Recreational marijuana & sin tax: is the revenue reliable?

Updated: Mar. 26, 2021 at 1:00 PM EDT
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ALBANY, N.Y. (WWNY) - With a deal to legalize marijuana in New York almost final, state officials are hoping lighting up will help bring in the big bucks in so called “sin taxes”. But one expert says that may not happen.

If you agree or not, New York state is moving forward with legalizing marijuana.

According to the New York Medical Cannabis Industry Association, the state market is estimated to be $4.6 billion.

But, getting to that number can pose challenges

“It’s only been a few years since legal sales have started and so there is no evidence that in the long term this revenue is sustainable and reliable,” said Alexandria Zhang, officer, Pew Charitable Trusts.

Zhang’s team specializes in sin taxes, or money brought in from sales of tobacco, alcohol and now even marijuana.

The New York Times reports the state will tax pot at 13 percent - 9 percent to the state and 4 percent to the local governments.

But, Zhang says those revenues depend a lot on consumer preferences.

“An extreme example is tobacco and cigarette taxes where we have certainly seen the public health aspect and campaigns really pushing down tobacco cosumption over the last few decades,” she said.

Zhang says sin tax revenues can have short and long term peaks that can be hard to predict, leaving lawmakers with some tough decisions.

“Each state has important priorities they want to fund, you know, evaluate if it’s a one time investment or if it’s a recurring program,” she said.

Zhang says another challenge for the legal market is the black market where marijuana is typically cheaper than the taxed product.

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