Several states are making a lot more off their cannabis markets than others
A decade ago, Colorado and Washington became the first states to allow recreational marijuana use. Since then, many more states have wanted to join the trend, especially after seeing how the tax revenues were quite juicy. Some jurisdictions have fared better than others, and a new survey has ranked which states have imposed the highest tax rates and benefited the most since legalizing the market.
Urban-Brookings Tax Policy Center authors Richard Auxier and Nikhita Airi shared a report a couple of months ago called “The Pros and Cons of Cannabis Taxes.” Through the findings, they found that Alaska’s recreational cannabis taxes are the highest in the country and New Jersey’s are the lowest.
The comparison is a little hard to understand. Currently, there are no two states in which recreational marijuana is legal and, at the same time, have a similar approach to the taxes earned through that market. “Each state is a special and unique flower,” said Auxier, a senior policy analyst at the Tax Policy Center.
States, depending on the laws they put in place from the start, handle taxes differently. There are weight-based taxes, excise taxes, and even power taxes, and wholesale taxes and their respective rates. All these discrepancies in the different jurisdictions have made it impossible to know a real comparison of marijuana taxes for adult use in the United States.
Because of this, research analysts Airi and Auxier decided to come up with a creative approach to examine cannabis taxes in various states in their report. As of September 2022, there were 19 states where adult-use taxes were enacted, which were used to compare their taxes on a retail purchase of 1 ounce of flower.
Assuming that an ounce of cannabis flower before tax in each state is $100, Alaska had the highest estimated tax. It is the highest weight-based tax rate in the United States. Washington state had the second-highest total tax on a hypothetical ounce at $47.25. The results also indicated that New Jersey and Michigan had the lowest total taxes on a hypothetical ounce at $14.32 and $16, respectively.