Wisconsin stands to generate nearly $170 million annually in tax revenue under an adult-use marijuana legalization bill introduced by a top Senate Democrat, according to state officials.
About one month after the cannabis bill was filed by Senate Minority Leader Melissa Agard (D), the Department of Revenue released a fiscal estimate of its potential economic impact, offering projected revenue from taxes and fees for the first three years of implementation.
While the bill’s prospects of advancing through the GOP-controlled legislature seem slim, with Republican leadership staunchly opposed to adult-use legalization, the economic analysis underscores what supporters have long argued: replacing prohibition with regulation would help fill state coffers.
The department looked at economic trends in the marijuana markets of neighboring Illinois and Michigan to develop its forecast based on the Wisconsin bill’s proposed excise, retail and general state sales taxes and local sales tax, as well as licensing and application fees.
Analysts estimate that, by the third year of implementation, the state would annually generate $60.1 million from the excise tax, $64.9 million from the retail tax and $41.7 million from the state sales tax. There would also be $3.1 million in local sales tax revenue, along with $615,000 from fees (assuming Wisconsin licenses 300 cannabis businesses).
There would be certain administrative costs, the fiscal note says. For example, the state can expect to pay a one-time cost of about $4 million to implement the bill’s tax provisions and $4.5 million annually to meet additional staffing needs.
What the estimate does not account for, however, are the potential ancillary economic benefits of legalization.
The revenue projection based on taxes and fees is “nothing to shake a stick,” Agard told Marijuana Moment on Friday. But “there are additional economic benefits to legalizing cannabis in Wisconsin” such as job creation in the marijuana industry and reduced criminal enforcement and incarceration costs from cannabis activities that would be made legal under the legislation.
“When it comes to local governments, whether it is through law enforcement or through the courts, we would have additional savings,” she said. “Right now, because of the way our laws are in Wisconsin, it’s the job of law enforcement to enforce laws. This is an unjust law, and we need to change it.”
The economic impact of legalization isn’t why the minority leader has been spearheading this issue, however. As she’s discussed with constituents and local businesses throughout the state as part of her “Grass Routes” tour to advocate for reform, she’s emphasized that this is an issue that grounded in her belief that the state has a “moral responsibility” to end prohibition.
“It is the right thing to do. It is the morally right thing to do on top of the fact that it is the right thing to do because nearly 70 percent of the people in the state of Wisconsin, including the majority of Republicans, want this,” she said. “But also, yes, there are economic benefits that come along with increasing public safety, removing barriers, making sure kids are safer, supporting our local governments and addressing injustices.”
Here are the key provisions of Agard’s marijuana legalization bill:
- Adults 21 and older could possess up to five ounces of cannabis for personal use, and they could grow up to 12 plants.
- The bill would impose a 15 percent excise tax on marijuana producers for the wholesale transfer of cannabis, and a 10 percent tax on retailers and lounges for the sale of marijuana. Medical cannabis patients would not be subject to a tax. And 60 percent of tax revenue the state generates would be earmarked for a community reinvestment grant fund.
- Grants would support efforts to support industry participation by women and minorities, healthcare equity and law enforcement training to combat impaired driving.
- The state Department of Revenue (DOR) would be responsible for licensing cannabis businesses. Producers and processors would need additional permitting from the Department of Agriculture. Businesses with 20 or more employees couldn’t be licensed unless they have a labor peace agreement.
- Because Wisconsin doesn’t have a medical cannabis program, the bill dually legalizes for adult and medical use. DOR would need to create a medical marijuana registry for qualifying patients, defined as those with a “debilitating medical condition” such as cancer or AIDS.
- The state Department of Justice would be tasked with reviewing records to identify cases where a person was convicted of an offense the bill legalizes. If the offense was non-violent, the department would need to initiate a process to clear the person’s record.
- With certain exemptions, employers would generally be prohibited from discriminating against workers or applicants on the sole basis that they lawfully use marijuana off the employer’s premise and during non-work hours. Unemployment benefits couldn’t be denied due to cannabis use, either.
Legalization would also mean that Wisconsinites would no longer need to travel across state lines to access regulated marijuana products. A legislative analysis requested by Agard estimated that Wisconsin residents spent more than $121 million on cannabis in Illinois alone last year, contributing $36 million in tax revenue to the neighboring state.
So far, however, arguments about the economic benefits of legalization have not translated into meaningful legislative action in the Badger State. Republican leaders have said they’re working on limited medical cannabis legislation, but a bill to that end has not yet been formally introduced this session, despite Assembly Speaker Robin Vos (R) saying they intended to get it out “this fall.”
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Another GOP lawmaker in the state, Sen. Mary Felzkowski (R), said recently that Democrats like Agard who are advocating for comprehensive legalization are detracting from efforts to advance incremental reform. But as the minority leader has pointed out, Republicans wield control of both chambers and could theoretically move whatever version of the reform they’d like at any point.
The GOP-controlled legislature in May voted again to strip cannabis reform language from Gov. Tony Evers’s (D) budget request, which included measures on legalizing, taxing and regulating cannabis in the state.
As part of the Evers’s budget request this year, his office estimated that the state would generate $44.4 million in “segregated tax revenue” from legal cannabis, as well as a $10.2 million increase in state general fund tax revenue, in fiscal year 2025 if the reform is enacted.
The governor also included adult-use and medical marijuana legalization in his 2021 budget, as well as decriminalization and medical cannabis in his 2019 proposal, but the conservative legislature has consistently blocked the reform.
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Photo courtesy of Philip Steffan.
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