Issues with Taxing Marijuana at the State Level

Source: Richard Phillips, Institute on Taxation and Economic Policy (ITEP), May 2015

From the press release:
While the focus of marijuana legalization debates is rightly on the potential health and criminal justice impacts, the decision to legalize marijuana also has real implications for state and local revenue.

Over the past two decades, 23 states and the District of Columbia have enacted laws allowing the production and use of marijuana for medical purposes. Taking this one step further, Colorado, Washington, Alaska and Oregon are moving forward with systems that will permit the general production and purchase of retail marijuana. California, Maine, Nevada and others may soon follow in the coming years.

Given the increasing prominence of these issues, the Institute on Taxation and Economic Policy (ITEP) has written a new report providing a comprehensive overview of best practices for taxing marijuana and the potential impact these taxes could have on state and local revenue.

One of the central findings of the ITEP report is that predicting how much money state and local governments could raise from marijuana taxes is extremely difficult. To start, no jurisdiction in the world has legalized marijuana in modern times for a sustained period of time so there is not much historic data to go on. ….