A 10% excise tax built into sales of recreational marijuana to adults 21 years and older – a provision included in a Northeast Ohio legalization law that lawmakers intend to introduce in the coming days – could be additional Generate tens of millions of dollars in government revenue.
The tax revenue would initially cover the cost of managing the tax and then “up to $ 20 million annually for two years for clinical trials to research the effectiveness of marijuana in treating veterans’ diseases and preventing veterans from suicide” , so the outstanding current language of the invoice will be introduced.
Here’s how the remaining revenue would be split from there:
• 15% to communities with at least one marijuana store, broken down by the number of stores in each community.
• 15% to districts with at least one marijuana store, based on the number of stores in each district.
• 35% for primary and secondary education (K-12).
• 35% for the repair and maintenance of roads and bridges.
So how much tax revenue are we talking about here?
Legislators say that they can only submit a reasonable estimate after the invoice has been completed.
However, employees of Rep. Casey Weinstein, D-Hudson, a co-sponsor of the law, point to Michigan as an example. Voters there approved recreational marijuana in 2018. The measure included a consumption tax of 10%.
The state’s first adult sales began on December 1, 2019. Between that point and September 30, 2020 – the end of fiscal 2020 for the state – Michigan recorded more than $ 341 million in recreational sales, according to the state’s Treasury Department.
Michigan reported that it generated more than $ 31 million in excise taxes in fiscal 2020 (it’s unclear why it wasn’t more than $ 34 million based on that 10%), which was a few months less than a full year of leisure sales.
You can read more about how they split this, which included nearly $ 10 million for 100 churches, here.
However, according to data from research firm New Cannabis Ventures, Michigan had total marijuana sales of $ 984.6 million in calendar year 2020. Medical devices were $ 474 million compared to adult sales of $ 510.7 million.
That would appear to be equivalent to more than $ 47 million in excise taxes generated that year.
Ohio had medical sales of approximately $ 219 million in 2020, the second year of the medical program. While the medical industry continues to grow here, sales in the early years were a bit disappointing compared to other markets – including Michigan, which more than doubled Ohio’s medical sales in 2020.
It is impossible at this point to say whether Ohio could see the same level of success as Michigan in terms of adult sales in the future.
That said, an earlier study by the charitable tax foundation found that the state could generate $ 221 million in annual revenue from an excise tax on recreational marijuana.
This analysis is based on a number of factors, including the assumption that people buying marijuana through the illegal market would participate in legal sales.
It also takes into account an excise tax rate greater than 10%, as Ulrik Boesen, researcher at the tax foundation, used average excise tax rates in states that already have them. States like Washington have a whopping 37% excise tax. The Montana tax rate is 20%. Michigan is obviously at 10%.
Here is the Recreational Agency Excise Tax Summary by state.
In either case, the excise tax would be in addition to the Ohio sales tax. (The statewide average Ohio tax rate would be 6.875%.)
Boesen notes that the federal legalization act, which is gaining traction, introduces a 25% excise duty, which also impacts state sales and excise taxes.
One concern could be excessive taxes, which could risk raising prices to levels that drive buyers towards the black market.
Ohio’s proposed tax rate, Boesen said, seems more reasonable than the stiff rates in other markets, which may have to readjust rates if a federal excise tax is added.
You can read more about the proposed law to legalize marijuana here.
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