If the average tax on Illinois’ recreational cannabis is 35 percent, based off the first day of sales, taxpayers paid more than $1.1 million for the privilege.
Legal pot sales began Wednesday in Illinois. The governor’s cannabis control leader, former state Sen. Toi Hutchinson, D-Olympia Fields, said there were 77,128 transactions in the first day.
“It was $3,176,256.71 in sales and for me that means there’s a significant chuck that’s going right back into the communities,” Hutchinson said. “So for me, I’m excited about all of it.”
The Illinois Department of Revenue said they won’t have the total tax revenue from cannabis sales for a few more weeks.
The tax rates depend on the potency of the marijuana being sold, but could average around 35 percent when including the state sales tax with the cultivation privilege and cannabis excise taxes. That would mean on Day 1, taxpayers buying pot in Illinois may have paid more than $1.1 million in taxes on $3.2 million of cannabis sales.
Starting July 1, cities that approved local sales taxes on cannabis purchases could tack on another three percent. The total tax rate could be more than 40 percent when someone purchases the highest grade of cannabis.
The taxes are distributed to different funds. The state’s General Revenue Fund gets 35 percent. The Recover, Reinvest and Renew Program meant to invest in community nonprofit groups gets 25 percent.
Hutchinson said as a state senator ushering the bill through the legislature last spring that the new tax dollars will go to nonprofit groups on the ground in neighborhoods impacted by the War on Drugs. She said there will be accountability for how the money is spent.
“It will include technical assistance to get folks to be data compliant … so we can actually monitor how these dollars are funded and see results over time,” Hutchinson said.
Programs addressing preventive substance abuse and mental health services will get 20 percent of the state’s cannabis revenue. Ten percent goes to the state’s multi-billion dollar bill backlog. As of Thursday, there was $6.3 billion in backlogged bills.
Eight percent of the state’s cannabis revenue goes to law enforcement through the Local Government Distributive Fund and two percent goes to public education and safety campaigns.
The next phase of legalization began Thursday as state regulators begin to pour through applications for the next round of dispensaries and the recipients of taxpayer-backed low interest loans for cannabis businesses. Hutchison said next week, the application window opens for other sectors of the industry.
“On Jan. 7, the application rounds will open up for transport and craft grow and infusion licenses and so people really should be excited to see this as an industry that grows in all kinds of areas,” Hutchinson said.
But it’s not a free market. It’s a strictly state-controlled market. Hutchinson said the strict control on licenses is by design “to actually incentivize equity applicants, people who are from communities and most impacted by the prohibition of the activity that we just made legal.”
“What we’re doing is trying to take this time to turn an industry around so that it actually looks like a state that we all call home,” she said.
May 1 the state expects to announce as many as 75 new dispensaries.