Connecticut’s new recreational marijuana law went into effect July 1, 2021, and over the next five years, the Office of Fiscal Analysis anticipates that the state will see nearly $75 million in new revenue due to the regulation and taxation of the recreational marijuana market.
Lawmakers spent the first half of the year debating the bill, and many of the points of tension centered on where that money would go. In Gov. Ned Lamont’s original proposal, half of that revenue would go towards low-income communities in the state, and the other half would have funded the payment in lieu of taxes program, or PILOT, for property owned or used by the state. That allocation appeared to appease no one, and Democratic legislative leaders were quick to argue that more funds should be more intentionally targeted towards equity.
In the final version of the law, far fewer dollars go towards general budget needs with funds focused more on combating substance abuse and righting the wrongs of the War on Drugs. On top of the state’s general sales tax, people legally purchasing marijuana products will pay a state tax on each milligram of Tetrahydrocannabinol, known as THC, that is sold. By mid-2026, the general state sales tax of 6.35 percent is expected to bring in more than $37 million per year, with the tax on THC bringing in an additional $17 million annually.
In the first phase of legal marijuana sales, state revenue will cover overhead and be allocated to the General Fund. By mid-2023, Connecticut will begin to distribute money between a fund for equity initiatives, a fund for substance abuse prevention, and the general fund. The general fund’s share of the pot will phase out by mid-2029, by which point three quarters of the state’s money will go to social equity, and one quarter to substance abuse services.
Retailers will also pay a municipal tax of three percent of their revenue. Municipalities with marijuana dispensaries are expected to bring a total of more than $18 million million per year by 2026.
Cities and towns can allocate that revenue to six different areas:
- Improving streets and neighborhood developments around marijuana retailers
- Funding education, youth employment and training programs
- Supporting reentry services for the formerly incarcerated or those on probation or parole
- Funding mental health or addiction services
- Funding youth service bureaus
- Funding efforts to promote civic engagement
Legalization will also create upfront costs for the state. For example, the Department of Consumer Protection will hire 49 additional staff at a cost of $13.2 million, and the Office of Fiscal Analysis anticipates tens of thousands of dollars in increased policing costs for the training of drug recognition experts.
The law also establishes a Social Equity Council to help create an inclusive marijuana industry, and determine how best to allocate money in the fund for equity initiatives. The council’s executive director will make $100,000 per year, an additional staff member will earn $65,000 per year, and the council will field a study looking into marijuana and equity at a one-time cost of $500,000.