Neighboring states give Illinois $ 10 million in cannabis taxes every month
It is common for states that legalize adult cannabis to bring in hundreds of millions of dollars in tax revenue that would otherwise flow into the illicit market.
Every month, US $ 10 million in taxes flow into Illinois from neighboring states. Illinois gladly accepts it.
What is less well known is how much tax prohibition states give to their neighbors under the rule of law. In other words, how many people in prohibited states travel to legal states to buy state-licensed cannabis? Data on this question are difficult to come by – with one exception.
Illinois is one of the legal states and tracks monthly sales to visitors outside of the state.
Illinois is bounded by five prohibited states: Wisconsin, Iowa, Missouri, Kentucky, and Indiana. And guess what, out of state visitors buy a lot of legal weed in Illinois.
That is money that they could otherwise spend in their home states. How much tax money is bleeding from prohibited states? Thanks to Illinois, we now know.
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Visitors made 26% of the purchases last year
In 2020, about one in every four Illinois adult cannabis purchases in Illinois was made by residents outside of the state. That year, Illinois brought in a total of $ 217 million in tax revenue (cannabis taxes plus state sales tax) on $ 669 million in adult cannabis sales.
That means visitors outside of the state added $ 56 million to the Illinois state coffers in 2020. And that during a pandemic year – when most people restricted their travel outside of the state.
Last month it was 30%.
This year the number of visitors is increasing as Covid shutdowns decrease. In March 2021, non-state buyers accounted for more than 30% of the $ 109 million in adult cannabis sales in Illinois. That means that consumers from other states gave Illinois US $ 10.5 million in tax revenue in a single month.
Bordering states are well on their way to donating $ 120 million to $ 150 million to Illinois this year.
Total Illinois sales are expected to increase as more stores open this year. So Wisconsin, Iowa, Missouri, Kentucky, and Indiana are well on their way to handing over $ 120 million to $ 150 million of their collective tax dollars to Illinois in 2021.
Frontier businesses are very popular
Of course, not all of these visitors come from neighboring countries. However, data from other rule of law states, including Washington and Oregon, has shown that businesses along the border with a prohibition state – Idaho – tend to generate excessive sales volume.
This is something other states are thinking about in similar situations. Pennsylvania will soon be bordered by two constitutional states, New Jersey and New York. Utah will soon be bordered by four constitutional states: Nevada, Arizona, New Mexico, and Colorado. In New Hampshire, tax revenue is already flowing across the Maine and Massachusetts border. And in Ohio, a lot of tax dollars are flowing north into legal Michigan.
We do not know exactly how much tax revenue flows from these prohibited states into neighboring constitutional states. Thanks to Illinois and its data, we now know that it can easily reach $ 10 million a month. And that could move some voices towards legalization in state legislatures where budgets are tight.
Leafly Senior Editor Bruce Barcott oversees news, investigations, and feature projects. He is a Guggenheim Fellow and author of Weed the People: The Future of Legal Marijuana in America.
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