Ohio could see up to $403.6 million in annual tax revenue from adult-use marijuana sales if voters approve a legalization measure that could appear on the November ballot, a newly updated analysis projects.
The paper from Ohio State University researchers assesses the potential economic impact of cannabis legalization in the state, providing tax revenue estimates for the first years of sales based on an analysis of comparable state markets.
The analysis focuses on marijuana sales trends in neighboring Michigan because the state has a similar population and because its tax structure largely mirrors what would be implemented in Ohio if the legalization initiative is approved—but it also looks at sales in Colorado, Illinois, Nevada, Oregon, and Washington State from 2018-2023.
This is the second iteration of the report, which has been updated from a version published last year to account for two additional years of cannabis sales in the legal markets. The authors said they decided to revisit the earlier estimates given that it appears likely that Ohio voters will get to decide on legalization at the ballot this year.
What the researchers found is that Ohio stands to generate between $276.2 million to $403.6 million in annual cannabis tax dollars by the fifth year of sales. That lower estimate is the same as in last year’s prior report, but the higher end estimate increased by nearly $30 million in light of the additional years of sales data from the six states.
The reason for the range in estimates is that researchers used three different pricing models for the analysis, showing potential revenue if Ohio marijuana products were taxed at the same rate as Michigan, 10 percent higher or 20 percent higher.
“Though these projections are subject to various assumptions, the tax revenue experiences of other states support claims that Ohio is likely to generate hundreds of millions in tax revenues from a mature adult-use market,” the authors said. “For comparison, in FY 2021, Ohio casinos have generated gross tax revenues of over $300 million, so it is possible that cannabis sales in Ohio will generate tax returns comparable to those now collected through the gross casino revenue tax.”
“Ultimately, the amount of taxes collected will be highly dependent on what type of tax levels and structure would be ultimately adopted if Ohio legalizes adult-use cannabis,” the paper says. “At present, the Michigan tax structure, as well as the Ohio tax structure proposed in the citizen-initiated statute, reflects some of the lowest tax rates among all states that have legalized cannabis for adult use.”
It’s possible that the legislature could move to impose a higher tax on marijuana products, however, and that “might produce higher overall tax revenues,” the analysis reasons. That said, higher taxes could mean more expensive products, which “might make it more difficult to combat the illicit cannabis trade and might ultimately lead to decreasing tax revenues.”
“Tax revenue estimates for new cannabis markets, though necessarily speculative, can provide useful information for the public and policymakers considering adult-use reforms,” it concludes. “Whatever tax structure is adopted, our analysis suggests it is reasonable to predict that Ohio would collect hundreds of millions in annual cannabis tax revenues from a mature adult-use cannabis market. But the amount of tax revenue collected would likely still represent a small percentage of Ohio’s $60+ billion annual budget.”
As the paper points out, revenue from cannabis generally increases at a rapid rate in the early years of adult-use legalization being implemented, but it tends to fall off as state markets mature, especially if prices fall.
From 2021 to 2022, four of the states they reviewed that had more established cannabis markets saw cannabis tax revenue decline, from -3 percent in Nevada to -14 percent in Colorado. The states with the newest recreational marijuana laws, Michigan and Illinois, had the opposite trend, growing revenue by 81 percent and 47 percent, respectively.
In Ohio, the new analysis projects that cannabis revenue would be as high as $218.4 million in the second year of legal sales, rising to as much as $305.7 million in year three and $366.9 million in year four, before hitting the $403.6 million mark in the fifth year.
So far in 2023, several legal cannabis states have seen consistent, record-breaking monthly sales.
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For example, Michigan marijuana sales reached a new monthly record of about $277 million in July. That beat the prior record set in June by more than $16 million.
Four Northeastern states—Connecticut, Maine, Massachusetts and Rhode Island—also each hit new records for cannabis purchases in July.
Illinois retailers sold $140 million worth of recreational marijuana products in July—the strongest sales of the year and second highest monthly total for the state since the adult-use market launched in 2020.
Maryland legal cannabis sales also hit a high of $87.4 million in July, the first month since the recreational market launched, state data shows. In the first weekend of adult-use sales alone, the state yielded over $10 million in combined medical and recreational purchases.
Missouri retailers have been selling about $4 million worth of marijuana per day on average since the state’s adult-use market opened up in February—and the state saw a record $121.2 million in cannabis purchases in June.
Back in Ohio, advocates are confident that the cannabis legalization initiative will make the ballot. They came up short by 679 signatures after turning in a batch of hundreds of thousands of petitions last month, but they managed to collect thousands more during a 10-day curing period that they believe will fill the gap. The campaign is awaiting confirmation from the secretary of state’s office that they were successful.
A USA TODAY Network/Suffolk University poll that was published in July found that about 59 percent of Ohioans support legalizing the possession and sale of cannabis for adults 21 and older. Just 35 percent are opposed.
Meanwhile, bipartisan Ohio lawmakers filed a bill to legalize marijuana in May, offering the legislature another opportunity to take the lead on the reform. But it has yet to advance, and now the stage is set for voters to make the choice.
Ohioans have made clear that they’re ready for a policy change during elections in multiple recent cycles. To date, more than three dozen Ohio localities have enacted decriminalization through the local ballot.
Last November, for example, voters five more cities approved local marijuana decriminalization ballot initiatives. And during a primary election in May, voters in Helena similarly enacted the reform.
The post Ohio Could See $404 Million In Annual Marijuana Tax Revenue If Voters Approve Legalization This November, Analysis Finds appeared first on Marijuana Moment.
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