Montana tax revenue from weed projected to go up; wine, beer stay relatively flat
(Daily Montanan) Hold the pinot noir, but raise a joint for the Montana economy.
Tax revenue from wine is forecast to be relatively flat in the Treasure State the next couple of years, and despite Montana’s claims to fame in microbrewing, per capita beer consumption is on the same path, according to revenue projections in Gov. Greg Gianforte’s budget proposal.
Revenue from taxes on booze is projected to go up, but only by a hair, and income from taxes on tobacco products is slightly down overall.
As expected, marijuana is forecasted to make a weighty contribution to state coffers, although it’s also just a sliver of the overall general fund collection, especially given recent “extraordinary” infusions of federal dollars into the state.
“Total stimulus spending directed to Montana individuals, businesses, and government entities amounted to $11.8 billion,” the budget proposal said.
From 2020 to 2022, general fund receipts “surged” from $2.53 billion to $3.77 billion, “a gain of over $1.2 billion in just two years,” the budget said. It said prior to the pandemic, it took 15 years for general fund revenue to grow by $1.2 billion.
Tax revenue from cannabis is projected to hit $50.7 million in the 2024 fiscal year and $57.5 million in 2025 for the general fund, according to estimates in the budget proposal.
That’s up from a projected $37.1 million in 2023, the first full year of implementation of the recreational marijuana program in Montana.
Some of the tax revenue is first distributed to other funds, such as the HEART Fund supporting addiction recovery, and the budget proposal noted gross revenue on cannabis is projected to be $61.1 million in 2023 and as much as $91.1 in 2025.
Pepper Petersen, president and CEO of the Montana Cannabis Guild, said he expects revenue to grow as well, but only for a short period.
“I anticipate that the tax revenue will increase a little year over year and level out after about ‘25, ‘26,” Petersen said.
He characterized the roughly 25 percent total tax on recreational marijuana — 20 percent from the state, plus a local contribution — as “ludicrously high.”
“On any other item, people would burn the Capitol down,” Petersen said. “Montanans hate sales taxes.”
In the future, he expects marijuana taxes to drop, especially if a national market is created that sets some consistency. In the meantime, though, he said he’d like to see the 4 percent for medical marijuana eliminated.
“Obviously, hard alcohol is much more corrosive to society than what marijuana is,” Petersen said.
But hard alcohol and other adult beverages also fill state coffers and are part of a long tradition in the country.
“The taxation of alcohol goes way back,” said Kyle Volk, a University of Montana history professor who teaches a course called “Intoxication Nation: Alcohol in American history.” “It predates the founding of the United States.”
The idea to tax alcohol arose in the 1780s even before the U.S. Constitution was written, said Volk, chairman of the history department. The nation was in dire straits economically, he said, and Secretary of the Treasury Alexander Hamilton had the idea to tax whiskey.
“Hamilton comes up with a plan to get the economy and financial system of the nation moving and to generate revenue for the new federal government,” he said.
Now in Montana, general fund revenue from liquor excise and license taxes is projected to hit $32.6 million in the 2025 fiscal year, up a hair from $30.1 million in 2023, according to the budget.
The number of liquor bottles sold increased 3.7 percent a year on average from the 2016 to 2019 fiscal years, the budget said. Then the pandemic hit.
In 2020, 2021 and 2022, bottles sold “increased significantly,” the budget said. It put those increases at 16.9 percent, 20.7 percent, and 10.6 percent, respectively, but it also noted the trend appears to be back to normal.
As for the chardonnay, wine is projected to put $2.7 million in the general fund in 2025, up slightly from $2.6 million in 2023.
Total wine tax revenue is roughly $4 million, but the budget noted 31 percent of it goes straight to the Department of Public Health and Human Services.
But wine money isn’t going to grow like weed money.
“While per capita consumption of wine is expected to increase, the population growth for this group is decreasing but supports a relative flat growth rate for the 2025 biennium,” the budget said.
Suds aren’t filling state piggy banks over the brim either.
General fund tax revenue from beer will be $3.3 million in 2025 based on projections, although the budget also noted some 23 percent of total beer tax revenue goes directly to the Health Department for alcohol treatment.
The number of beer drinkers isn’t growing at a clip, the budget said.
“From FY 2010 through FY 2022, the cohort of beer consumers used in this model has experienced a growth rate of 1.3 percent per year,” the budget said. “While per capita consumption of beer is expected to remain flat, the population growth for this group is slightly below the 10-year average, at 1.2 percent.”
The total revenue from taxes on tobacco products is projected to be $35.5 million in 2025, down from $36.3 in 2023, the budget said. That includes a drop in revenue from taxes on cigarettes.
“According to the Center for Disease Control, the national prevalence of cigarette smoking has resumed a slow decline after stalling for several years,” the budget said. “This model assumes a 1.8 percent annual decrease in per capita consumption during the forecast period.”