Cannabis use by adults in Washington state has huge impacts, but the tax burden is high

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Washington State’s adult marijuana industry directly employed 11,330 workers and generated more than $ 1.4 billion in revenue in 2020, according to a first economic analysis From the market

The study, conducted by Seattle-based High Peak Strategy and commissioned by the Washington CannaBusiness Association (WACA) nine years after voters legalized a commercial market, found that the economic impact of cannabis use by adults amounted to :

  • 18,360 jobs.
  • $ 876.5 million in labor income.
  • $ 2.7 billion in revenue.

The firm counted more than 1,600 businesses with 2,795 cannabis licenses in 2020. Tax revenues totaled $ 695.4 million.

Despite those impressive numbers and 23% annual revenue growth between 2015 and 2020, there is a downside:

The 37% state excise tax rate on cannabis for adult use is by far the highest tax of its kind in the US, said Spencer Cohen, founder and director of High Peak Strategy.

He said the average tax rate, including excise tax and state and local sales taxes, stands at 46.2%, pushing some consumers into the illicit market.

Business owners licensed in Washington state, particularly retail and processing operations, express concern that onerous taxes and state regulations will hamper their ability to scale, he said.

Access to capital is also a major issue, Cohen added, noting that the state residency requirement inhibits foreign investment.

“While Washington pioneered the legalization of recreational cannabis, in the opinion of many companies interviewed for this study, it has since lagged behind other states in areas of regulation and taxation to support state industry,” Cohen wrote.

Cohen compiled his report from state and federal data, interviews, out-of-state research, and other sources.

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Vicki Christophersen, executive director of WACA, said the research will be used to help educate legislators and “hopefully help everyone understand who we are and the contribution we make.”

He said that while the high tax rate has been a good thing for the state in generating revenue, “it becomes very onerous for the industry” and undermines long-term business sustainability.

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