Research Insight into Legal Cannabis Tax Allocation
Research conducted by the Moritz College of Law at The Ohio State University has disclosed that the lion’s share of local tax intake from legalized marijuana is allocated to law enforcement and overall municipal coffers, comparatively neglecting sectors such as educational and health initiatives. As the first comprehensive inquiry into the fiscal practices of locales with legal cannabis, the study provides insight into current expenditure trends and highlights the necessity for enhanced fiscal management and strategy at the state level.
The investigation scrutinized the states of Michigan, New Mexico, and Oregon—all with operational adult-use cannabis markets—as well as Ohio, where despite the start of sales in August, municipalities haven’t yet designated the tax collections from these sales. Out of 501 localities surveyed in these states, roughly one out of three shared details on the deployment of these revenues derived from cannabis.
Summary of Findings and Monetary Trends
According to collected survey responses, the most common strategies for the utilization of marijuana tax proceeds include funneling these funds into the general pot of financial resources for discretionary use, bolstering local law enforcement budgets, and enhancing parks and recreational services within communities. Small jurisdictions, particularly those with populations under 25,000, which constituted 76 percent of the surveyed pool, predominantly reported the integration of these monies into their general funds, with 60 percent of all participants acknowledging this practice.
Nevertheless, disparities were evident among the different states involved. Oregon saw a high 78 percent of local bodies reporting the use of general funds for marijuana tax income, whereas in Michigan, this figure was significantly lower, falling below the 50 percent mark. While “26 percent of respondents conveyed that marijuana tax dollars are allocated for specific projects,” there was a portion—12 percent—who stated that only a fraction of these funds were earmarked, with the remainder being absorbed into general funding pools.
The study further probed into the outlook of how these funds ideally should be appropriated, finding a general consensus that echoed prevailing expenditure preferences. It also cast a look at Ohio’s forthcoming plans for the distribution of tax revenues, highlighting that less than a third of its municipalities had debated spending intentions, with approximately 10 percent not engaging in any form of discourse on the issue.
With Ohio initiating legal non-medical marijuana transactions amassing over $131 million in revenue, subject to a 10 percent tax, the study underscores the advisement for the state to observe and ensure responsible administration of these funds by local authorities. It draws attention to contrasting strategies seen in states like Illinois and New York, where efforts are made to channel resources toward neighborhoods most impacted by drug law enforcement.
The revealed data prompts contemplation over the sufficiency and congruence of present tax revenue assignment relative to community demands and posits suggestions for enhancements to inform forthcoming policy development. The Marijuana Tax Revenue findings warrant consideration of the balance between contributing to Police and General Funds and other community investment opportunities.
