Potency-Based Cannabis Taxes Are Better at Reducing High-THC Product Demand
In an experimental marketplace with 1,250 cannabis users, potency-based taxes were more effective than price-based taxes at reducing demand for high-THC products.
Quick Facts
What This Study Found
Both tax types reduced overall cannabis demand, but potency-based taxes specifically reduced demand for high-THC products more effectively (elasticity -0.59 vs. -0.49 for price-based), and shifted spending away from potent products.
Key Numbers
1,250 adult cannabis users. Price elasticity of quantity demanded: -0.46. Price elasticity of THC demanded: -0.48 to -0.52. Potency-based tax elasticity for high-THC products: -0.59 vs. -0.49 for price-based (p = 0.046).
How They Did This
Online experimental cannabis marketplace with 1,250 adult cannabis users in legal states, comparing hypothetical purchase behavior under varying price-based and potency-based tax rates.
Why This Research Matters
High-potency cannabis products pose greater health risks, especially for mental health. If tax policy can specifically discourage high-potency purchases, it becomes a targeted public health tool rather than a blunt revenue instrument.
The Bigger Picture
Cannabis tax design is an active policy debate. This evidence suggests potency-based taxes can serve dual public health and revenue goals by steering consumers away from the highest-risk products.
What This Study Doesn't Tell Us
Hypothetical purchase behavior may differ from real-world decisions. Online sample may not represent all cannabis users. Doesn't account for black market substitution effects.
Questions This Raises
- ?Would consumers shift to the illicit market to avoid potency taxes?
- ?Can potency-based taxes be practically implemented given product variety and testing challenges?
Trust & Context
- Key Stat:
- Evidence Grade:
- Well-designed experimental marketplace with large sample, though hypothetical purchases limit real-world applicability.
- Study Age:
- Recent (May 2024) study addressing the timely policy question of optimal cannabis tax structure.
- Original Title:
- Estimating and comparing the effects of price- and potency-based taxes on cannabis purchase patterns in an experimental cannabis marketplace.
- Published In:
- Addiction (Abingdon, England), 120(9), 1770-1779 (2025)
- Authors:
- Xing, Jin(2), Shi, Yuyan(18)
- Database ID:
- RTHC-07985
Evidence Hierarchy
Frequently Asked Questions
What's the difference between price-based and potency-based cannabis taxes?
Price-based taxes add a percentage to the product price regardless of THC content. Potency-based taxes charge more for higher-THC products, creating a financial incentive to choose lower-potency options.
Do cannabis taxes actually change what people buy?
Yes — this study found that both tax types reduced demand. However, potency-based taxes were specifically better at steering consumers away from high-THC products.
Read More on RethinkTHC
Cite This Study
https://rethinkthc.com/research/RTHC-07985APA
Xing, Jin; Shi, Yuyan. (2025). Estimating and comparing the effects of price- and potency-based taxes on cannabis purchase patterns in an experimental cannabis marketplace.. Addiction (Abingdon, England), 120(9), 1770-1779. https://doi.org/10.1111/add.70086
MLA
Xing, Jin, et al. "Estimating and comparing the effects of price- and potency-based taxes on cannabis purchase patterns in an experimental cannabis marketplace.." Addiction (Abingdon, 2025. https://doi.org/10.1111/add.70086
RethinkTHC
RethinkTHC Research Database. "Estimating and comparing the effects of price- and potency-b..." RTHC-07985. Retrieved from https://rethinkthc.com/research/xing-2025-estimating-and-comparing-the
Access the Original Study
Study data sourced from PubMed, a service of the U.S. National Library of Medicine, National Institutes of Health.
This study breakdown was produced by the RethinkTHC research team. We analyze and report published research findings without making health recommendations. All interpretations are based solely on the published abstract and study data.