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Massachusetts Cannabis Tax Revenue Exceeds that of Alcohol

Massachusetts cannabis tax revenue exceeds that of alcohol, and they’re not the only ones. Read on for details

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Need news now? Here’s the short version of what we’re covering today:

  • At the end of 2021, cannabis tax revenue earned Massachusetts $74.2 million while alcohol accounted for just $51.3 million.
  • While alcohol sales are still high, the stark difference in tax revenue sheds light on changing consumer habits. Plus, the increase in cannabis tax revenue is happening in several states.
  • Tax dollars earned through adult-use cannabis are being used in a variety of ways by different states. Most are funneling funds back into public programs (schools, healthcare, criminal justice, etc.).

Massachusetts Cannabis Tax Revenue Surpasses Alcohol by Millions

When it comes to tax revenue, cannabis is proving to be a much larger money-maker than alcohol in Massachusetts. Adult-use cannabis started in November of 2018 in Massachusetts and overall it’s brought the state $2.54 billion since then. 

At the end of 2021 cannabis earned Massachusetts $74.2 million while alcohol taxes accounted for just $51.3 million. WCVB stated, “The excise tax of 10.75% on recreational cannabis is only about half of the total tax revenue being collected for cannabis. There is also a 6.25% state sales tax, plus a local tax of up to 3%. It all added up to $208 million in total tax revenue last fiscal year.” 

While alcohol sales are still high, the stark difference in tax revenue sheds light on changing consumer habits.

Are Consumers Drinking Less and Consuming More Cannabis?

One Boston resident, interviewed by WCVB, said “"In my circle — I'm 30 — people drink less alcohol and smoke more weed, at least in Massachusetts." 

In the same article, Mikayla Bell, the community outreach manager for one of the largest cannabis retailers in the state said, “I think that people are looking for an alternative to make them feel better. Oftentimes people are turning to alcohol for relief. And now they found another product without the hangover, without the calories."

The phenomenon of avoiding alcohol but still consuming cannabis (sometimes called Cali-sober) seems to be traveling from the west coast to elsewhere in the U.S. This could be for a variety of reasons (celebrity endorsements, pandemic-era trends, etc.), but it’s also not clear how many consumers are JUST purchasing cannabis vs. both alcohol and cannabis.

What’s more, the increase in cannabis tax revenue is happening in several states.

Cannabis Tax Revenue Exceeds Alcohol in Several States

In 2021, cannabis tax revenue exceeded that of alcohol by roughly $100 million in the state of Illinois. Before that, according to a report from the Marijuana Policy Project (MPP), Washington state officials reported for the fiscal years of 2019 and 2020 “that revenue from the 37% cannabis retail tax outpaced alcohol tax revenue, despite the fact that many more adults consume alcohol than cannabis.”

In that same report, MPP said, “As of December 2021, states reported a combined total of $10.4 billion in tax revenue from legal, adult-use cannabis sales. In addition to revenue generated for statewide budgets, cities and towns have also generated hundreds of thousands of dollars in new revenue from local adult-use cannabis taxes.” 

How Are Cannabis Tax Dollars Being Used?

In states with adult-use cannabis, regulators are being careful with how tax dollars are invested. 

Illinois, for example, is investing $3.5 million in organizations aimed at lessening violence via intervention programs. Lt. Governor Juliana Stratton tweeted, “These grants will increase programming, job opportunities, provide safe spaces, and other positive outlets for youth and emerging adults. When we empower people, we change lives and communities.”

Adult-use cannabis tax revenue brought California roughly $817 million during the 2020-2021 fiscal year, which is a 55% increase over the prior fiscal year. During the summer of 2021, California officials awarded about $29 million to nonprofit organizations. The Governor's Office of Business and Economic Development tweeted, “These grants will help advance health, wellness, & economic justice for populations & communities harmed by the War on Drugs.”

Other states, like Colorado, are reserving a portion of their cannabis tax revenue for public school systems. According to the MPP, for every $1 billion in collected revenue, Washington funnels nearly $600 million “into public health initiatives, influencing a fund that provides health insurance for low-income families.”

In Oregon, “Of the cannabis-related tax revenue it collects, the state distributes 40% to public schools, 15% to law enforcement, and 25% to mental health and treatment programs.”

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