In the last fiscal year, Colorado’s tax revenue from marijuana outpaced that from alcohol or cigarettes, contributing $280 million to various government programs and services, including K-12 education and health care. This analysis was released by the state’s nonpartisan Legislative Council Staff (LCS) on Wednesday.
Despite a significant decrease in annual marijuana tax revenue over the past two years, cannabis sales continue to contribute more funds to Colorado’s budget than other regulated substances. The past year’s tax revenue from marijuana was nearly equal to the combined revenue from alcohol ($56 million) and cigarettes ($234 million). Cannabis tax revenue also exceeded that from non-cigarette tobacco products ($61 million) and nicotine products ($56 million) in the Fiscal Year 2022-2023. The LCS economic analysis further breaks down how the state is utilizing its cannabis tax revenue. The funds are distributed among several programs, including substance misuse treatment, early childhood literacy, youth mentorship and bullying prevention, law enforcement training, affordable housing, research, and illicit market interdiction.
For instance, the K-5 Social and Emotional Health Pilot Program received $2.5 million, while $15.3 million was allocated to Affordable Housing Construction Grants and Loans. The report indicates that about 37 percent of total spending from marijuana revenue was directed towards school funding and construction, while the Department of Human Services received about 20 percent for various programs, including those focused on behavioral health and addiction.
The revenue is derived from two distinct taxes imposed on adult-use marijuana products: a 15 percent excise tax and a 15 percent special sales tax. The total also includes revenue from the sale of medical cannabis products, which are subject to a 2.9 percent sales tax. Although the state’s total yield for the past year was down about $140 million compared to its peak of about $425 million in 2021, the revenue has returned to Fiscal Year 2018–2019 levels due to decreased sales. This is not the first time Colorado’s cannabis tax dollars have outpaced those of alcohol or cigarettes. Similar trends were observed in both Colorado and Washington State during the 2021–2022 Fiscal Year, with eight other states generating more tax revenue from marijuana than cigarettes during that time period. In other states, such as Arizona and Massachusetts, tax revenue from legal marijuana sales surpassed that from tobacco and alcohol combined in March 2022 and halfway through the fiscal year, respectively. Illinois also reported that cannabis taxes exceeded those from alcohol for the first time in 2021.
Recent polls indicate that adults consider marijuana to be significantly less dangerous than cigarettes, alcohol, opioids, and even technology. Additionally, more Americans have tried marijuana than cigarettes, with more people now actively smoking cannabis. In related news, a Colorado law permitting online marijuana sales officially took effect this month, over a decade after the state legalized the substance. Governor Jared Polis also recently signed legislation to enhance marijuana-related protections for working professionals in the state. In May, he signed another bill to create a regulatory framework for legal psychedelics under a voter-approved initiative. Polis stated in a recent interview that his state’s moves to legalize marijuana and psychedelics have resulted in a “very good” experience.
