‘Half-baked’ Illinois marijuana roll-out costs state $600M

April 20, 2022

Illinois’ high marijuana taxes, license mistakes hurt revenues while illegal sales thrive

PRESS RELEASE from the
ILLINOIS POLICY INSTITUTE

CONTACT: Micky Horstman (312) 607-4977

‘Half-baked’ Illinois marijuana roll-out costs state $600M
Illinois’ high marijuana taxes, license mistakes hurt revenues while illegal sales thrive

“half-baked,” and created an overregulated and overtaxed market.

The Illinois Policy Institute found high cannabis taxes and restrictive licensing have cost the state $600 million in potential revenue, while allowing the illegal market to thrive.

In 2021, Illinois brought in just $317 million from cannabis taxes, despite a surge of demand for cannabis during the COVID-19 pandemic. That fell far short of the bottom range outlined in a study commissioned by Illinois lawmakers in 2019, which estimated Illinois could produce $440 million to $676 million in annual tax revenue.

“Illinois’ legal cannabis market is underperforming and not living up to proponents’ goals. The most restrictive licensing regime in the nation and a complex system of high, multi-layered taxes explain why,” said Adam Schuster, vice president of policy for the Illinois Policy Institute. “If Illinois wants to reap the benefits of legal cannabis by maximizing its tax revenue and reducing illegal sales, it should lower and simplify its cannabis taxes as well as remove the cap on licenses.”

Schuster points out the average price per ounce of high-quality marijuana in Illinois, pre-tax, is higher than in any other state with legal recreational use. When legal cannabis is more expensive, consumers may be more likely to pursue cheaper alternatives from illegal sources.

Fast facts on weed taxes from the Illinois Policy Institute: 

  • If Illinois’ cannabis revenue collections matched Colorado or Washington, proportional to the size of their economies and population, it could bring an additional $600 million annually.
  • Compared to other states with legal cannabis, Illinois’ cannabis revenues are the second lowest in the nation proportional to the size of its economy and per capita.
  • Illinois has the lowest number of marijuana-related business licenses per capita of any legal state.
  • Illinois’ cannabis taxes are the third highest on average and, because of complex multi-layer taxation, can be the highest for some products.
  • Illinois is the only state to impose higher taxes based on the potency of the product, despite no clear link to consumer safety.
  • Illinois is one of three states to apply taxes at the wholesale level as well as at the point of sale. Businesses generally pass these taxes to the consumer, increasing the cost of the product.
  • Research shows that higher prices and higher taxes help bolster black market sales, undercutting the crime reduction goals of legalization proponents.

To read more about Illinois’ marijuana sales, visit illin.is/smoke.

For bookings or interviews, contact media@illinoispolicy.org or (312) 607-4977.