Estimated Revenue from 15% Marijuana Sales Tax in Arizona

August 31, 2015

Estimated Revenue from 15% Marijuana Sales Tax in Arizona


By Dave Wells, Ph.D., Research Director

Grand Canyon Institute


The Grand Canyon Institute neither favors nor opposes the effort to legalize the recreational use of marijuana in Arizona.


The Campaign to Regulate Marijuana like Alcohol held a press conference on Wednesday, August 19th declaring that their initiative if passed by voters would raise (at least) $40 million for public schools through a 15% tax on sales.  The initiative allocates 40 percent of revenues to K-12 education, 40 percent to help fund all-day Kindergarten and 20 percent to the Department of Health Services.

 Marijuana and Cash

No independent analysis has been provided to evaluate this estimate.  The Grand Canyon Institute has done so and finds that the revenue projections were conservative as proponents claimed. GCI estimates that, if the initiative were fully phased in now with dispensaries operating as in Colorado, the tax would generate $64 million, $25.5 million to K-12 education, $25.5 million to help fund all-day Kindergarten and $13 million to the Department of Health Services.  If the initiative, were to make the ballot and be passed by voters, GCI expects 2019 to be the first year with a full rollout of retailers and at that point due to inflation and population growth, the expected totals would be $72 million: with almost $29 million each to K-12 education and helping fund all-day Kindergarten plus $14 million to the Dept. of Health Services.


The revenue gains do exceed the $40 million espoused by proponents of the initiative.


Tax revenues are only one of many factors voters will need to consider.  Legalization will lower marijuana possession related arrests and consequently reduce court costs, but many people also have concerns about greater public health and law enforcement consequences from higher marijuana use and whether it would lead to greater under age use.  At this time, not enough data is available from states with legal marijuana to sufficiently evaluate claims and concerns.


This tax revenue estimate uses Colorado as the basis for comparison and finds the following relative to Colorado:

  • Arizona’s marijuana use (pre-recreational legalization in Colorado) is 75 percent that of Colorado.
  • Arizona’s adult population is 24 percent greater than Colorado and likewise the number of out of state visitors to Arizona is similarly larger.[1]
  • By 2019 due to the growth of states with legal recreational marijuana, tourist use as a portion of the market will be less in Arizona than it is estimated to be in Colorado today.
  • The proper tax comparison to use in Colorado is the 10 percent recreational marijuana sales tax, not the 15 percent recreational marijuana excise tax, though Arizona’s sales tax would be 15 percent, not 10.