Source: Economy Sector on March 11, 2014 | by Laya Mallela ’17
According to the Drug Policy Alliance, an organization dedicated to reversing the prohibition of marijuana, “legalizing and regulating marijuana will bring the nation’s largest cash crop under the rule of law, creating jobs and economic opportunities.” This week Colorado validated this assertion. On Monday, Colorado revenue officials announced that in the month of January the state collected about $3.5 million in taxes from the marijuana industry.
Colorado legalized marijuana sales in 2012, but the first commercial sales of the drug began in January of 2014. Marijuana can be legally sold to anyone 21 years and older as of January 1, 2014. Of the $3.5 million in tax revenue, medical marijuana generated $1.4 million and recreational marijuana generated $2.1 million. Yet, medical marijuana sold more than double as much as recreational marijuana with sales of $31 million and $14 million, respectively.
Recreational marijuana reaps higher tax revenues than its medicinal counterpart due to the high taxes placed on it. In November 2012, voters enacted a 10% special sales tax and a 15% excise tax on top of the normal 2.9% state sales tax on the drug. Pro-marijuana advocates proudly declare that these numbers demonstrate that the growing and selling of the drug can provide windfall to the state government, instead of funding to drug cartels.
Yet, two factors skewed the January numbers, both positively and negatively. First, Colorado has about 160 state-licensed marijuana stores, but due to local licensing problems, some could not open on January 1st. As more stores open, retailers will pay more wholesale taxes. Additionally, after the one-time tax-free transfer of medical marijuana to the recreational market expires, the government will collect even more in wholesale taxes. On the downside, the initial surge of demand declined in the following months. However, Colorado state officials remain optimistic that the revenues from increased stores will offset any decreased demand.
After Monday’s release of the revenue figures, lobbying intensified over how the money from the marijuana tax should be spent. Many sectors want a share of the funding the new source of income generates. Previously, voters approved that the first $40 million of the excise tax should go to school construction and improvement. This promise to improve education with the marijuana tax helped push voters to legalize the drug. Still, Governor John Hickenlooper and the legislature must decide how to spend the predicted $77 million tax revenue the marijuana tax will generate in the next fiscal year. Hickenlooper is pushing a $134 million proposal for spending the new marijuana revenue on anti-drug messaging to children and advertising discouraging driving while under the influence of marijuana. The state police department has also requested more money to enforce the new marijuana laws.
Another problem facing Colorado is the state’s budget constraints, which prevents officials from spending the tax-dollars in excess of the amount presented to voters. Colorado’s Joint Budget Committee meets on Wednesday with lawyers to discuss spending marijuana taxes beyond the planned $70 million.
In the future, Washington State will begin selling recreational marijuana and we can determine if this state generates similar revenues. While every state will not legalize marijuana, cash-strapped ones may view marijuana sales as a source of additional tax revenue. Internationally, other countries are watching Colorado as the world’s fully regulated recreational marijuana market. The Netherlands allows sales of the drug, but does not allow its growth or distribution. Uruguay’s marijuana program is still under development. As Colorado’s marijuana market continues onward, we will likely see the world reacting to its successes and failures.
Article Source: http://www.cornellcurrent.com/2014/03/11/the-legalization-of-marijuana-pays-in-colorado/