New York's Legal Cannabis Tax Revenue
I was pleased to see that a recent budget projection from governor Kathy Hochul, New York, estimates that the state could collect $1.25 billion in tax revenue from legal cannabis sales over the next six years. This announcement means that NY will include these revenue projections in next year's budget.
As the ongoing COVID-19 pandemic calls for increased social and economic support, I believe the state of New York will continue investing in projects that help cultivate more tax dollars to reinvest into communities negatively impacted by the drug war and public sectors, including medical centers and state infrastructure.
As a reminder, the state of New York legalized recreational marijuana in 2021. When looking forward to 2023, New York's state budget estimates $56 million in legal cannabis revenue. Detailed in an 85-page briefing book within the governor's office, this projected tax revenue includes the potential to make $40 million from licensing fees for cannabis businesses alone.
Six years from now, the budget projection predicts an outcome of $1.25 billion in cumulated revenue from taxes and fees related to recreational cannabis. This number is expected to increase with the inevitable influx of retailers, processors, and producers. In 2024, legal cannabis tax revenue is expected to amount to $95 million. Meanwhile, the fiscal year 2028 could reach 363 million dollars in legal cannabis tax revenue.
The Potency Tax
Recently, I was asked by High Times Magazine to comment on the state's optimistic projections and clarify the concept of a cannabis “potency tax,” an innovative strategy for taxing cannabis based on product potency.
New York has included new tax regulations related to the legal cannabis industry, including a 9% excise tax and a 4% tax for local governments; this also refers to their isolated tax on THC, the potency tax, increasing the amount of taxation with the increased potency of the product. In other words, the higher the level of THC within a legal cannabis product, the more they collect taxes related to it.
Keep in mind that this will vary depending on the form of the cannabis product and the amount of THC within it. For example, an edible containing 100 mg of THC will cost more than one containing 10 mg of THC. Also, the THC tax relies on wholesale transactions, specifically referring to transfers between distributors and retailers.
It's a great win for NY, as the potency tax will remain a constant revenue generator due to the consistent amounts of THC within certain products, whether they're raw or unprocessed. This tax protects the state against the unpredictability of crop cultivation and consumers' preferences for legal cannabis products. Essentially NY will not feel any financial pinches, regardless of the cannabis industry's fluctuations in the market space.
This state-produced projection data is a win for New York and the cannabis industry in the US as a whole. A certain portion of these taxes will also contribute to development projects for towns, villages, and cities. Although the official launch date for the legal sales for adult-use cannabis is yet to be released, it's predicted to occur within 2022 or early 2023.
As a longstanding marijuana defense attorney with decades of experience, I'm happy to see public officials embracing the positive impacts that the cannabis industry can have on our state governments and citizens.