State Tax Collections Could Add $2.3 Billion from Legal Marijuana Sales in 2020

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In the 28 states and the District of Columbia where marijuana use either for medical or recreational purposes is legal, state tax collections on legal retail sales is expected to reach $2.3 billion by 2020. That’s growth of more than three times expected 2017 tax collections of around $745 million.

About 85% of state tax collections in 2017 will come from direct taxes on recreational marijuana sales, and the remainder will come from various other taxes that apply to all retail sales in the states, including sales of cannabis for medical purposes.

According to cannabis industry research firm New Frontier Data, by 2020, tax revenues from recreational users of cannabis will grow to $1.8 billion, of which $1.4 billion will be from cannabis-specific taxes.

Giadha Aguirre De Carcer, CEO of New Frontier Data, said:

During this tough economy states are looking for any way to close their budget shortfalls and it appears that cannabis may hold an answer for them. New Frontier Data looked at the potential revenues that could be generated from state cannabis taxes and found that in this year alone, states could raise nearly $750 million and triple that number by 2020. These revenues will have a meaningful impact on state programs and provide governors with much needed breathing room in their budgets.

New Frontier Data also has estimated that the legal cannabis industry will create nearly 300,000 jobs by 2020. That’s about double the 150,000 jobs currently supported by the industry.

According to New Frontier Data, the legal cannabis market was worth an estimated $7.2 billion in 2016, and is projected to grow at a compound annual growth rate (CAGR) of 17%, a decline from 28% CAGR in 2016. The medical market is projected to grow at 13% CAGR through 2025, growing from $4.7 billion in 2016 to an estimated $13.3 billion in 2020. During the same period, adult use sales are projected to grow at a 25% CAGR, from $2.6 billion to $11.2 billion (through projections based solely on the markets having passed medical and adult use legalization initiatives as of January 2017, but not including assumptions for additional states that may yet pass legalization measures before 2025).