The ongoing legalisation of cannabis across numerous U.S. states has sparked discussions on its broader societal impacts. With the number of states allowing nonmedical cannabis use increasing and potential federal legal changes on the horizon, the debate on mitigating adverse effects is more relevant than ever. One approach gaining attention is the taxation of cannabis products, which could serve both to curb usage and generate revenue for public services.

Current State of Cannabis Use in the U.S.

Cannabis use in the United States is widespread. In 2021, an estimated 36.4 million people aged 12 and older reported using cannabis in the last month. While cannabis has shown benefits for certain medical conditions, its use is also linked to various negative outcomes, including impaired cognitive and motor functions, potential IQ loss, and increased risk of psychiatric disorders.

Approximately 10% of regular adult cannabis users, and up to one-third of daily users, develop cannabis use disorder. This disorder is characterised by significant impairment or distress due to a problematic pattern of use.

Cannabis Legalisation and Tax Policy

As legalisation progresses, state-level taxation emerges as a potential tool to mitigate cannabis use. Tax policy could discourage excessive consumption while providing states with additional revenue streams to support public health and safety initiatives. However, the implementation of such taxes must be carefully crafted to balance public health goals with economic considerations.

Potential Benefits of Cannabis Taxation

1. Reduction in Use: Higher prices resulting from taxation can deter consumption, particularly among young users, who are generally more sensitive to price changes.
2. Public Revenue: Taxes on cannabis can generate substantial revenue that states can reinvest in public services, such as education, healthcare, and addiction treatment programs.
3. Regulation and Control: Taxation can incentivise the legal market, reducing the influence of illicit trade by making regulated products more competitive.

Challenges in Implementing Cannabis Taxation

1. Setting Effective Rates: Determining the optimal tax rate is complex. Rates that are too high could sustain illegal markets, while rates that are too low may not significantly impact usage patterns.
2. Economic Disparities: High taxes could disproportionately affect lower-income individuals, raising concerns about equity and access.
3. Monitoring and Enforcement: Effective monitoring and enforcement mechanisms are necessary to ensure compliance and prevent leakage into unregulated markets.
4. Impact on Medical Use: Policymakers must consider the implications of taxation on medical cannabis patients, ensuring that access to necessary treatments is not unduly restricted.

Source: JAMA Psychiatry