State governments must be loving 4/20 almost as much as Tax Day

If you smell something musky in the air today and see puffs of smoke, don’t be alarmed. Today is 4/20, an unofficial holiday for those who like to partake in marijuana. These days, legal weed is a big business, which brought in over $3 billion in tax revenue for state governments in 2022 alone.

A new tool from the United States Census Bureau breaks down quarterly cannabis tax data from 2021 to now. In the final quarter of 2023, the western states of Washington, Alaska, and Colorado brought it the most moolah from marijuana as a percentage of their total tax revenue, according to the data product, which the bureau describes as “experimental.”

Washington brought in $113.4 million of tax revenue from cannabis sales for the quarter. The state’s total quarterly tax revenue was $8.2 billion, so marijuana makes up 1.37% of that figure.

Alaska takes home the silver medal. The Last Frontier’s total state tax revenue was $534 million for the quarter. Cannabis sales made up 1.32% of that figure, coming in at around $7 million.

Percentage wise, third but not least is Colorado. The Centennial State made $4.9 billion from quarterly taxes. Of that, $61 million was from Mary Jane, making it 1.23% of the total tax revenue.

In terms of raw tax revenue from cannabis sales, California is by far the top state, with $161 million for the quarter. Washington came in second, followed by Michigan and Illinois.

A brief history of legal weed in the United States

In 1996, California became the first state to legalize medical marijuana with the passing of the Compassionate Use Act. Colorado and Washington voters were the first to legalize recreational marijuana use in 2012. Today, 24 states, Washington, D.C., and Guam have all legalized recreational enjoyment of weed. At the federal level, marijuana still remains illegal.

The arguments for the legalization of weed are numerous. For one thing, taking it off of the street corners and regulating it creates a safer product—consumers actually know what’s in it. Decriminalizing weed also combats racist drug laws that unfairly target communities of color. There is also money to be made by growing, distributing, and selling marijuana. It creates jobs and boosts the economy.

In fact, a number of states (Arizona, Colorado, Maine, Massachusetts, Michigan, Montana, Nevada, New Mexico, and Oregon) made more money from marijuana than alcohol in the last quarter of 2023, according to the Tax Foundation. During that same time period, four states had more than 1% total tax revenue generated from cannabis excise sales taxes. Five states made between 0.5 and 1%.

These figures are only expected to grow. In 2021, municipal-bond strategists at Barclays predicted that cannabis tax revenue would reach $10-12 billion by 2030.