The Cannabis Economy: Mapping the opportunities and threats of an emerging multibillion-dollar industry

The Cannabis Economy: Mapping the opportunities and threats of an emerging multibillion-dollar industry

By   –  Staff Reporter, Portland Business Journal

Federal legalization of cannabis would have far-reaching consequences.

It would clear the way for interstate sales, providing a potential lift for cannabis retailers and growers who have seen prices plummet. Those same businesses would have access to the banking services and tax deductions currently enjoyed by companies in other industries. And it would open the gates for billions in new capital.

The existing cannabis economy is difficult to map. There is no national repository of data. State data is rarely comparable and is murky as markets shift from medical to recreational sales.

Over the past few months, the Business Journal has worked to provide clarity, collecting tax, revenue and dispensary information from state governments, supplemented by research firms and other private sources.

Twenty one states and the District of Columbia allow legal recreational use with Maryland and Missouri voters just recently approving a ballot measure legalizing recreational sales. All but a dozen states allow medical use. To enable comparisons in the data to follow, the Business Journal estimated some sales figures by combining recreational and medical sales. (Hover over charts for more detailed information.)

The tax question

As of March, states reported a combined $11.2 billion in tax revenue from adult-use cannabis sales, according to the Marijuana Policy Project, including $3.7 billion in 2021. Rates vary widely, with similarly varying effects. By its sheer size, California hauls in the most revenue, but high rates are blamed for hampering growth of the legal industry. A grower tax was recently eliminated and the excise tax capped. It’s been a different story in Washington: Two years after adult-use sales began, 73% of product purchases had moved to the legal market, despite the highest excise tax in the U.S. Revenue surged past $500 million a year, topping alcohol tax collections.

A sampling of state programs

Setting up legal cannabis markets has proved challenging for states. No single model has emerged for regulation, licensing, testing, tax rates, equity programs and the like. With that in mind, Business Journal reporters nationwide provided highlights from their state programs.

A view from California

Voters approved adult-use cannabis in 2016, launching an effort to merge a new system with a two-decade-old medicinal program. Local governments can decide whether to allow cannabis businesses, and many have not done so. The state has collected more than $5 billion in tax revenue, but with fewer than 1,000 licensed dispensaries, industry growth has been stymied and the unregulated market has flourished. Gov. Gavin Newsom recently signed several bills intended to expand the legal market. One bill creates a process for possible interstate sales, and another prohibits employment discrimination based on cannabis use outside the workplace.

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