Iowa GOP leaders oppose legalizing pot to fill shortfalls from tax cuts
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Cannabis plants for Bud & Mary's, a medical marijuana dispensary. Photo: Linh Ta/Axios
While Iowa GOP lawmakers are likely against legalizing cannabis this session, a former state official expects they'll soon "need a new sin tax" to make up for lost revenue from tax cuts, reports Iowa Capital Dispatch.
Why it matters: State forecasters project Iowa's revenue to decline by around $1 billion over two years because of major tax cuts signed into law by Gov. Kim Reynolds, who also says she wants to eliminate the state income tax by 2027.
- While Republicans say they expected revenues to go down and still have a nearly $2 billion surplus to work with, Democrats are warning that this year's expansion of a private school "voucher" program will compound the losses, IPR reported in December.
Driving the news: State estimates show a 5.3% drop in revenue for fiscal year 2025 and a 6.3% drop in fiscal year 2026.
- Mike Tramontina, the former director of the Iowa Department of Management, which oversees state budgeting, predicts Republicans will avoid raising income or sales taxes during a financial shortfall, due to political objections, and instead turn to cannabis legalization.
- He estimates the state will need $40 million to $50 million in new revenue and the current medical marijuana program won't cover that. Cigarette and alcohol sales taxes are already "quite high," he tells ICD.
Zoom out: Neighboring states — including Illinois, Minnesota and Missouri — are reaping fiscal benefits from Iowans crossing state lines to purchase recreational cannabis.
- Missouri, which legalized recreational cannabis in February 2023, garnered $65 million in tax revenues from its first year of sales. Illinois estimated it generated about $3.6 million in tax revenue from Wisconsin residents alone in 2022, about 7.8% of all its cannabis revenues.
- A cannabis dispensary in Eagleville, Missouri, regularly advertises in Iowa and has customers who travel across state lines for products.
What they're saying: Rep. Ann Meyer (R-Fort Dodge) chairs the Health and Human Services Committee and is a key lawmaker for passing recreational cannabis legislation.
- While Meyer tells ICD she opposes legalizing recreational use, she supports the state's medical program and is open to "revising" it if any changes are needed.
The big picture: The Trump administration appears to favor policies legalizing cannabis in the U.S., including rescheduling it at the federal level, NPR reported in November.
- Trump legalized hemp in 2018.