At the turn of the new year, recreational cannabis became legal in Illinois, and after just five days of sales, the state’s revenue has already exceeded the first four weeks of pot revenue generated in the state of Michigan.
In the first five days, Illinois sold over $11 million worth of pot; in four weeks of legal sales, Michigan’s sales come in just under $7 million.
On top of this significant difference in sales numbers, one element of Illinois’ legalization sharply differs from Michigan: the pardoning of people incarcerated for pot-related crimes. On December 31, Illinois Governor J.B. Pritzker granted tens of thousands of pardons for people convicted of low-level marijuana-related offenses.
Michigan Governor Gretchen Whitmer hinted at extending pardons to Michigan inmates incarcerated for such crimes, but no such action has yet been taken.
Illinois does have more people than Michigan. However, the population difference between the two states is not large enough by itself to account for the significant difference in sales numbers.
This all begs an important question: why is it that Illinois is generating so much more money than Michigan when it comes to recreational weed?
There are many answers to this question, but the two most important ones are cut-and-dry: tax rates, and opt-out rates.
In both states, the possession and use of cannabis is now legal for all adults over 21 under certain conditions in all communities. However, individual communities in both states were able to vote on whether or not recreational cannabis businesses would be able to legally operate in their cities.
One of the most important differences between the two states, then, is related to opting out. Chicago, the largest population of any city in Illinois, opted in, allowing recreational cannabis businesses to operate legally within the city limits.
By contrast, the most populated city in Michigan–Detroit–voted against recreational cannabis businesses in the city.
As a result, Illinois has had increased sales, because recreational cannabis is actually available in the most densely-populated communities in the state.
Another factor contributing to the significant difference between the two states’ revenues is tax rates. In Michigan, all recreational cannabis products have a 6% sales tax, as well as a 10% excise tax. This 16% total tax rate does not change based on the quality of product, type of product, or the amount purchased.
Conversely, Illinois taxes at variable rates based on the type and quality of product. Purchases of cannabis flower or products with less than 35% THC have a 10% sales tax. Cannabis-infused products such as edibles come with a 20% tax. Products with a THC concentration higher than 35% come with a 25% tax.
In addition to these tax rates, local communities have the option to add more tax to recreational pot in addition to the state taxes.
While it could be argued that both programs have been a success, and that both will generate millions of dollars in tax revenue for each respective state, the numbers so far illustrate that Illinois has outdone Michigan with its rollout of legalization. Illinois has generated more sales and more tax revenue in less time, and has pardoned tens of thousands of people for pot-related offenses.
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