HARRISBURG (TNS) — Although it won’t have an impact on the 2023-24 budget, one item in the fiscal documents released Tuesday by Gov. Josh Shapiro points to what could be a major wildcard in later budgets — legalized marijuana.
Shapiro’s budget — his first as governor — includes among its supporting documents a list of revenue modifications that are being considered by the administration as part of its projections of state income.
Among them is what the administration is referring to as an “adult use cannabis tax” resulting from marijuana legalization. This is assumed to be a 20% tax on wholesale prices, with sales commencing in 2025, according to the budget document.
Administration officials cautioned that this remains a rough and uncertain part of Shapiro’s overall budget plans for his term as governor — but was worth including given how impactful it could be in the coming years. Shapiro has previously endorsed marijuana legalization and taxation.
Shapiro’s budget materials project revenues as far out as 2028, but do not feature any itemization that would indicate how much revenue may or may not come from legalized marijuana.
Shapiro is not alone, however, in signaling interest in the financial boost of legalized marijuana; a growing number of lawmakers have pitched bills to do so, including some Republicans who have traditionally been more opposed to legalization.
“I think a lot of that is going to depend on him,” Sen. Mike Regan, R-York, said of Shapiro with regard to legalization. “He’s going to need to sell it.”
Regan, the chair of the Senate Law & Justice Committee, has been a proponent of marijuana legalization in order to reduce violence associated with the drug trade and to raise revenue for law enforcement. He sees cannabis income as a way to fund the Pennsylvania State Police and reduce the agency’s dependence on state gas tax revenues.
Shapiro also shares the goal of finding new ways to fund the state police. One feature of his budget proposal unveiled Tuesday is to use cuts in the state’s tobacco, liquor, and other similar funds to build up a separate fund for the state police and in turn free up gas tax revenues for infrastructure projects.
Speaking shortly after Shapiro’s budget details were released, Regan said he had not spoken with the governor’s office about the matter and cautioned that he felt a 20 percent tax rate may be too high, driving up prices and encouraging people to continue to buy marijuana illicitly.
Legalized marijuana has proven to be a revenue driver in states that have adopted it, although tax structures vary widely. There are also thriving underground markets that circumvent taxation in several states where recreational marijuana is legal.
Arizona charges a 16% tax on marijuana at retail, on top of the state’s normal 5.6% transaction tax, equivalent to a sales tax. Legalized marijuana brought in $490 million over the last two years, according to Arizona’s revenue department.
Illinois charges a 7% tax at wholesale, and another 10% to 25% at retail, depending on potency; the state is now seeing $445 million per year from marijuana legalization, according to the Illinois governor’s office.
