Marijuana Taxes: A Convenient Shield for the Wealthy?

Since the legalization of marijuana, states have hailed cannabis taxes as a major fiscal success. Billions of dollars in tax revenue are flowing into public coffers, funding youth programs, environmental restoration, public safety, and more. At first glance, this seems like a win for states and communities. But a closer look raises a pressing question: Are marijuana taxes being used to replace revenue that should have been collected through taxing the wealthy?

By relying on cannabis taxes to fund essential programs, are states allowing the rich—particularly property owners and corporations—to avoid contributing their fair share? Cannabis legalization has brought with it a new form of "sin tax"—high taxes levied on products deemed socially undesirable, like alcohol or tobacco. 

How Marijuana Taxes Shield the Rich

Property taxes are a major source of funding for public programs, especially schools, housing initiatives, and infrastructure. But in many states, property tax systems are skewed in favor of the wealthy: Policies like California's Proposition 13 cap property taxes for long-time owners, disproportionately benefiting those with expensive properties while shifting more of the tax burden onto new homeowners and renters.

Gentrification and redevelopment projects often displace low-income residents, while wealthy property owners reap the benefits of rising property values with minimal tax increases. Marijuana taxes, rather than addressing these inequities, act as a substitute revenue stream. This allows states to avoid politically contentious debates about raising property taxes on the rich or implementing progressive reforms.

Marijuana taxes, like other consumption taxes, are inherently regressive. They disproportionately impact lower-income consumers, who spend a larger share of their income on these products. Meanwhile, wealthier individuals, who might own the properties where dispensaries operate or invest in the cannabis industry, benefit indirectly from the tax revenues without facing increased tax burdens themselves.

States often use marijuana tax revenue to plug budget gaps rather than addressing systemic issues. 

In California, where homelessness has surged despite marijuana legalization, cannabis taxes are funding public safety programs and youth initiatives, but these efforts are barely scratching the surface of the state’s affordability crisis. Instead of introducing new taxes on high-income earners or luxury properties to fund affordable housing or rental assistance, states lean on cannabis revenue as a politically safe alternative. By relying heavily on marijuana taxes, states miss an opportunity to implement meaningful tax reforms. Here’s what’s being lost:

Redistributive Policies: Taxes on the wealthiest individuals, such as increased property taxes on high-value homes or progressive income taxes, would create a fairer system that prioritizes those who can afford to contribute more.

Targeted Investments: While marijuana taxes generate significant revenue, they’re often spread thin across multiple programs, leaving systemic issues like poverty and housing unaided. For example, California’s homelessness crisis continues to worsen, with over 171,000 people unhoused in 2023 despite billions in cannabis tax revenue.

Restorative Justice: Much of the harm caused by the War on Drugs disproportionately affected low-income and marginalized communities. Marijuana taxes could be a tool for equity, but without broader reforms, they primarily act as a regressive revenue source that doesn’t address these injustices.

A Tale of Two Taxes

Option 1: Use marijuana taxes to fund schools and housing programs, while leaving the property tax system unchanged and allowing wealthy property owners to benefit from loopholes and caps.

Option 2: Reform property taxes or introduce wealth taxes, using them alongside marijuana taxes to create a more equitable and robust funding system.

Most states have chosen Option 1, avoiding politically risky reforms while leaning on cannabis taxes to fund public goods. This approach, while convenient, fails to address the root causes of inequality and poverty. If states want to maximize the impact of marijuana taxes and ensure that the wealthy pay their fair share, they need to adopt a more balanced approach:

Reform Property Taxes: Close loopholes and implement progressive property taxes to redistribute wealth more effectively.

Expand Wealth Taxes: Introduce taxes on high-income earners, luxury properties, and corporate profits to complement cannabis taxes.

Use Marijuana Taxes for Equity: Prioritize cannabis tax revenue for restorative justice initiatives and investments in the communities most harmed by the War on Drugs.

Marijuana taxes were heralded as a game-changer for state budgets, but they’ve also become a convenient excuse for avoiding tougher conversations about taxing the wealthy. As cannabis tax dollars fill gaps in public funding, the structural inequities of property taxes and wealth taxation remain unaddressed.

If states truly want to achieve equity and social justice, they need to stop treating marijuana taxes as a silver bullet and start using them as part of a broader, fairer tax system. Only then can we ensure that everyone—rich and poor alike—pays their fair share toward building stronger, healthier communities.