Study: A 10% Cannabis Tax Increase Cuts Legal Sales By 12.6%

Every $1 increase in cannabis excise taxes raises retail prices by several dollars, or more precisely, between $3.91 and $6.32. That’s according to a new study, published in the International Journal of Drug Policy in June, that focuses on market factors in the US. 

The new findings, which are based on an analysis of nearly a decade of data, suggest that higher prices are inversely proportional to legal cannabis sales.

According to researchers, a 10% increase in cannabis excise taxes leads to a 12.6% decline in legal sales, while a 10% increase in retail prices results in a 17.8% drop in sales volume.

They also noted that if legal cannabis becomes too expensive, consumers may turn to illegal or unregulated suppliers.

The researchers also found that higher taxes on products such as cigarettes and beer reduce legal cannabis sales, while no significant relationship was identified between cannabis purchases and E-cigarettes.

While cannabis taxes may help support public health goals, they can also push consumers away from the legal market, fuel illicit sales and ultimately reduce the tax revenue many states expected from legalization, according to the study.

In Canada, a similar pattern was studied before, reinforcing the findings from the U.S. study that keeping legal prices competitive is vital in attracting consumers away from the illicit market.

A 2025 study in British Columbia found that a 10% drop in regulated cannabis price was linked to a 14% increase in the quantity of cannabis bought in the province during the study period.