How does Illinois spend millions in cannabis cash?

How does Illinois spend millions in cannabis cash?

In Illinois’ fifth year of recreational cannabis sales, it’s already made nearly $180 million in tax revenue. But it is losing sales to neighboring states with lower taxes.

April 20 marks Illinois’ fifth high holiday of legal cannabis sales, and Illinois has already netted nearly $180 million in fiscal year 2024. From fiscal year 2022 to 2023, Illinois’ cannabis revenue slightly declined.

But where does that money go?

Administrative expenses: This refers to costs for agencies tasked by state cannabis laws with overseeing marijuana sales, such as the Illinois State Police and the Department of Agriculture.

ReinvestmentRestore Reinvest Renew (R3) grant funds are designated for Illinois communities that have been affected by “violence, excessive incarceration, and economic disinvestment.”

Statewide budget support: The Budget Stabilization Fund, known as the “rainy day” fund, and general revenue funds get the same amount as community reinvestment receives each year.

State lawmakers have full discretion over general funds, so millions of those cannabis dollars likely go to pensions, which took up 20% of general funds in the most recent budget.

Out-of-state revenue is trending downward. That is partially because Missouri legalized recreational cannabis with the lowest excise tax rate in the nation, which is a magnet for central Illinoisans trying to save money on April 20.

Michigan also taxes cannabis at a flat 10% rate of retail price. These lower rates have led to Michigan surpassing Illinois, where revenue has stagnated since 2021.

U.S. Census Bureau data shows Michigan’s lower excise tax rate has led to their quarterly revenue surpassing Illinois in 2023, the most recent data available.

What is the tax rate for cannabis?

Just like products with a higher alcohol by volume percentage are hit with higher taxes, products with a higher THC percentage get a higher tax of up to 25%. Sales taxes are also added, meaning the price of a potent product in Chicago gets up to 41.25% higher.

High taxes can push people to the illegal market, using unregulated products that provide no tax revenue. But with lawmakers’ addiction to taxes, Illinoisans near Missouri or Michigan can choose to celebrate 4/20 with cheaper out-of-state weed.

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