New Economic Report Highlights Potential Tax and Regulate Revenue in Vermont
Analysis suggests that S. 54 will likely generate more revenue than previously anticipated — if legislators decide they want to begin sales in 2021, the state could generate over $175 million in cannabis taxes through 2025
MONTPELIER — On Wednesday, advocates for regulating and taxing cannabis touted the release of an economic report that illustrates how regulating cannabis markets could help Vermont recover from the economic recession.
The report, authored by Andrew Livingston, Director of Economics and Research at well-known industry firm Vicente Sederberg, LLP, indicates that previous revenue estimates by the Joint Fiscal Office are probably lower than what would be produced if S. 54 becomes law. Also, the report examines what would happen if the legislature amends S. 54 to allow for early-start sales, and it projects that Vermont could generate over $175 million in cannabis taxes through 2025 if it chooses to do so.
In addition to highlighting revenues from regulated market sales, the report takes into account financial impact of the ongoing coronavirus pandemic, pointing out that the state will see losses of half a billion dollars through fiscal year 2021. From the report’s executive summary:
While cannabis is already legal in the Green Mountain State, Vermont will not collect new revenue without a system for taxation and regulated sales. Moreover, the state is facing over $570 million in pandemic-related budget losses through fiscal year 2021, and without federal support and new sources of revenue, community services will likely be reduced. If S.54 were to pass this year — and revisions are made to allow cannabis produced by existing hemp cultivators and medical dispensaries to be sold for adult use beginning in 2021 — this analysis projects the ability to generate over $175 million in cannabis sales taxes through 2025.
Highlights from the report:, which can be found embedded below:
- If Vermont decides to begin sales in 2021, it could generate over $175 million in cannabis taxes through 2025. The tax structure in the House version of S.54 could produce revenues exceeding $17 million in 2021, $31 million in 2022, $45 million in 2023, $49 million in 2024, and $52 million in 2025. The Senate’s proposed tax structure could bring in more than $15 million in 2021, $28 million in 2022, $41 million in 2023, $44 million in 2024, and $47 million in 2025.
- The new estimates are based on the actual track record of sales in other states, such as Washington and Colorado. The projections are substantially higher than those from the Joint Fiscal Office because the report relies on new data that was not available in the past. Additionally, the new estimate accounts for demand from consumers who live in neighboring states.
- The state can only realize this amount of revenue if S. 54 is amended to prioritize licensing of cultivators and to allow for early-start sales beginning in 2021. Although advocates will support any reasonable final version of S. 54, this would be a sensible option for legislators to consider in light of the negative economic impacts associated with COVID-19.
- The report also suggests that to meet consumer demand, Vermont agricultural businesses, such as hemp growers or flower nurseries, could be permitted to grow a small quantity of cannabis for sale to dispensaries while state regulators develop a formal licensing system.
S. 54, which already passed the House (90-54) and the Senate (23-5), awaits action from a conference committee that has been formed to work out a final version of the bill. A summary of the bill is available here.
Vermont legalized possession and cultivation of cannabis for adults 21 and over in 2018, marking the first time any state legislature legalized cannabis for adults’ use through the legislative process rather than through a voter initiative. However, Vermont remains one of only two U.S. jurisdictions where cannabis is legal but where adult-use sales are still illegal and unregulated. If S. 54 is enacted, Vermont would join 10 states that have laws regulating and taxing cannabis for adult use.
An overwhelming 76% of Vermont residents support allowing adults 21 and over to purchase cannabis from regulated, tax-paying small businesses according to a poll conducted by Public Policy Polling and commissioned by the Marijuana Policy Project earlier this year. The complete results are available here.
The state legislature passed a limited medical cannabis law in 2004 and decriminalized possession in 2013.
Adapted from an August 5 Marijuana Policy Project press release.