Politics

Report: Legal pot will contribute ‘little or nothing’ to Colorado’s bottom line

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Greg Campbell Contributor

How much pot will Coloradans consume once it becomes widely and legally available?

About 150,000 pounds a year, according to a new study by the Colorado Futures Center at Colorado State University. The study warns its estimate is probably conservative.

Put another way, that’s roughly 672 million bong hits per year, which may generate as much as $130 million in tax revenue.

But despite the best efforts of Colorado pot smokers, not even that amount of toking is expected to produce enough revenue to cover the costs of regulating the industry, much less contribute to other areas of the state’s balance sheet.

“Revenue from marijuana taxes will contribute little or nothing to the state’s general fund,” the report concludes.

Lawmakers are currently considering a one-time excise tax of 15 percent applied at the point of sale between the cultivator and retailer and a 15 percent special tax paid at the cash register along with a 2.9 percent state sales tax.

Voters must approve the taxes during the election in November before they can be applied.

The good news for cannabis aficionados is that even after taxes are added, CSU researchers estimate that regulated pot will retail for less than the black market, at around $187 per ounce. According to the crowdsourcing website Price of Weed, the average price of high- and medium-quality marijuana from the Colorado street market is $219 per ounce.

If the CSU forecast is correct in its assumptions about the pot market, the excise tax will earn the state $21.7 million per year, which is earmarked (up to $40 million) for school capital construction; $90.9 million from the special tax to be shared with the localities that haven’t banned retail pot stores from within their borders; and $17.6 million from the existing sales tax that will be used to fund enforcement and regulation.

While those numbers are significant, “marijuana tax revenues may not cover the incremental state expenditures related to legalization,” the report says.

But the report is also filled with caveats and warnings that its estimates may be way off. For example, the report acknowledges that it doesn’t take into account demand by people who visit from out of state, or by those under 21, who will inevitably coax their adult friends into buying it for them.

It also made several assumptions about the extent to which people surveyed lied about their marijuana use and about the rate of retail markup from wholesale prices (not to mention the wholesale costs themselves).

The report did not mention another factor that will likely impact the size of the retail market. Amendment 64, the measure that legalized marijuana, also allows adults to personally grow up to six plants themselves and give it away to other adults, meaning an unknown number of home growers and their friends may not participate in the retail market.

This exercise underscores the complexity facing lawmakers as they debate a slate of regulations around the country’s first-ever legal marijuana market. Since it’s never been truly taxed and regulated, no one is sure where the threshold for taxation lies — or to what extent the state will benefit from it.

“While taxes from marijuana will contribute to school capital construction needs and may cover the incremental costs associated with legalization, they will not contribute in any significant way to solving the structural gap developing in the state budget,” the report concludes.

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Content created by The Daily Caller News Foundation is available without charge to any eligible news publisher that can provide a large audience. For licensing opportunities of our original content, please contact licensing@dailycallernewsfoundation.org.