Marijuana Tax for the Arts: How Much Could That Be?
Just in case you missed it, Ohio House Bill 86, as passed by the Ohio Senate, includes a provision for Ohio Counties to offer voters a 3 percent tax on marijuana for the arts. The provision was added by Senator Kent Smith, who saw an opportunity for the arts and culture sector to benefit from the new law—and make up for some of the revenue lost as cigarette tax revenues continue their dramatic decline. What could that mean, in terms of dollars, for artists and arts organizations of Cuyahoga County?
Senate passage early in December put the bill back in the hands of the House. The House could act in January: an “as-needed” session is scheduled for January 10, and a Floor voting session January 24. The permission for a tax for the arts could survive negotiations, or it could be cut, or the legislature could also do nothing. Ultimately, any revision the legislature approves must be signed by Governor DeWine, but other outlets have reported that the Senate version of the bill has the Governor’s support. It’s an uncertain road. But what could it mean—in terms of money—for the arts in Cuyahoga County?
Because Ohio has no track record of legal, taxable sales, it is difficult to forecast how much revenue a 3 percent tax on pot might generate for the arts. To get an idea, CAN spoke with Tony Lange, Associate Editor with Cannabis Business Times, a Valley View Ohio publication that tracks the cannabis business sector nationwide, as well as in Canada and other countries.
As a starting point, Lange provided a graph showing per-capita use in states that have legalized cannabis, including recreational—therefore taxable—use. The graph includes new markets, like New York, as well as established ones, like Colorado and Washington State. In general, the volume of legal sales per-capita is lower in early years because at first, the legal, taxable system has no foothold in a marketplace that has been dominated by illegal sales. In subsequent years, the amount of legal sales grows because the number of dispensaries grows, and the proportion of legal vs. illegal accessibility increases. So if a tax for the arts in Ohio counties were possible, the revenue from it could reasonably expected to grow for some years while the market develops, instead of shrinking as the cigarette tax has.
In addition to offering a starting point, the graph reflects other factors. For example, New York’s per-capita figure in the state’s first year of legal sales is remarkably low, at just $7 per person. Lange says that is not because people there are not smoking as much pot there, but because of an extremely limited number of dispensaries–the rollout of which was slowed by a state commitment to ensuring that the first licenses went to communities that had in the past been disproportionately punished during prohibition. New York did not allow established medical dispensaries to sell to recreational adult users. The goal was to create an equitable marketplace, Lange said.
Ohio is addressing some of those issues now. For example, the rationale behind the legislature’s interest in allowing medical dispensaries to sell to adult, recreational users is to more quickly offer a legal way of buying pot, in the (perhaps naïve) hope that this will prevent an illicit market from developing.
Lange says there are not yet any credible projections for Ohio sales, but there are ways of getting insight.
“Before the election Ohio State University did a study based mostly on Michigan [ . . . ] If Ohio launched sales in 2024, I would guess that by 2025 Ohio adult use would be somewhere in the realm of $1 Billion (statewide).”
Also, in most cases as markets mature, legal sales go up. As Lange says, “Michigan has a 4 year old market. Their first full year of sales was 2020. Their adult use sales went from $510 Million in the first year to $1.3 billion in the second year, to $2 billion in the third year, and this year the Michigan adult use market will be close to $3 billion.”
While adding taxes does impact sales, he says convenience—the proximity of dispensaries—is the bigger factor. “Just like grocery stores, people go for convenience,” he says.
Addressing the possible tax for the arts, Lange breaks it down to the county level:
“Looking at a rough estimate for Cuyahoga County, let’s say in 2025–the first full year of adult use–that Cuyahoga County is averaging $100 per capita in cannabis sales [a figure in the lowest quarter of per-capita use as reported above]. Multiply that by 1.25 million people in Cuyahoga County, and multiply that by the 3% tax. That is close to $4 million in tax revenue in one year. That number will probably triple in 3 to 4 years. You might be looking at $12 to $15 million (of tax revenue for the arts) in Cuyahoga County by the time market matures.”
An additional $12 to $15 million in tax revenue for the arts in Cuyahoga County would more than double the current, diminished revenue from the cigarette tax, and would put the total well above the $19.5 million realized in 2008, the first full year of collection. And that is without any revision to the current, 30 cent-per-pack cigarette tax.
The Ohio House could take action as early as January. It’s also possible that the House does nothing, which would leave Issue 2 as passed by voters–with no tax for the arts–in place.