Study: Pennsylvania Could See $1B in Tax Revenues Over 5 Years from Adult-Use Cannabis

Adult-use cannabis sales in Pennsylvania could bring in more than $1 billion in tax revenues to the state over the five years following the rollout of sales, according to a report released last month by the Independent Fiscal Office (IFO).

The study suggests that were cannabis legalized for adult use this year, it could generate $41 million for the 2024-2025 fiscal year, $185 million for fiscal year 2025-2026, and more than $250 million in each subsequent year.

In February, Democratic Gov. Josh Shapiro included legalization in his budget proposal with a 20% tax. The IFO report includes the 20% tax rate and outlines how cannabis revenue would be spent by the state:

• $5 million to the Pennsylvania Commission on Crime and Delinquency for restorative justice initiatives;
• $5 million to the Department of Agriculture;
• $2 million to the State Police for enforcement;
• And $500,000 to the Department of Revenue for administration.

The remaining balance in the “restricted” account be transferred to the General Fund, the report says.

“Currently, all border states except West Virginia have legalized and impose tax on adult recreational use cannabis. These taxes were enacted recently in Ohio (2023), Maryland (2023), New York (2021) and New Jersey (2020). Because nearly all border states already tax recreational cannabis, the estimate is not increased for cross border sales that may have occurred in other states that were first to tax recreational marijuana in a region.” — IFO, “Analysis of Revenue Proposals,” March 2024

During his February budget address, Shapiro said that the state’s “failure to legalize and regulate” cannabis “only fuels the black market and drains much-needed resources for law enforcement.”

Pennsylvania legalized medical cannabis use in 2016 and former Gov. Tom Wolf (D) had backed adult-use legalization but the reforms were blocked by Republican lawmakers.