Chicago to Garner $3.5 Million in Taxes Next Year From Legal Marijuana
Recreational marijuana tax revenue will result in $3.5 million in new taxes next year in Chicago despite sales only being legal for four months, based on Mayor Lori Lightfoot’s proposed $11.65 billion budget announced earlier this week.
According to the Associated Press, the figure represents four months of expected tax collections because the state law that legalized pot sales prevents cities and towns from collecting taxes on those sales until next September. During those last four months of 2020, “a local 3% excise tax on pot sales would bring in $1 million and increased sales tax revenue would drum up the rest of the cannabis cash, according to the city’s budget framework.”
The AP notes that cannabis products containing less than 35% of THC — the chemical compound that gets users high — will also be taxed at a 10% rate on the state level, while products with more THC will be taxed at a 25% rate and cannabis-infused products will carry a 20% tax.
Lightfoot, who has repeatedly downplayed marijuana’s potential economic impact on city coffers, has previously projected that recreational pot sales will eventually bring in $10 million in annual tax revenues, which is in line with the budgeted figures.
The mayor’s projection comes after Cook County Board President Toni Preckwinkle pitched a $6.2 billion budget in October that didn’t account for any pot-related revenue — although the county can impose its own 3% tax on weed products. And four months earlier, Gov. J.B. Pritzker also passed on projecting grass taxes in his $40 billion budget, which initially included a proposed $140 million in revenue from cannabis-related fees alone. The Democratic sponsors of the state pot law have offered the clearest projection for the first year of recreational sales, estimating they will create only $56 million in new taxes, according to the Associated Press. However, the modest outlook from lawmakers doesn’t mean that recreational pot legalization will ultimately be a buzzkill. Once the new program is fully baked, both tax dollars and jobs are expected to flow into the state.
A study commissioned earlier this year by the Democratic sponsors found that a developed Illinois pot market could create $440 million to $676 million in annual tax revenue. And another recent report estimates that Illinois’ legal cannabis industry by 2025 could employ 63,000 people.
In addition to the revenue projections, Lightfoot’s budget also notes that the Department of Business Affairs has been tasked with devising a regulatory framework for the local recreational cannabis industry by the start of next year.
“This structure will ensure that legalized cannabis is rolled out effectively, safely and equitably while enhancing our local economy and neighborhood business,” the budget proposal states.