In the mid-19th century, miners from all over traveled to California to dig for gold. Towns like San Francisco quickly became gold boom towns with populations swelling overnight. The same occurred in the early 20th century in Texas when oil boom towns emerged. The same also happened as recently in 2009 in North Dakota when oil fracking was introduced post-recession. But today, it’s neither gold nor oil that’s accounting for a new landscape of boom towns. Instead, modern ones are being called cannabis boom towns driven by tremendous cannabis tax revenues. And while the boom isn’t likely to last indefinitely, it’s certainly separating the haves from the have-nots on a state level.
Over the last decade, more than half the states in the U.S. have adopted some legislation legalizing cannabis use. In addition, the vast majority of these states have also established laws and tax policies that benefit them greatly. As a result, towns and counties in these states, especially cannabis boom towns, are reaping the benefits. Cannabis revenues are paving the way for expanding police and emergency workers. It’s also allowing new social programs and community supports. Given this, one might think all states would be eager to take advantage of these opportunities. But in reality, there remain several that refuse to change their stance on cannabis legalization. And it’s this stance that could undermine their long-term capacity to thrive.
“States that have made the decision to legalize and regulate cannabis are benefiting from hundreds of millions in tax revenue each year. These new streams of revenue are helping to fund crucial social services and programs across the country…” – Toi Hutchinson, President and CEO of the Marijuana Policy Project
Rising Cannabis Tax Revenues
In total, since 2012, there have been 23 states that have legalized cannabis for recreational use. Likewise, more than two-thirds have passed legislation permitting medicinal cannabis use. It’s therefore not surprising that cannabis tax revenues have progressively increased over this period of time. According to some statistics, the total amount of cannabis tax revenues raised since 2014 comes to $15.1 billion. In 2022 alone, the annual figure was $3.77 billion. Thus, as more and more states have embraced cannabis use, the rise in tax revenues from these sales have advanced exponentially. For these states and cannabis boom towns, the resulting windfall has made a huge difference. And for those yet to pass cannabis legislation, the opposite often occurs.
In considering cannabis tax revenues, maturity of cannabis legalization laws does matter. Some of the states reaping the greatest benefits are those who adopting legalized cannabis use early. Of course, population totals also matter, but in terms of per capita revenues, established states seem to have an advantage. For example, Washington, which was among the first states to legalize recreational use, earned $530 million in 2022 tax revenues. Oregon enjoyed roughly $150 million in 2022 cannabis tax revenues while California had nearly $1.1 billion in tax income. These figures are noteworthy, allowing many towns to add municipal services that they could otherwise not afford. And some noted to be top-tier cannabis boom towns are even stockpiling these earnings for future years.
“Our cannabis market [in Ontario, Oregon] caters almost exclusively to Idaho residents. This has been an economic boom unlike any this city has seen. We know that this will not last forever, so we’re being prudent.” – Debbie Folden, Mayor of Ontario, Oregon
Border Towns and Boom Towns
At a state level, there are noted advantages financially that cannabis legalization provides for all towns and counties. But in a more specific way, some towns enjoy these advantages on a greater scale. For counties and cities near state borders adjacent to a non-legal cannabis state, their revenue potential is even greater. Over years, residents from states where cannabis has yet to be legalized travel to adjacent states for cannabis products. It is this dynamic that has created cannabis boom towns, and they enjoy a lion’s share of cannabis tax revenues as a result. It is precisely this phenomenon that’s driving growth of come cities that otherwise might be struggling.
There are several examples of these types of cannabis boom towns even today. For example, many residents of Texas have no trouble driving to border towns in Colorado. The same is true for residents of Indiana making the trek to Michigan. And one of the most notable cannabis migrations currently exists between Idaho and Oregon. Specifically, the vast majority of all cannabis tax revenues coming into Ontario, Oregon, come for Idahoan residents. Ontario in 2022 enjoyed a total of $104 million in cannabis sales, which was second highest in the state. This is pretty impressive given that Ontario has a population of only 1,000 people. Certainly, its 11 cannabis dispensaries aren’t needed for the locals but instead serve a much broader area.
“Legalizing marijuana can help bring in different forms of cash. Just look around the country — we as a state should be more forward-looking.” – Patrick Bageant, Boise, Idaho Councilperson
A Vanishing Opportunity to Thrive
In business, markets are often defined by the timing of new product or strategy adoption. Early adopters routinely enjoy greater advantages when compared to late adopters. Such is likely to be the case when it comes to cannabis boom towns versus those yet to legalize cannabis use. Towns like Ontario are reaping the benefits at the expense of many border towns in Idaho. The significant cannabis tax revenues being collected is enabling these cities to establish a solid foundation for the future. And for those like Ontario who are stockpiling revenues currently, their ongoing potential to thrive is notable.
Of course, the opposite is true for states and cities where cannabis legalization has yet to occur. By the time these states adopt such legislation, the opportunity to take advantage of a first-mover position will be gone. Certainly, these towns will be able to increase their financial position through cannabis tax revenues. But the volumes will be much less when compared to those of cannabis boom towns during their heyday. Most believe eventual cannabis legalization is inevitable, at least at a medicinal level. In fact, many expect the cannabis industry to boom. Once that happens, cannabis boom towns will lose their edge. But more importantly, other cities that might have stood to gain from early cannabis sales will lose an opportunity.