Illinoisans don’t seem to mind what costs they have to pay to get their hands on some newly legalized pot.

In just the first two weeks of legalized recreational marijuana sales, state residents have turned out in droves to the numerous newly minted dispensaries that have opened for business across the state. These 37 locales, to date, cleared almost $11 million in sales during the first week. By the end of the second week, about another $9 million worth had been sold across the state.

Illinoisans are forking over as much as $80 for an eighth of an ounce of the recently legalized weed, and the demand has been so strong and the crowds of customers have been so overwhelming that many dispensaries have witnessed long lines and diminished supplies. For instance, a dispensary in Collinsville reported lines of people extending out the door, but the people were still more than willing to wait for as long as 90 minutes to make a purchase. By Monday, the St. Louis suburban dispensary ran out of inventory and was forced to temporarily close their doors.

For now, Illinois residents’ don’t seem to mind the inconveniences, as their pursuit for recreational marijuana is still a novelty. But state consumers may not be particularly paying closing attention to the price tag. At some point, those customers who are feeding their need for legal weed should realize that they are paying about twice as much for it, compared to most of the other nine states that have also legalized recreational marijuana sales.

When Illinois lawmakers approved legislation to become the 10th state to legalize recreational marijuana, it did with a steep tax rate. This high tax burden’s creation is the state’s effort to generate much-needed revenue. But consider that another Midwest state like Michigan, which has also legalized recreational marijuana sales, has a considerably lower tax rate. Whereas Illinois designed a three-tiered tax rate, which reaches as high as 41.25 percent in Chicago, the Wolverine State’s tax rate is a flat one, at 16 percent across the board.

The only state with a higher tax burden for legalized marijuana sales is Washington, at 47.1 percent. But that state also has some of the lowest cannabis prices because it is also home to more than its share of growers. In comparison, the next lowest tax burdens are in both California and Colorado, which have tax rates at 24.8 percent and 24.1 percent, respectively.

The concern here is that after the novelty fades and the sticker shock sets in, Illinois consumers may opt to buy their weed from elsewhere, such as the black market, where the state would lose out on needed revenue. This, according researchers from Illinois Policy, is the biggest potential problem. Illinois Policy has cited a study of the black market in California, a state where marijuana was legalized for recreational use in 2018. The research cited that despite legalized sales, 80 percent of cannabis sold in the Sunshine State still comes from the back market.

Illinois Policy also points out that another issue that could cost the state revenue is Illinois consumers’ option to purchase marijuana for medicinal purposes. Last year, the state expanded the legal conditions for which Illinoisans can purchase marijuana for medicinal purposes. This gives state consumers another way to avoid paying the high tax rates and another way the state could lose out on potential revenue.

Those who have lobbied for marijuana’s legalization for years have supported their cause and made their case by arguing that this move could generate a healthy tax revenue stream. It seems many state lawmakers only saw dollar signs when they legalized marijuana sales in Illinois by electing to apply a massive tax to the price tag, perhaps in their pursuit to shore up state pension costs that have soared beyond 500 percent within the past two decades and a state budget that has not been balanced since 2001.

But the folks from Illinois Policy have also found that this approach has often failed elsewhere. Instead, the researchers suggest a more weighted-based tax, as alcohol is taxed, to avoid losing customers to the black market or other states where the product is cheaper.

Meanwhile, the state is just two weeks into its era of legalize recreational marijuana sales. In time, we will learn if such an enormous tax rate will pay off in Illinois or if state lawmakers want to rethink and revisit its decision to tie too much tax to the price tag.

 

Will Buss teaches broadcasting and journalism at Western Illinois University.