Could pot pay for potholes in Tennessee?

Could pot pay for potholes?

As interest in legalizing marijuana grows in Tennessee, lawmakers are also debating where any new tax revenue should go. At the same time, drivers across the state face a familiar problem every winter and spring: roads that need repair.

Rep. Aftyn Behn and Sen. Heidi Campbell, both Nashville Democrats, have suggested pairing the two by legalizing cannabis and directing the tax revenue toward road maintenance.

That raises a straightforward question for Tennessee policymakers and taxpayers alike: Could one realistically pay for the other?

States that have legalized recreational marijuana have generated billions of dollars in tax revenue over the past decade. Colorado alone has collected more than $2.6 billion in cannabis taxes since legal sales began in 2014.

Those figures have helped fuel interest in similar proposals across the country, including in Tennessee. Supporters argue a regulated cannabis market could generate new tax revenue for infrastructure and other public needs. Critics warn legalization may increase substance use disorders and create additional public health costs for states.

The experience of other states suggests the financial equation is more complicated than simply counting new tax dollars.

Legal cannabis markets require regulatory systems. States must license producers and retailers, conduct inspections, oversee laboratory testing, monitor compliance and enforce rules designed to prevent illegal sales. All of those responsibilities carry costs.

That means the central fiscal question for Tennessee lawmakers is not simply how much cannabis taxes might generate. The question is how much revenue would remain for road repairs after the state builds and operates the system needed to regulate a legal cannabis market.

Looking at states such as Colorado, Michigan, Washington, Arizona and Missouri offers a clearer picture of what Tennessee might expect.

Colorado provides one of the longest-running examples. The state taxes cannabis through a 15% wholesale excise tax and a 15%retail sales tax, in addition to standard state and local sales taxes. Since legal sales began in 2014, the system has generated more than $2.6 billion in tax revenue.

Annual revenue has stabilized in recent years. In 2024, Colorado collected about $237 million in cannabis tax revenue. With a population of roughly 5.9 million residents, that equals about $40 per resident each year in state cannabis taxes.

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If Tennessee generated revenue at a similar per-capita level to Colorado’s mature market, though with a different tax structure, the state’s population of about 7.3 million would produce roughly $290 million annually in cannabis tax revenue before regulatory costs are deducted.

That figure represents gross revenue, not the amount available for any single program. Michigan offers one example ofdministrative costs needed to support a legalized cannabis market. In 2024, the state’s Cannabis Regulatory Agency reported about $19 million in expenses tied to regulating the adultuse marijuana market, including salaries, benefits and operational costs.

Washington operates one of the most established regulatory systems in the country. The Washington State Liquor and Cannabis Board reported roughly $69 million in operating expenses in fiscal year 2025 across its alcohol and cannabis regulatory programs, including enforcement units responsible for investigations, compliance checks and licensing oversight.

Those figures illustrate a basic budget reality. Legal cannabis markets generate revenue, but they also require a permanent regulatory infrastructure.

That raises the next question for Tennessee. How much of any cannabis tax revenue would remain after regulatory costs are paid?

The fiscal note attached to Tennessee’s legalization proposal estimates roughly $29 million in recurring annual revenue flowing to the state’s Highway Fund once the market is fully operational. The estimate assumes a 15% tax on cannabis sales with most of the revenue earmarked for transportation.

Whether that projection proves accurate would depend on several factors, including consumer demand, competition from neighboring states, pricing changes and the size of the regulatory system Tennessee ultimately builds.

Even if the estimate proves correct, the scale of the funding must be placed in context.

Road maintenance and paving projects across Tennessee require hundreds of millions of dollars annually through fuel taxes, vehicle registration fees and federal transportation funding. A new revenue stream of roughly $29 million would represent a modest addition to that broader system rather than a complete solution to the state’s road repair needs.

Cannabis taxes could provide additional funding for road maintenance. The numbers suggest they would supplement Tennessee’s transportation budget, not transform it.

The phrase “pot for potholes” may capture attention. The numbers suggest a more limited reality. Cannabis taxes could help fund road repairs, but they would represent only a small piece of Tennessee’s overall transportation funding system.