Cannabis / Marijuana, STAFF NEWS & ANALYSIS
Colorado's Windfall Could Help Speed Cannabis Legalization
By Staff News & Analysis - February 05, 2015

Pot Is Making Colorado So Much Money They Literally Have To Give Some Back To Residents … The state constitution limits how much tax money the state can take in before it has to give some back. That means Coloradans may each get their own cut of the $50 million in recreational pot taxes collected in the first year of legal weed. It's a situation so bizarre that it's gotten Republicans and Democrats, for once, to agree on a tax issue. – High Times

Dominant Social Theme: Cannabis is a losing proposition.

Free-Market Analysis: Not long ago, cannabis was generally illegal and you could go to jail for a long time by smoking it. But now with legalization and decriminalization taking place in the US and elsewhere, cannabis is being touted as a government money spinner.

In the case of Colorado, the money is pouring in faster than Colorado can spend it. And because of certain peculiarities in Colorado tax laws, the state is now facing the prospect of tax reimbursements.

Here's more:

… A 1992 voter-approved constitutional amendment called the Taxpayers' Bill of Rights requires all new taxes to go before voters. The amendment also requires Colorado to pay back taxpayers when the state collects more than what's permitted by a formula based on inflation and population growth. Over the years, Colorado has issued refunds six times, totaling more than $3.3 billion.

Republicans and Democrats say there's no good reason to put pot taxes back into people's pockets, and state officials are scrambling to figure out how to avoid doling out the money. It may have to be settled by asking Colorado voters, for a third time, to cast a ballot on the issue and exempt pot taxes from the refund requirement.

… Because the economy is improving and other tax collections are growing faster, Colorado is obligated to give back much of what it has collected. Final numbers aren't ready, but the governor's budget writers predict the pot refunds could amount to $30.5 million, or about $7.63 per adult in Colorado.

What we see here is that an additional tax bonanza has enriched Colorado to the point where returns are necessary. This is surely a predicament that other states would like to be in.

As cannabis is often being positioned as a kind of sinful indulgence (despite its medical applications), it is currently fairly easy for legislators to make the case that the taxes derived from it ought to go to "worthy" endeavors such as schools and parks. So legislators may do what they can to keep the windfall.

Of course, an alternative would be for Colorado to lower other taxes in order to take into account cannabis revenues. Currently cannabis proponents in Colorado don't seem to be suggesting this alternative but eventually someone will surely propose it.

The additional Colorado revenue buttresses our contention that cannabis taxation is going to move many states toward legalization in the near future. Also, the profile of cannabis is more like alcohol than gambling, which means that sooner or later all 50 states should recognize it without criminal or even civil penalties. See here: Indian Tribes Advance Into Cannabis Cultivation, Though Gaming Model May Not Apply.

After Thoughts

Reports such as those featuring Colorado's cannabis revenue are surely circulating throughout 50 separate state capitols. Legalization or at least decriminalization may happen even more quickly than we think.

Posted in Cannabis / Marijuana, STAFF NEWS & ANALYSIS
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