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Making History: Cannabis Taxes Beat Alcohol in Legal States

Cannabis Taxes Outraised Alcohol by 20 Percent in States with Legal Sales Last Year

Ben Franklin famously said the only reliable things in life are ”death and taxes.” Cannabis legalization and taxation have brought new life to the revenues of legal states.


Making History: Cannabis Taxes Beat Alcohol in Legal States

Cannabis Taxes Smoke Alcohol Revenues

In 2021, the 11 states that allowed legal sales within their borders raised nearly $3 billion in cannabis excise tax revenue, an increase of 33 percent compared to a year earlier. While the tax remains a small part of state budgets, it’s beginning to eclipse other “sin taxes” that states have long had on the books. Most of the states that allowed cannabis sales last year raised more revenue from cannabis excise taxes than from alcohol excise taxes and profits (in the case of state-run liquor stores). In total, cannabis revenues outperformed alcohol by 20 percent by this measure. Source: Institute on Taxation and Economic Policy

Colorado: Cannabis Taxes Raise 7x More Excise Taxes than Alcohol

  • Alcohol excise taxes: raised a combined total of $53 million in 2021

  • Cannabis excise taxes: raised $396 million

But cannabis isn’t always the most lucrative “sin tax.” Last year, four of the 11 states that allowed for legal cannabis sales raised more revenue from alcohol. This includes Alaska, which has a higher alcohol tax rate than most states (15 cents per shot of liquor, for example), as well as three "control states” that generate profit directly at state-run liquor stores: Maine, Michigan, and Oregon. Moreover, because the alcohol industry is significantly larger than the legal cannabis industry, its overall tax contribution from general sales taxes, fees, various local taxes, and other levies surely surpasses that from cannabis.

What About Tobacco Tax Revenues?

  • Tobacco tax revenue and use is declining

  • U.S. adults who smoke tobacco drops 40 percent


Cannabis Tax Revenue Beats Tobacco in Colorado and Washington

  • Colorado Cannabis Tax Revenue: 17% higher than tobacco

  • Washington State Cannabis Tax Revenue: 44% higher than tobacco


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