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Mickelson Wants $20M More in Tobacco Tax; Mentele Might Get $12M–$19M from Marijuana Tax

Speaker G. Mark Mickelson wants to raise taxes on tobacco to subsidize vo-tech tuition. His proposed initiative foresees up to $20 million in new vo-tech revenue from the extra buck-a-pack tax.

Melissa Mentele and New Approach South Dakota want to legalize, regulate, and tax marijuana to reduce prison costs and boost funding for schools, drug education and addiction treatment, law enforcement, and the general fund. Their proposed initiative includes no end dollar figure, but I’ve previously estimated that if legalized marijuana sold as well here as it does in Colorado, then, factoring in our smaller population, South Dakota might make $19.6 million a year in taxes from marijuana sales.

Let’s update that estimate by factoring in the percentage of marijuana users, the likely customers who would pay that marijuana tax.

According to 2014 data from the National Survey on Drug Use and Health, as reported in the Lincoln Journal Star last January, South Dakotans are less likely to use marijuana than almost anyone else in America. Among South Dakotans age 12 and up, 9.41% reported using marijuana in the past year, and 5.14% reported using marijuana in the past month. Colorado and Washington report far higher rates of marijuana use:

State Colorado Washington South Dakota
age 12+ report using marijuana in past year, 2014 20.05% 18.32% 9.41%
age 12+ report using marijuana in past month, 2014 14.01% 12.74% 5.14%
population age 12+, 2014 4,522,756 5,992,151 709,417
population age 12+ using marijuana in past year 906,813 1,097,762 66,756
population age 12+ using marijuana in past month 633,638 763,400 36,464

Legalizing marijuana does not clearly drive higher usage rates (evidence here and here). One new study found increased post-legalization marijuana use among Oregon college students, but the effect occurred primarily among binge drinkers. (Tangent bait—which one is the gateway drug: marijuana or alcohol?) To stick with the data we have and keep the math simple, let’s assume higher usage rates drive legalization… which would mean that legalization in South Dakota is far less likely than in other states.

But if the unlikely happens, how much money could we get, given current consumption habits?

In Fiscal Year 2017, Colorado collected $210.4 million in marijuana taxes. (Updated figures suggest my original Colorado calculation was low!) Washington collected $314.8 million.

Colorado Washington SD yearly revenue à la Colorado SD yearly revenue à la Washington
tax per past-year user $232.04 $286.80 $15,490,169 $19,145,710
tax per past-month user $332.08 $412.42 $12,108,934 $15,038,379

The average tax collection from each person who used marijuana over the past year was $232 in Colorado and $287 in Washington. More frequent marijuana users may be paying $332 a year in Colorado to $412 a year in Washington just in taxes for their highs.

Depending on how South Dakota users’ purchases would compare to their counterparts out of state, factoring in our lower user rate, South Dakota might bring in between $12.1 million to $19.1 million per year by legalizing and taxing marijuana.

Of course, neither Mentele nor Mickelson will make a dime off me, since I decline to waste my money or lung tissue on sticking smoldering weeds of any flavor in my mouth and breathing in the fumes and particulates. But it’s interesting to see both the Republican Mickelson and the Democrat Mentele seeking to tax unhealthy behavior to the tune of millions of dollars to fund education.


  1. Porter Lansing 2017-08-02

    Those are the stats I use, also. 14% of CO residents use cannabis. The extra taxation comes from tourists whom the bulk of the biz is now being directed at. As I stated, 71% of the state has voted against allowing retail pot stores. The 29% are mostly tourist areas aka ski towns.
    It’s proper you site the potential tax revenue and don’t dismiss it out of hand. One doesn’t have to drink wine or bourbon to realize what those products do for Northern California and Kentucky. I don’t gamble but I realize what truck stop slots do for your economy. It’s about choices. People have free will.

  2. Cory Allen Heidelberger Post author | 2017-08-02

    Thanks, Porter! The tourism count would further complicate the estimate. On the one hand, with our well-developed tourist industry, we might enjoy some strong revenue advantages from folks coming for the Sturgis Rally, Deadwood, the Black Hills, and fall hunting (uh oh). On the other, we might not be able to cash in on marijuana-specific tourism as the market becomes more saturated with states offering the product (just like the growing difficulty in cashing in on casino gambling as more states legalize slots etc.).

    Hmm… would there be tourism synergy between Deadwood gambling and marijuana smoking?

  3. Porter Lansing 2017-08-02

    Funny you should ask. Two years ago I had a discussion/argument with Larry Kurtz about this subject. He wanted SoDak to legalize weed in Deadwood, only. My argument, and it’s been born out in CO, is that casinos don’t want their guests high on pot. Pot makes people cautious and casinos want people drunk and reckless. You can see how that paradigm realizes that drunk people gamble and cautious people are more apt to just watch others be reckless gambling with their money. Cautious pot smokers are highly courted by ski areas. Stoned caution helps mitigate reckless behavior and ski accidents decline which is good for return business.
    Only now, several years after legalization, have Colorado casino towns began to allow retail marijuana stores as an experiment. Las Vegas has also taken up the experiment. It’s too soon to determine if gambling towns will see sufficient returns on risk to rewards, but I say they won’t.
    Hunters? Do out of state hunters get drunk at night? Does pheasant hunting begin at noon, after a hangover has been somewhat relieved? Does pot smoking make revenues at alcohol establishments go up or down? Probably up.
    Colorado’s newest experiment is to allow legalized marijuana clubs (not private clubs) as places to go and smoke the pot. These clubs have no alcohol. It’ll be very popular with tourists, people who want to take an Uber to the club and leave the kids home with Grandma, and non-drinking dance enthusiasts. The law was voted in and it allowed alcohol in these clubs but Governor Hick vetoed it. I think he has a very level headed approach to politics.

  4. grudznick 2017-08-02

    It turns out the demon weed is leading more and more people into doing that meth business and if you meth up once you have a 50% chance of being a junky and if you meth up twice you have a 75% chance and if you meth up 3 times you are 100% a junky. The weed is bad, it is bad.

    Just look to the sloppily written weed bills put forth. People where high when they wrote those and it shows.

  5. Porter Lansing 2017-08-02

    Grudzie is an encyclopedia of misinformation. What else can we expect from the Queen of VNOE? (vote no on everything)

  6. barry freed 2017-08-03

    They say that beer makes people mean. Whether your problems stem from harsh potty training, alcohol, low se;f-esteem or any of a great number of psychological issues, there is hope you can find relief for your need to hurt others.
    See a professional, you don’t have to be this unhappy.
    Hey, go to Colorado and smoke one of the strains of weed scientifically proven to be good for self reflection.
    Just don’t come back for 30 days as they have Catheter Checkpoints on all of the major roads for the Motorcycle Rally.

  7. Porter Lansing 2017-08-03

    Ahhhhh … the tortured logic of the “Using marijuana leads to hard drugs, assertion!!”
    It compares to, “Every Hell’s Angel began by riding a bicycle as a kid.”
    Sometimes it happens. Almost always, it doesn’t.

  8. Roger Cornelius 2017-08-03

    Just more of the tax and spend republican party in South Dakota.

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