Tobacco vs Cannabis: why doesn't the government want our money?
Legalizing cannabis presents an opportunity for the federal government to tap into a valuable source of revenue. (Benzinga)
Instead of relying solely on sales taxes, the integration of the cannabis industry into the legal space can generate substantial personal and corporate income taxes.
This potential windfall has already been witnessed at the state level, where billions of dollars have been collected in tax revenue from adult-use cannabis sales. Since 2014, they have collected over $15.1 billion in tax revenue from adult-use cannabis sales, with 2022 alone generating more than $3.77 billion.
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Tobacco Vs. Cannabis
In both Colorado and Washington State, the cannabis tax revenue has surpassed tobacco tax revenue, with cannabis outperforming tobacco by 17 percent in Colorado and 44 percent in Washington State in 2021.
A recent report reveals that in Fiscal Year 2022, both Colorado and Washington State generated more tax revenue from marijuana sales than from alcohol or cigarettes. Despite a decline in overall tax revenue in both states, marijuana taxes still outperformed alcohol and tobacco.
Similar patterns were observed in states like Arizona, Massachusetts
and Illinois, where marijuana tax revenue exceeded alcohol or tobacco during specific periods. These findings shed light on the evolving dynamics of marijuana taxation and its growing significance in generating revenue for state coffers.
However, the current regulatory and taxation environment in the cannabis industry is challenging.
Tax Reform
Federal tax provision 280E unfairly burdens cannabis businesses by not allowing them deductions for their expenses. This, along with limited banking services and anti-business regulations, has caused economic distress for the industry. To unlock the full potential of the cannabis economy, tax reform is crucial.
According to a study by Cannabis research firm, Whitney Economics, reforming 280E would increase operator profitability, stimulate billions in economic activity and support employment growth.
Whitney's report shows that reforming 280E could increase operator profitability, cannabis employment and economic activity by $35.2 billion over a 10-year period.
Major Tobacco Players In Cannabis
Major players such as Philip Morris International, Altria Group, Imperial Brands and British American Tobacco are exploring opportunities in the cannabis market.
Altria invested $1.8 billion in Cronos Group, Imperial Brands invested in Oxford Cannabinoid Technologies and Auxly Cannabis Group and BAT invested in OrganiGram Holdings Alliance One International, now Pyxus International, acquired majority stakes in Goldleaf Pharm and Canada's Island Garden.
