Drug policy was on the ballot in many states in 2024. Voters in Florida, North Carolina, and South Dakota considered legalizing recreational marijuana; voters in Nebraska had the option to legalize medical marijuana; and voters in Massachusetts considered legalization of natural psychedelic substances. Legal access to drugs, and thus legal (taxable) markets for them, continued to expand in 2024, but the expansion via 2024 ballot initiatives stalled.
The lone state to expand access to previously illegal drugs was Nebraska. A wide margin of Nebraska voters decided to join the 38 other states and DC that have already legalized medical marijuana. Two ballot initiatives passed in Nebraska with the support of more than two-thirds of voters. One initiative enables the use and possession of medical marijuana upon recommendation from a health-care provider and the other initiative enables the manufacturing and distribution of medical marijuana to be regulated by a new Nebraska Medical Cannabis Commission.
The commission is empowered to establish the rules and regulations governing the newly legal medical marijuana market, which may include levying a taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.
on sales of the previously criminalized substance. Whether this new legal market will be taxed is not yet known, as the commission has until July 1, 2025, to establish the framework for the regulatory process. Not all states that have legalized medical marijuana levy an excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections.
on it, since the externalities and sin tax sentiments associated with recreational marijuana are often not present or heavily diminished for medical marijuana.
Though voters resoundingly passed the initiatives, there is a legal challenge to medical marijuana in Nebraska, as a lawsuit backed by former State Senator John Kuehn is attempting to invalidate the signatures that put them on the ballot in the first place. If the Nebraska Medical Cannabis Commission is created and does provide for an excise tax on the newly legal medical marijuana, the tax rate should be kept low to ensure that the safer, legal market remains price competitive with preexisting illicit markets.
In contrast to the success of medical marijuana, none of the initiatives for recreational marijuana passed. Florida voted on an initiated constitutional amendment that would have legalized recreational marijuana. The initiative in Florida received support from about 56 percent of voters, but this failed to achieve the 60 percent supermajority required to amend the Florida State Constitution. This comes after a similar measure for legalizing medical marijuana passed in 2016 with approval from 71 percent of voters.
Florida does not levy an excise tax on medical marijuana, and no excise tax was attached to this effort to legalize recreational marijuana. However, a financial impact statement estimated that sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding.
revenues from recreational marijuana would be almost $200 million. There were some references from supporters to a possible excise tax levied on newly legalized recreational marijuana, but specifics are unlikely to be developed due to the measure’s failure.
The North Dakota ballot initiative would have legalized the possession and use of small amounts of recreational marijuana, as well as enabled licensure for some cultivation facilities and retailers. The measure failed to pass, garnering only 47.5 percent of votes cast in support.
A very similar ballot initiative in South Dakota would have done the same, but with more restrictions on how the substances could be stored and where they could be used. Neither effort to legalize recreational marijuana specified any excise tax to be levied on the new market, though supporters emphasized the potential for revenue to be generated from legal marijuana sales. South Dakota voters supported a ballot initiative in 2020 to legalize recreational marijuana. However, that 2020 ballot measure was invalidated in November 2021 by the South Dakota Supreme Court. A further effort to legalize recreational marijuana in South Dakota was rejected by voters in 2022. That measure would have levied a 15 percent tax on sales of the newly legalized substance.
While most of the 2024 marijuana-related ballot measures failed, the margins of those decisions were close. A majority of Florida voters supported recreational marijuana, but the measure was 4 percent shy of the required supermajority. The measures in North Dakota and South Dakota failed by 3 percent and 6 percent, respectively. As public perception shifts toward supporting legalization, the close results of the 2024 ballot initiatives may indicate that similar measures will find more success in the future.
Voters failed to approve a Massachusetts ballot initiative that would have legalized natural psychedelic substances by a similarly low margin, only 7 percent. Attached to the legalization effort were details on how the newly legalized substances would be taxed. The state would levy a 15 percent tax on the sale of psychedelic substances and localities would be empowered to levy an additional local option tax of up to 2 percent. Revenues were to be directed to a Natural Psychedelic Substances Regulation Fund, which is required to provide for administration and enforcement of the regulatory scheme before any other appropriations. However, any revenues in excess of the cost of administration and enforcement are not explicitly earmarked for costs associated with psychedelic legalization, as would be appropriate for an excise tax.
This election did not see any states join those that have already legalized recreational marijuana. State ballot initiatives have historically been a crucial driver of legalization efforts. Of the 24 states that have legalized recreational marijuana, 13 were the result of a citizen-initiated ballot initiative. For medical marijuana, 18 of the 38 states had the substances legalized through the ballot initiative process. With the significant potential for state revenues, and the prior political success of arguments that legalization can shift consumers to safer legal markets, it seems likely that states will continue to see legislation and ballot initiatives to legalize marijuana at the state level—even states that failed to do so this election.
Legal markets in states are still hampered by an exclusion from interstate commerce, normal banking operations, and other challenges associated with federal criminalization. This may be alleviated somewhat by the ongoing effort to reschedule marijuana within the Controlled Substances Act, or more robustly by a policy that defederalizes marijuana policy entirely, like the STATES 2.0 Act.
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