legalize marijuana taxes

Legalization of marijuana under consideration in Illinois.

Could legalizing the recreational use of marijuana solve Illinois’ ongoing budget woes? Perhaps.

Seven states and Washington D.C. have already made sales of recreational pot legal: California, Colorado, Maine, Massachusetts, Nevada, Oregon, and Washington. Illinois could be next. Identical measures (SB 316 and HB 2353) seeking to legalize marijuana are currently under consideration in the Illinois Legislature.

States are embracing legalization largely for its revenue-generating potential. Illinois SB 316 sponsor Sen. Heather Steans says that “prohibition is a financial hole in the ground.” By contrast, legalization and regulation would “generate hundreds of millions of dollars per year in new revenue for our state” and take money out of “the pockets of criminals and cartels.” The Marijuana Policy Project estimates that legalization in Illinois could generate $349 million to $699 million annually in tax revenue. The measures propose taxing wholesale sales of pot at a rate of $50 per ounce, and retail sales at 6.25 percent (the state sales tax rate).

Steans and Rep. Kelly Cassidy, author of the House bill, are not planning to push their bills for a vote this session. Instead, they’ll explore the issue with hearings and discussions. They hope to have enough support to move forward with a legalization bill next year (Chicago Tribune).

Since the federal government still lists cannabis as a schedule 1 controlled substance, going into the marijuana business is challenging. Under federal law, banks are prohibited from taking money linked to marijuana, even medical marijuana. One Colorado marijuana business has “cycled through 14 checking accounts in six years.”

It isn’t unusual for marijuana businesses to pay their taxes with “bags of bills.” Marijuana businesses are a magnet for crime — California has even had to increase security at tax collection offices. And as often happens with cash-based businesses, it is difficult for state and local officials to “make sure they are obeying the law and paying their taxes” (The PEW Charitable Trusts).

According to Andrew Freedman, director of Colorado’s marijuana coordination, “We don’t truly think we’ll see a solution unless there’s a federal solution.” It is unknown whether President Trump’s administration will attempt to change the status quo or maintain it.

photo credit: mind if i do a j? via photopin (license)