Could high taxes on legal weed force Coloradans to buy on the black market? It seems possible as state lawmakers are considering the possibility of taxing legal recreational marijuana at a rate that could be nearly 40 percent in some areas.
The bill that emerges from the House-Senate committee, which is introducing a bill this week drafted from the 58 recommendations that the pot task force issued last month with taxes being one of several issues the committee is considering, could ask voters to approve a 15 percent excise tax and a 15 percent special sales tax. Those rates plus existing local and state tax rates -- for food and beverage sales in Denver, the the combined total tax rate is 8 percent -- could mean a total tax rate 0f 38 percent on marijuana purchases in the Denver area.
Currently, medical marijuana is taxed like all food and beverage sales are and fluctuates from county to county, in Denver that rate is just 8 percent.
Colorado voters would be asked to weigh in on the two additional 15 percent tax proposals and The Associated Press's Kristen Wyatt reported that some state lawmakers fear that voters will reject one or both of the tax proposals leaving the state stuck with the tab for enforcing pot sales but without the budget to pay for it.
Amendment 64 states that the first $40 million raised from the 15 percent excise tax would go to to school construction. And although many voters who supported A64 did so because it could raise money for schools, lawmakers are concerned that even fans of that excise tax rate and the use of its revenue could be turned off by a total tax rate that would exceed 30 percent.
7News reports that dispensary owners are worried that the increased taxes will raise the price of pot to such a degree that buyers would be forced to purchase pot on the black market. Shop owners also said that they pay large licensing and other fees to run their businesses already which should be the revenue that the state uses to fund enforcement.
It could also simply pull marijuana users out of the buying market where they could be heavily taxed and into the home-growing market where the taxes would apply for the initial plants and supplies but from then on out, growers would have their own tax-free product for personal use. Amendment 64 allows adults 21 and over to grow up to six plants at home, with only three of those plants flowering at a given time.
ColoradoPols has argued that it is more likely that Colorado voters would vote for a higher tax on legalized marijuana, but they also wonder what the upper threshold is for that tax rate:
How much is too much, folks? We don’t have a good sense of the answer to that question. As a vice product that has been illegal for many decades, and using the taxation of, for example, tobacco as a guide, one would think that the public would tolerate a tax on pot that doubled the retail price of the product or more. On the other hand, the easily-quantifiable public costs of tobacco use do not cleanly apply in the case of marijuana–at least not yet.
One thing we agree with Rep. DelGrosso on wholeheartedly is that Amendment 64 was approved by voters to produce revenue for the state, in addition to the goals of policy harm reduction and reasonable, enforceable laws. Despite our state’s stoner reputation, we’d say many if not a majority of the voters who approved Amendment 64 are not themselves pot smokers. Those are the voters who need to feel confidence in this process.
And there's certainly an argument to be made that a higher than usual tax rate is needed since it's not exactly clear how much a legally regulated marijuana market will actually cost because there's never been one for recreational marijuana before, only medical marijuana, which is presumably a much smaller market than what could appear here in Colorado come January 2014 when commercial pot sales begin in the state.
Colorado's Marijuana Task Force issued its final recommendations for how the state ought to implement Amendment 64 in March, though the actual regulations will be made by state lawmakers. The 165-page report included 58 recommendations to be reviewed by the governor and state legislators. Read the full report here.
"This was ground-breaking work and the Task Force process went very well," task force co-chair Barbara Brohl said. "It was supported by many committed and astute individuals who took the Governor's charge very seriously. Task force members represented differing viewpoints, they addressed all issues in a well-thought-out manner and worked hard to develop sound solutions. The Task Force did all the 'heavy lifting," but now a lot of follow up work has to be done in the coming months."
Lawmakers have been considering recommendations such as a ban on smoking marijuana in bars as covered by the Colorado Clean Indoor Air Act, prohibiting anyone without valid medical marijuana licenses from growing, processing and selling recreational marijuana during the first year of licensing as well as THC percentage in products, labeling and more.
On Monday, lawmakers will consider whether pot sellers should have to grow most of their product.