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Tax talk (Updated)

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* Crain’s has a story up entitled “Jim Belushi nudges Pritzker to lower weed taxes”…

Jim Belushi, the actor and comedian whose latest role is gentleman cannabis farmer and entrepreneur, says he gave Gov. J.B. Pritzker a friendly nudge about taxes on weed.

The state tax rate has long been a hot topic in the weed industry, and Belushi addressed it during the Cannabis Innovation Summit yesterday at startup incubator 1871.

“I had a conversation with Gov. Pritzker, who I really think is on our side. He’s a good guy,” Belushi said. “I said, ‘Last year, you guys collected $417 million in cannabis taxes, and you collected $207 million in liquor taxes. There’s a lot more liquor stores and bars than there are dispensaries.’ ”

I asked Pritzker spokesperson Jordan Abudayyeh if the governor supports a cannabis tax cut. Her answer…

No

Here’s how cannabis taxes are distributed…

This is not your usual tax. Lots of vital local programs directly depend on it.

…Adding… Belushi’s argument just doesn’t hold up…

Illinois’ adult-use cannabis sales for March soared to $148.9 million, marking a 9.81% increase from February’s $135.6 million, according to the latest figures released by the Illinois Department of Financial and Professional Regulation (IDFPR). The combined total of adult-use and medical cannabis sales reached $174.8 million.

This growth stands as the second-highest monthly total since the state legalized cannabis in 2020 and is part of a consistent upward trend, with the number of items sold rising by 11.33% to more than 4 million in March from 3.6 million in February. While the IDFPR data signals robust demand from both in-state and out-of-state residents, a closer analysis reveals a decreasing trend in purchases by out-of-state residents.

The upward trend is not merely a monthly spike but signifies broader growth within the Illinois cannabis market. Year-over-year, adult-use cannabis sales surged by 10.45% from March 2023’s $134.8 million, indicating a maturing market and potentially expanding consumer base.

* Meanwhile, CBS 2 has a story on sports betting taxes…

A battle has been brewing over sports betting in Illinois.

On one side, Gov. JB Pritzker is trying to more than double taxes on the revenue from bets won by sports betting operators. On the other, the betting companies are now asking their customers to get involved to stop it.

Companies like DraftKings, FanDuel, and BetMGM have all come together to form the Sports Betting Alliance. The competitors are united against Pritzker’s proposed tax hike – which he estimates would generate an additional $200 million for the state. They have sent emails to users urging them to write to their legislators and oppose the tax hike. […]

Sports betting companies said if approved, higher taxes would mean worse odds, and fewer promotions for users – which they warn could fuel the illegal market. The companies also warn the tax hike may drive all but the top three sportsbooks out of Illinois.

The “adjusted sports wagering revenue” tax is on industry profits. And even though New York has a 50 percent tax (way higher than the proposed 35 percent tax here), it has 9 sports betting companies.

Maybe run fewer TV ads?

posted by Rich Miller
Thursday, Apr 18, 24 @ 12:25 pm

Comments

My biggest gripe with legal weed in Illinois is the restrictive number of licenses. We can have an unlimited number of slot machine cafes and sell booze in every Walgreens or 7-11, but for some reason weed needs to be super restrictive and limited?

Comment by Homebody Thursday, Apr 18, 24 @ 12:34 pm
Hard to think of a less sympathetic industry group than the people screaming odds at us during ballgames.

Comment by DS Thursday, Apr 18, 24 @ 12:35 pm
=== but for some reason weed===

It’s not just “some reason.” The logic behind this is to eventually get people into the business from communities that have been harmed by the war on drugs.

Whether it’s working is another story.

My opinion from the beginning is that the state shouldn’t allow vertical integration and follow alcohol’s three-tiered system. That law is concentrating wealth and harming competition.

Comment by Rich Miller Thursday, Apr 18, 24 @ 12:38 pm
The cannabis tax is something many are willing to pay, as sales in Illinois are doing well. Belushi’s products are pretty good, incidentally.

