It has been over a decade since the first adult-use cannabis markets launched in Washington and Colorado in 2014. Since then, legalizing cannabis for adults has generated nearly $25 billion dollars in state tax revenue to invest in the needs of the states.
Twenty-four states have legalized cannabis possession for adults 21 and older. All but one of them — Virginia — have also legalized, regulated, and taxed cannabis sales. In two legalization states — Delaware and Minnesota — sales have not begun yet.
States have generated a combined total of more than $24.7 billion in tax revenue from legal, adult-use cannabis sales. In 2024 alone, legalization states generated more than $4.4 billion in cannabis tax revenue from adult-use sales, which is the most revenue generated by cannabis sales in a single year. In 2024, seven states collected over $200 million in adult-use cannabis taxes. Four of those states generated over $500 million in revenue, one of which collected over $1 billion.
States with legal, adult-use cannabis sales have allocated tax revenues to a variety of needs, including their General Funds and specific services and programs. Cannabis taxes have provided funding for Medicaid, education, school construction, housing, roads, early literacy, bullying prevention, behavioral health, alcohol and drug treatment, veterans' services, conservation, job training, conviction expungement expenses, and reinvestment in communities that have been disproportionately affected by the war on cannabis, among many others.
With states facing an uncertain fiscal landscape, strained budgets, and a possible economic downturn, legalizing and taxing cannabis for adults helps lessen the pain. Taxes on a single product cannot solve all of a state's financial challenges. But it helps. In several states, cannabis tax revenue brings in more than alcohol taxes.[77] In states with mature markets, adult-use cannabis taxes often amount to 0.25% to 1.5% of the entire state budget.[78]
$4.42 billion — the total state tax haul in 2024 for adult-use cannabis taxes — is enough to cover 582,000 people on Medicaid.[79] That's an average of more than 27,700 people in each of the 21 states that had adult-use cannabis sales in 2024.
Adult-use cannabis legalization also frees up law enforcement resources to focus on crimes with victims and creates thousands of new jobs. It is important to note that the financial impact of legalizing and regulating cannabis for adult use is one of the many benefits of legalization. In states that are home to 54% of the U.S. population, adults are now free to choose to use cannabis to relax or as an over-the-counter medicine for sleep, pain, and other ailments. Since states began legalizing cannabis, hundreds of thousands of individuals have been spared traumatic arrests,[80] possible incarceration, and criminal records that shut the door of opportunity. Meanwhile, teenagers' cannabis use rates decreased in most states after they legalized cannabis and moved sales to businesses that check ID.[81] Legalization also allows regulation, enabling potency labels and regulations for harmful pesticides, heavy metals, and molds. Voter support has grown as more states legalize cannabis.
You can view the state tax bracket breakdown here.
Source: MPP