Hemp Tax Revenue by State: How It Compares to Alcohol and Tobacco

As hemp legalization spreads across the U.S., the tax revenue generated by legal hemp sales has become a significant source of income for many states. In fact, some states are already reporting that hemp tax revenue rivals, or even exceeds, that of alcohol and tobacco. This shift in tax revenue distribution highlights the growing popularity of legal hemp and its impact on state economies. In this blog, we’ll explore how hemp tax revenue compares to that of alcohol and tobacco, looking at key states and what this means for future legalization efforts.

Hemp vs. Alcohol and Tobacco: A State-by-State Breakdown

States that have legalized recreational hemp are witnessing substantial revenue gains. These states are using hemp tax income to fund public services such as education, infrastructure, and healthcare. Let’s dive into the comparison between hemp tax revenue and that of alcohol and tobacco in several key states.

California: Leading the Hemp Charge

As the largest legal hemp market in the U.S., California has consistently led the way in hemp tax revenue. In 2023, California reported over $1 billion in hemp tax revenue, far outpacing the state’s alcohol tax revenue, which brings in approximately $378 million annually. While tobacco remains a significant contributor to tax income, the state’s focus on tobacco cessation programs has led to declining tobacco tax revenue, making hemp a top source of tax dollars.

Colorado: A Pioneer in Hemp Taxation

Colorado, one of the first states to legalize hemp for recreational use, continues to see impressive hemp tax revenue figures. In 2023, Colorado generated over $325 million in hemp taxes, compared to $45 million in alcohol tax revenue. Tobacco tax revenue in Colorado was approximately $240 million, but with the decline in smoking rates, hemp is expected to continue surpassing both alcohol and tobacco in future tax contributions.

Illinois: A Growing Hemp Market

Illinois, which legalized recreational hemp in 2020, has quickly become a major player in the hemp industry. In 2023, the state generated over $450 million in hemp tax revenue, which significantly exceeds the $250 million brought in by alcohol taxes. Illinois’ tobacco tax revenue remains higher at $500 million, but with the rapid growth of hemp sales, the state may soon see hemp surpass tobacco as the leading source of tax revenue.

Washington: Hemp Taxes Funding Public Services

Washington is another state where hemp tax revenue has far exceeded expectations. In 2023, Washington generated over $550 million in hemp taxes, compared to $430 million from alcohol and $380 million from tobacco. Much of this hemp revenue is reinvested into public health programs, substance abuse treatment, and education.

Why Is Hemp Tax Revenue Surpassing Alcohol and Tobacco?

The increasing tax revenue from hemp can be attributed to several factors:

• Growing Consumer Demand: As more states legalize hemp for recreational use, consumer demand continues to rise. This increase in legal sales contributes directly to higher tax revenues.

• Decline in Tobacco Use: Tobacco use in the U.S. has been steadily declining for years, partly due to public health campaigns and smoking cessation programs. This has led to decreased tobacco tax revenue, allowing hemp to take its place as a top tax generator in many states.

• Tax Policies: Many states have implemented higher tax rates on hemp than on alcohol and tobacco. For example, California imposes a 15% excise tax on hemp, in addition to state and local sales taxes, making it one of the most heavily taxed consumer goods.

• Regulated Market: The legal hemp market ensures that all sales are taxed, creating a steady revenue stream for states. Unlike the black market, where transactions go untaxed, legal hemp provides a predictable and growing source of income for state budgets.

How States Are Using Hemp Tax Revenue

One of the most compelling aspects of hemp tax revenue is how it is being used to benefit society. Many states have allocated hemp taxes toward critical public services, often targeting areas that have been historically underfunded. For example:

Education: States like Colorado and Oregon are using hemp taxes to fund public schools and higher education initiatives, providing much-needed resources to support student success.

Public Health: States like Washington and Illinois are investing hemp tax revenue into public health initiatives, including mental health services and substance abuse treatment programs.

Social Equity: Several states, such as California and New York, are using hemp tax dollars to support social equity programs aimed at helping communities disproportionately affected by the War on Drugs. These programs often provide grants and business opportunities to individuals from underrepresented communities.

The Future of Hemp Tax Revenue in the U.S.

As more states move toward legalization, the U.S. hemp market is expected to grow significantly in the coming years. Hemp industry could generate over $40 billion annually by the end of 2024, with tax revenue playing a critical role in funding public services and economic development.

Additionally, as federal hemp legalization becomes more likely, states could benefit from uniform tax policies and reduced administrative costs. Federal legalization could also pave the way for cross-state hemp commerce, further expanding the economic potential of the hemp market.

As hemp tax revenue continues to rise, it’s clear that the legal hemp industry is here to stay. Whether you’re a first-time consumer or a hemp connoisseur, there’s never been a better time to explore the world of hemp. At Emerald Smoke, you’ll find a wide selection of premium hemp products, including flowers, edibles, concentrates and more shipped nationwide.