Comment by Grandson of Man Thursday, Apr 18, 24 @ 12:40 pm
The three tiered system for the Illinois liquor industry has been in place since prohibition and has actually worked particularly well where retail distribution barriers to entry are small.
Perhaps the legislature and Governor’ office should revisit the current law.

Comment by Back to the future Thursday, Apr 18, 24 @ 12:55 pm
Even if the goals were noble, it isn’t like the people impacted in the war on drugs have the capital to go around hiring consulted to make sure they get perfect scores on the competitive bidding for the licenses. So the end result is the people who are able to capitalize on the laudable goals of a program aren’t the ones who benefit.

I’m generally opposed to the “let’s not directly help people, let’s just set the rules for a capitalist program so that maybe private enterprise helps” because it never seems to work. It is how we end up with targeted tax breaks or special monopolies that let the rich get richer. The people these programs are supposed to benefit rarely seem to.

I’d rather just maximize the size of an industry, maximize tax revenue off it, minimize red tape expenses, and then spend the tax dollars wisely on programs to directly help those disadvantaged groups.

Comment by Homebody Thursday, Apr 18, 24 @ 12:58 pm
Remember when you had to maintain whole fake friendships, pretend you liked music/video games/movies/sports you didn’t, and generally put up with whatever the herb-haver/seller dished out in order to catch a buzz?

The new way is worth every dollar in tax.

Comment by Bentoh's Thursday, Apr 18, 24 @ 1:05 pm
===The new way is worth every dollar in tax===

Agreed.

Comment by Rich Miller Thursday, Apr 18, 24 @ 1:09 pm
Personally, I wouldn’t care if the tax was 100%. I’d still buy just as much as I do now no matter what the tax rate was.

It’s a luxury item.

There’s an easy fix though. Configure the cannabis taxing structure to more resemble how liquor is taxed.

Most people are barely aware how much liquor taxes are, and even fewer are aware that as a percentage of the total price, the taxes on a cheap 1L of vodka are actually higher than cannabis. Consumers don’t notice that because the tax is paid at the distribution level and all the consumer sees is the retail price which already includes those ‘invisible’ taxes on the backend. Same amount of taxes, but all the consumer actually sees when making a purchase is the sales tax and nothing more.

Comment by TheInvisibleMan Thursday, Apr 18, 24 @ 1:15 pm
I thought we don’t have any unpaid bills anymore. (Not snark)

Comment by Dan Johnson Thursday, Apr 18, 24 @ 1:41 pm
Belushi hasn’t lived in Illinois in 40 years. Why should Pritzker care about him?

Comment by SammyG Thursday, Apr 18, 24 @ 1:46 pm
==Sports betting companies said if approved, higher taxes would mean worse odds, and fewer promotions for users – which they warn could fuel the illegal market.==

Oh those promotions, which are very much designed to lure new bettors into longshots and increase their appetite for risk and tolerance for losses, might go away? Perish the thought.

Gambling companies operate on the idea that the rake is for them and no one else. It may have a glossy professional sheen to it now and operate out of people’s pants pockets, but it’s the same business it was when it was exclusive to smoke-filled windowless parlors in Vegas and Atlantic City.

Comment by Roadrager Thursday, Apr 18, 24 @ 1:59 pm
“Whether it’s working is another story.”

A sad story, since it has failed miserably. While weed should be legal, I can now see why some black legislators were reluctant to sign on. The people who suffered most from criminalization have not benefited from its legalization the way they should have.

I think there are a handful (if that) of dispensaries in the state which are majority minority-owned. It seems like white people are the ones profiting from legalization.

Comment by Techie Thursday, Apr 18, 24 @ 3:16 pm
I’m glad our neighbors stubbornly keep it illegal. I’m loving the out of state tax revenue.

Comment by Proud Papa Bear Thursday, Apr 18, 24 @ 7:15 pm
===The people who suffered most from criminalization have not benefited from its legalization the way they should have===

No matter what, only a small percentage of those folks would get into the legal cannabis industry. On the other hand, truly huge numbers of people have had their criminal drug records wiped clean. That is probably the most important aspect of this entire law.

Comment by Rich Miller Friday, Apr 19, 24 @ 4:52 am