Cannabis has long been considered to be one of the easiest ways to gain revenue for statewide projects. With all of the legalization occurring around the U.S. and internationally, it seems as though the popularization of cannabis is massively under effect. Michigan and New Jersey recently became the latest states to legalize the use of recreational cannabis which yet again, sets an example for the millions in tax revenues that can come with legalizing the substance.
Michigan as of November 6th, decided to legalize the use of recreational cannabis with more than 55% voting in favor of the substance. Taking place on December 6th, adults aged 21 or over will be able to walk into a dispensary and purchase cannabis at will.
In terms of New Jersey, the state recently passed a bill that would allow the use of recreational cannabis statewide. The bill still needs to be approved by the full legislature in the state as well as the Governor who is in full support of its passing. New Jersey, if the law is passed, will become the 11th state in addition to Washington D.C., to legalize the use of cannabis.
Recreational marijuana sales throughout Michigan are slated to bring in as much as $89 million in tax revenue during the fiscal year. 70% of that revenue will go to schools as well as repairing various infrastructure projects around the state with 30 percent going to municipalities with marijuana businesses domestically. New Jersey, on the other hand, will be able to rake in as much as $60 million before June of next year.
The two states have shown that they will have some of the lowest tax rates for cannabis throughout the whole of the U.S., which begs the question as to how high taxes for weed needs to be. In Michigan, sales tax will be 10% in addition to the 6% sales tax that already abounds. New Jersey will have a 12% sales tax with municipalities having the option to have as much as 2% more if they so choose.
These numbers may seem large to those unfamiliar with the industry but we have to take into consideration other states that have legal cannabis. Washington and Colorado both have between 30-37% taxes when combined which show the massive decrease for the new states working to legalize cannabis’ use.
The governor of New Jersey, stated that he would like to see as much as 25% tax on recreational cannabis which could mean as much as $300 million for the state in the long term. Others, however, are pushing for the lowered amount of 12% tax that is shown on the current bill. Senate President Steve Sweeney stated that “I believe this is a reasonable and responsible rate that is fair to the consumers and will generate adequate revenue to support the regulatory system.”
One of the issues with a high tax rate is that individuals may end up using the black market instead of the legally available cannabis due to a massive price increase. The hopes are that the state may stick with this lower tax rate to ensure the driving down of the black market as the industry continues to shift.