NJ and Conn. didn't, people would flock to NY to buy pot.

Posted by: minipax | Dec 1, 2009 7:51:05 AM

Is it moral to excessively tax a medicine?

Cannabis is and herb. In Colorado, there is sales tax and ONLY sales tax on herbs. The greed in this chart is offensive.

Posted by: Kathleen Chippi | Nov 30, 2009 11:21:22 PM

Where is Kansas? My experience (pre-law - now nobody tells me anything) is that every working man in KS is high by the time he gets in the van to come ad value to your real estate improvements. Or at least the ones under 40. They don't call it K-Weed for nuthin -

Posted by: kansas | Nov 30, 2009 9:24:09 PM

I would gladly pay a cannabis tax if it meant that I could have a choice over alcohol. In fact I believe millions of people would walk away from alcohol for good if they had a choice. For 72 years america has not had a legal alternative to alcohol and we have paid the price in deaths, violence, broken homes, child abuse and assaults. There is no one more obnoxious than a drunk! Are there any positives accorded to alcohol use? Cannabis is a SAFER alternative to alcohol in every respect. Given the light of day and an absence of lies and misinformation cannabis can benefit millions of americans, sick or not simply by giving us an alternative to the deadly, mind robbing alcohol.

Posted by: Denbee | Nov 30, 2009 7:35:22 PM

If you legalize marijuana and keep its costs low, you get more public health problems. If you tax it too much, you get smuggling and a black market. So keep it illegal, says George Will. Washington Post

State governments, misunderstanding markets and ravenous for revenue, exaggerate the potential windfall from taxing legalized marijuana. California thinks it might reap $1.4 billion. But Rosalie Pacula, a Rand Corp. economist, estimates that prohibition raises marijuana production costs at least 400 percent, so legalization would cause prices to fall much more than the 50 percent assumed by the $1.4 billion estimate.

Furthermore, marijuana is a normal good in that demand for it varies with price. Legalization, by drastically lowering price, will increase marijuana's public health costs, including mental and respiratory problems, and motor vehicle accidents.

States attempting to use high taxes to keep marijuana prices artificially high would leave a large market for much cheaper illegal -- unregulated and untaxed -- marijuana. So revenue (and law enforcement savings) would depend on the price falling close to the cost of production. In the 1990s, a mere $2 per pack difference between U.S. and Canadian cigarette prices created such a smuggling problem that Canada repealed a cigarette tax increase.

Posted by: Woody | Nov 30, 2009 6:44:57 PM

I think that the CNN numbers severely underestimate the number of tokers in Maine and other rural states.

Posted by: Nothanks | Nov 30, 2009 5:09:48 PM

Colorado Attorney General John Suthers issued a formal opinion Nov. 16 that the state can collect sales tax on medical marijuana. The opinion includes discussions of possible exemptions.

Posted by: Meredith | Nov 30, 2009 3:37:23 PM