Some say Illinois' high cannabis tax rate is costing state in revenue
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[April 27, 2023]
By Andrew Hensel | The Center Square
(The Center Square) – Illinois has the second highest taxes on cannabis
products in the nation, behind only Washington State, and some believe
the high amount is hurting the state's profits.
In March, Illinois generated $135 million from legal cannabis sales as
the state implemented a tax rate of 25% of the purchase price of
marijuana. In 2022, Illinois generated $445 million in tax revenue from
legal cannabis sales.
Bryce Hill of the Illinois Policy Institute said no matter where people
live in the state, the taxes will be high.
"In Illinois, you have tax rates at the state level just ranging from
just over 16% to slightly above 31%, depending on the type of cannabis
product you buy. You also have local taxes that can factor in on top of
that," Hill said. "In Chicago, for example, you have tax rates ranging
all the way from 41% to 26%."
Hill told The Center Square that some Illinoisans had found different
ways to purchase cannabis products to avoid paying the taxes.
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"Taxes within Illinois are second highest in the nation on cannabis, and
there's a very real effect that has on pushing customers back into the
black market rather than into the legal market," Hill said.
If Illinois implemented a similar tax rate as Colorado, they could see
almost $900 million in extra revenue. On a smaller scale, if the state
modeled itself after Nevada it could see hundreds of millions more in
revenue each year.
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"Even if we look at a lower propensity state like Nevada, we could be
collecting an additional $300 to $400 million there as well if we had
tax rates more in line with Nevada," Hill said.
Lawmakers have suggested cutting the tax so the state can stay
competitive and businesses can thrive in Illinois.
State Representative Mike Marron, R-Fithian, told the Center Square that
the taxes are a sign of an "inhospitable business climate."
"Illinois Democrats routinely create higher taxes, red tape regulations,
and focus on cultural battles instead of prioritizing fiscal
responsibility for all communities in the state," Marron said. "As a
downstate farmer located next to tax light Indiana, I know the
inhospitable business climate in Illinois better than most. I am not for
encouraging vices on anyone, especially our youth, but this outrageous
tax rate is symbiotic of the out-of-touch tax and spend progressive
policies."
State Rep. LaShawn Ford, D-Chicago, said people want a safe product, but
still suggested a change.
"The Illinois Cannabis Act has been the law since 2019, and the
transitional market sales have taken a blow in sales. If we want to
eliminate the illegal sale of weed, we have to be competitive with the
price and taxes of the legal product." Ford said. "It's clear by now
that people make the choice regardless of price. People pay for clean
products and services."
Cannabis products have been legal for sale and consumption in Illinois
for four years.
Andrew Hensel reports on issues in Chicago and Statewide.
He has been with The Center Square News since April of 2021 and was
previously with The Joliet Slammers. |