State fiscal estimates reveal potential annual tax revenues from cannabis legalization exceeding $165 million

Posted: June 14, 2019 by Gary Storck
Category: Legalization

The Wisconsin Department of Administration's Division of Executive Budget and Finance has released new fiscal estimates showing that if AB220, sponsored by Rep. Melissa Sargent (D-Madison) is enacted, there will be an annual increase in state revenues exceeding $165 million.

The department obtained the figures using data from the Colorado Marijuana Enforcement Division's annual report, the US Substance Abuse and Mental Health Services Administration and the US Census Bureau, to estimate marijuana usage rates and population differences. DOA estimates that a 15% excise tax imposed on sales to marijuana processors would raise an additional $65.1 million each year. The $65.1 million in new revenues would include cannabis moving from producer to processor to compassion centers.

AB220 also imposes a 10% excise tax on marijuana retailers. This tax rate is not imposed on sales of medical cannabis by compassion centers. Based on Colorado tax collections and adjusted by population and marijuana consumption differences between the states, the department estimates the retail tax would increase excise tax revenue annually by $67.1 million.

ln addition to the excise tax, retailers would collect and remit the 5.0% state general sales tax on marijuana sales, which is expected to yield another $33.6 million annually. The estimate also notes that county and stadium taxes made up 7.9% of the state sales tax in Fiscal Year 2018, if this ratio does not change, county and stadium tax revenues are expected increase an additional $2.7 million per year

Finally, under the provisions of AB220, each producer, processor, and retailer must obtain separate permits to engage in their marijuana-related business activities. DOA notes that assuming the department issues a total of 300 permits, new revenue for Fiscal Year 2019 is estimated to be $75,000. Further, assuming all permits are renewed, and a 20% increase in issued permits, fee revenue for FY20 from permits is estimated to be $615,000.

These numbers illustrate the potential economic benefits to the state of Wisconsin if lawmakers were to enact AB220 are very significant. They do not include benefits from creating new jobs and facilities for the cannabis industry.