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New York Officials Say Marijuana Tax Revenue Will Help Fill Budget Gap From Declining Cigarette Sales



New York officials are projecting that marijuana tax revenue will help keep the state’s budget afloat as cigarette sales continue to decline over the coming years.

In a first quarterly update for the 2022 fiscal year that was released this week by Budget Director Robert Mujica Jr., state analysts said that New York stands to generate about $20 million in revenue from adult-use cannabis business license fees next year. And as the market matures, marijuana tax revenue and license fees are expected to generate $245 million by fiscal year 2025.

At the same time, cigarette tax revenue is expected to continue to decline, dropping from $972 million in the 2022 fiscal year to $852 million in 2025.

The state said that “along with the second year of license fees, the State’s THC-based and retail excise taxes on the sale of adult-use cannabis products are projected to generate $115 million,” and those increases “are partially offset by a continued decline in taxable cigarette consumption.”

In other words, New York is seeing the same trend that’s playing out nationally. People are smoking fewer cigarettes while more adults are trying cannabis. And creating a regulated market for marijuana is helping to create an alternative revenue source for states that legalize.

Part of the reason behind that trend seems to be public perception. A 2018 Gallup poll found that 96 percent of Americans view cigarettes as either “very harmful” or “somewhat harmful,” compared to only 56 percent of respondents said the same about cannabis.

The following year, Gallup released a survey showing that adults between the ages of 18 and 29 are more likely to smoke marijuana as cigarettes, with consumption of the latter at a 75-year low.

Just last month, Gallup reported that overall, half of U.S. adults have tried cannabis and that “nearly as many Americans today say they smoke marijuana as say they smoke cigarettes.”

Nora Volkow, director of the National Institute on Drug Abuse (NIDA), recently talked to Marijuana Moment about another emerging drug trend with young adults. A large-scale survey found that alcohol consumption is declining at the same time that more people are consuming cannabis and psychedelics.

The New York comptroller released an initial budget analysis of the state’s legal cannabis market in May, two months after former Gov. Andrew Cuomo (D) signed the reform legislation into law. The figures in this new quarterly update are consistent with those projections.

Meanwhile, newly inaugurated Gov. Kathy Hochul (D) has made clear that she’s prioritizing the implementation of legalization in New York, making key regulatory appointments that were delayed under Cuomo and have since been confirmed by the Senate.

Leaders in both chambers of the legislature have also recently announced their picks to serve on the Cannabis Control Board. The governor has two more appointments to make that will not be subject to Senate approval.

Because the process has been drawn out, however, one GOP senator wants to give local jurisdictions another year to decide whether they will opt out of allowing marijuana businesses to operate in their area—a proposal that advocates say is unnecessary and would create undue complications for the industry.

Separately, another senator filed a bill in July to create a provisional marijuana licensing category so that farmers could begin cultivating and selling cannabis ahead of the formal rollout of the adult-use program.

In the interim before retail shops open, adults 21 and older can possess up to three ounces of cannabis or 24 grams of concentrates in New York—and they can also smoke marijuana in public anywhere tobacco can be smoked.

Adding pressure to get the market up and running is the fact that regulators in neighboring New Jersey recently released rules for its adult-use marijuana program, which is being implemented after voters approved a legalization referendum last year.

The first recreational marijuana retailers in New York may actually be located on Indian territory, with one tribe officially opening applications for prospective licensees last week.

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Photo courtesy of Martin Alonso.

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