Excessive Cannabis Taxes Undermine Legal Markets

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A new op-ed argues that excessive cannabis taxes across the U.S. are undermining legal markets and pushing consumers to the illicit market. The article cites data showing declines in adult-use sales and industry job losses in highly taxed states like California, Colorado, Illinois, and Washington, while the illicit market remains entrenched. The author says higher taxes simply change where consumers buy their cannabis, not eliminate demand.

Why it matters

As more states legalize cannabis, policymakers are increasingly looking to cannabis taxes as a revenue source. However, this op-ed warns that overly high and complex tax structures are straining legal markets, contributing to business closures, and driving consumers back to the illicit market - the opposite of what legalization aims to achieve.

The details

The op-ed argues that taxes on legal cannabis are higher than almost every other industry in the U.S., generating nearly $25 billion since adult-use sales began in 2014. Despite these high rates, efforts to increase cannabis taxes continue, with several states attempting to raise or expand taxes in 2025. In some large markets, the effective tax burden can exceed 40% when combining excise, sales, wholesale, local, and potency-based taxes. The author says these structures are contributing to business closures, particularly among smaller operators, and pushing consumers to the illicit market.

• In 2025 alone, Maryland, Minnesota, Maine, Ohio, Michigan and California attempted to raise or expand cannabis taxes.
• This year, Colorado and Oklahoma are looking to raise cannabis taxes.
• In 2025, San Diego raised its local cannabis tax to 10%, double the previous rate.
• In Michigan, a 24% wholesale tax took effect this year, leading to a 16% decrease in January 2026 sales revenue compared to December.

What they’re saying