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What Tennessee Is Missing Out On Without Recreational Cannabis Legalization

 

What If Tennessee Legalized It And Taxed It?

What Tennessee Is Missing Out On Without Recreational Cannabis Legalization

Here’s a state-specific look at what Tennessee is likely missing out on right now by not legalizing recreational cannabis — in terms of potential tax revenue, economic activity, and what other states with legal markets are already collecting:

📌 Estimated Tax Revenue Tennessee Could Collect if It Legalized

💰 Projected Annual Tax Revenue

Various economic analyses and revenue projections estimate what Tennessee could collect per year from a legal cannabis market:

  • Tax Foundation estimate (annual excise tax revenue potential):
    Tennessee: about $146 million annually from recreational cannabis excise taxes alone, based on national modeling of adult-use markets.

  • 24/7 Wall St. projection (pre-legalization):
    Estimated state cannabis tax revenue potential around $133 million per year.

  • SilentMajority420 economic forecast:
    A more comprehensive market analysis suggests that if Tennessee legalized and built an optimized regulated market, the state could generate $175 million–$235 million per year in tax revenue once the market matures.

These figures include excise taxes, sales taxes, and potentially business taxes after legalization — and don’t include additional income taxes or licensing fees.

💸 Near-Term Legislative Estimates (from Tennessee Fiscal Review)

Although Tennessee hasn’t legalized recreational cannabis, some bills have included revenue estimates for regulated sales:

  • A fiscal note from proposed legalization legislation estimated about ~$34 million in total state revenue in the first partial year (with limited sales) and about $68 million annually in ongoing state revenue.

These early legislative projections tend to be conservative and don’t fully model a mature market — so external economic projections are often higher.

📊 Sales & Market Size Tennessee Is Losing to Other States

Even without legality, Tennesseans are spending on cannabis — either in illicit markets or by traveling to neighboring states:

  • Estimated annual illegal cannabis market in Tennessee: $900 million–$1.1 billion (untaxed and unregulated).
  • Cross-border purchases (Tennesseans spending money in other states): $175 million–$270 million/year — generating tax revenue for other states.

This means Arkansas, Missouri, and Virginia are capturing money Tennesseans spend legally just outside the border.

If Tennessee taxed cannabis at roughly 20–22%, that would translate to an estimated $35 million–$60 million in tax revenue that’s currently going to other states or staying in the black market.

📈 What Other States Are Doing With Their Cannabis Tax Revenue

For reference, states with legal adult-use marijuana are already collecting large revenues:

  • The U.S. total from legal adult-use cannabis taxes is nearly $25 billion+ since 2014.
  • In 2024 alone, legalization states collected more than $4.4 billion in cannabis taxes.
  • Major states like California, Illinois, Washington, and Michigan each bring in hundreds of millions — or over $1 billion — annually.

By comparison, if Tennessee legalized cannabis, it likely would not collect dollars anywhere near those totals — simply due to its smaller population — but still would generate tens to hundreds of millions annually, which is a meaningful new revenue stream for the state.

📌 Summary: What Tennessee Is Missing Out On

  • 💸 Revenue Not Being Collected
    • $130–$235 million+ per year in potential tax revenue that other states are already capturing.
    • $35–$60 million currently being spent out of state by Tennesseans and untaxed.

  • 🛍 Untaxed Market Activity
    • Nearly $1 billion annually in cannabis consumed in Tennessee exists outside a regulated market.

  • 📈 Jobs & Commerce
    • A legal industry could create thousands of jobs (suggested 8,000–10,000+).

  • 💡 Economic Spillovers
    • Besides direct taxes, a legal market yields income tax revenue from business owners and employees, tourism dollars, licensing fees, and reduced enforcement costs.
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