EAST LANSING – If passed on November 6, Proposal 18-1 that would legalize the recreational use of marijuana would generate between $81 million and $175 million in additional sales and excise tax revenues in 2023, which is when the market would likely reach maturity.
While tax collections on recreational marijuana would increase by at least $127 million, this would be offset by reductions of $31 million in medical marijuana excise tax revenues and cannibalization of $16 million in sales tax revenues from medical marijuana and other sources.
Net Effect of Proposal 18-1 on State Sales and Excise Tax Revenues (millions)
Source: Anderson Economic Group analysis using base data from AEG AndCan Index and Proposal 18-1
For an interactive visualization, click here
The Tax Note also includes a breakdown of how these tax collections are distributed to public entities, such as different state government funds, schools, municipalities, and counties. In 2023, the School Aid Fund would receive at least $54 million in additional funding, Michigan’s roads and bridges could receive an extra $27 million, and local governments would receive $10 million under a low-growth scenario. However, state restricted funds would see a loss of about $13 million.
“Legalizing recreational cannabis would increase annual sales and excise tax collections to the tune of over $80 million under a mature market,” said Traci Giroux, co-author of the Tax Note and Consultant at Anderson Economic Group. “Schools, roads, and local governments in aggregate would receive this funding under Proposal 18-1.”
Anderson Economic Group’s Tax Note is the first assessment of Proposal 18-1 that does all of the following:
- Accounts for cannibalization of medical marijuana sales, alcohol beverages, and other goods due to legalizing recreational marijuana;
- Accounts for reduction in tax revenues due to repeal of the 3% excise tax on medical marijuana; and
- Provides a breakdown allocating the net effects on various government entities receiving state sales and excise tax revenues.
The Tax Note utilizes analysis from Anderson Economic Group’s AndCan Index, a proprietary monthly index that tracks consumer demand for U.S. cannabis products. Launched in June 2017, the AndCan Index builds on over three years of comprehensive coverage of the U.S. cannabis industry.
Anderson Economic Group’s Tax Revenues from Legalizing Recreational Marijuana Under Michigan’s Proposal 18-1 evaluates the net effect of legalizing recreational marijuana on marijuana-related tax collections.
About Anderson Economic Group
AEG has provided independent analysis of tax, business climate, and other policy issues for numerous states, universities, large corporations, businesses, trade associations, labor unions, cities, and counties since 1996. A large number of reports, including past business tax burden studies, are available on the company web site: www.AndersonEconomicGroup.com. AEG has offices in East Lansing, Michigan and Chicago, Illinois.