Colorado Marijuana Revenue Is Declining As Other States Legalize, But It Still Outpaces Alcohol Taxes, Report Shows

Tax revenue from marijuana sales has gradually decreased in Colorado over the past five years as more states have enacted legalization and as intoxicating hemp products have grown in popularity, state officials say in a new report. Nonetheless, cannabis is still bringing in more tax dollars compared to alcohol or cigarettes.

In a memorandum from the Colorado legislature’s nonpartisan Legislative Council, staff sought to answer “common questions about how revenue from the marijuana industry fits into Colorado’s state budget.” That includes the $231.1 million in cannabis revenue the state collected in the 2024-25 fiscal year.

Adult-use marijuana is taxed at three levels in Colorado: A 15 percent excise tax, 15 percent special sales tax and 2.9 percent state general sales tax. As one of the first states to legalize marijuana for recreational use, Colorado saw revenue from those sales grow “consistently for the first eight years of legalization, peaking at $424.4 million FY 2020-21.”

Following that, however, “revenue fell for the first time in FY 2021-22, and has declined each year since,” the Legislative Council said. “Marijuana tax revenue fell to $231.1 million in FY 2024-25, 45.5 percent below its FY 2020-21 peak.”

Notably, the memo says that the declining tax revenue from marijuana in more recent years is “has largely been due to low prices and falling demand as other states across the country legalize marijuana, and alternatives like intoxicating hemp become more widely available.”

Early on Gov. Jared Polis (D), a longtime champion of cannabis reform, was perceptive to the potential economic impact of the spread of legalization, poking fun about how he hoped states like Texas would continue to stall on the issue so Colorado could continue to reap the marijuana tourism dollars.

Texas might still remain a prohibitionist state, but with cannabis now legal for adult use in nearly half of the states in the U.S., that broader shift has evidently contributed to the revenue decline.

But the new report also says the rise of intoxicating hemp products is diverting tax dollars. Whether that changes when a federal ban on such products takes effect in November is yet to be seen.

Even with the spread of state-level legalization and increased consumer demand in the intoxicating hemp market, however, Legislative Council released data showing that marijuana remains a more potent revenue generator compared to other vices, including alcohol and cigarettes.

In the 2024-25 fiscal year, marijuana sales generated more tax revenue than alcohol ($54.3 million), tobacco products ($68.2 million), nicotine products ($91.6 million) and cigarettes ($213.9 million).

Via LCS.

To that point, surveys have consistently found that Americans are increasingly choosing marijuanaand cannabis-infused beverages over alcohol and cigarettes.

Meanwhile, in 2025 alone, Colorado saw over $1 billion in marijuana sales—a milestone the governor touted in December. And while Legislative Council attributed part of the decline in cannabis sales to intoxicating hemp product sales, Polis also recently said the pending federal ban will “stifle growth and innovation” in the market.

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Meanwhile, the governor said last week that his state should not have joined a lawsuit supporting the federal ban on gun ownership by people who use marijuana that’s now before the U.S. Supreme Court—and he personally opposes the state attorney general’s “legal position on this.”