Taxing Marijuana and the Road to Reparations: Comparing the Colorado and Illinois Cannabis Markets

Abstract

Although still prohibited at the federal level, cannabis can now be found on the shelves of recreational dispensaries across thirty-three U.S states. This thesis examines the development of this legal market from both historical and empirical perspectives. Using a new data set, it estimates the determinants of cannabis sales and tax revenues in the Colorado market and analyzes the incidence of a single tax increase. The results, which suggest that legal cannabis behaves like a luxury good, are used to analyze the potential for cannabis-funded reparations programs in Illinois, which recently approved recreational sales of cannabis.