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Taxing Choice: Excise Taxes in 2021

As new markets have emerged, either through legalization or innovation, new excise taxes have too.

Nearly half of all states have now legalized marijuana, collecting a combined $1.8 billion in excise tax revenue in 2020. Not to be left out, the U.S. House of Representatives passed marijuana decriminalization legislation last year that included an excise tax, and Senate Majority Leader Chuck Schumer (D-NY) has called for decriminalization by next year.

After a 2018 Supreme Court decision, legitimate businesses can now take advantage of a once-illegal sports betting market three times the size of the entire market for marijuana. But the federal government imposes a little-known excise tax on sports betting that could hinder its growth.

Newly-developed, vapor-based nicotine products are expected to grow 20 percent in volume by 2023. Over half the states tax, or plan to tax, vapor products; however, they remain untaxed by the federal government.

It’s likely that these new markets will continue to grow as legalization and innovation continue, but the structure of excise taxes could dictate where and how that growth occurs.

This has raised important questions as policymakers debate how best to enact or fix excise taxes:

  • How should excise taxes be structured so as not to stifle growing industries or push participants into the black market?
  • How much will these new taxes raise, how stable will collections be, and are there better or worse ways for governments to allocate the revenue?
  • To what extent are different excise taxes effective tools for curbing unwanted behavior?
  • What lessons should the federal government take from the policy experiments in the states?

Join our webinar panel of excise tax experts on Thursday, July 22nd at noon EST to discuss critical questions like these and others. Please register below if you would like to attend.

Our lineup will be moderated by Tax Foundation excise tax expert Ulrik Boesen and feature:

  • Norman Birenbaum, Director, Cannabis Programs at the State of New York and President, Cannabis Regulators Association
  • Richard Auxier, Senior Policy Associate, Tax Policy Center
  • Todd Nesbit, Assistant Professor of Economics, Ball State University