Colorado’s Legal Marijuana Market Is Bringing In Way More Tax Revenue Than Expected
Colorado’s legal marijuana market is far exceeding tax expectations, according to a budget proposal released Wednesday by Gov. John Hickenlooper that gives the first official estimate of how much the state expects to make from pot taxes.
The proposal outlines plans to spend some $99 million next fiscal year on substance abuse prevention, youth marijuana use prevention and other priorities. The money would come from a statewide 12.9 percent sales tax on recreational pot. Colorado’s total pot sales next fiscal year were estimated to be about $610 million.
Retail sales began Jan. 1 in Colorado. Sales have been strong, though exact figures for January sales won’t be made public until early next month.
The governor predicted sales and excise taxes next fiscal year would produce some $98 million, well above a $70 million annual estimate given to voters when they approved the pot taxes last year. The governor also includes taxes from medical pot, which are subject only to the statewide 2.9 percent sales tax.
Washington state budget forecasters released a projection Wednesday for that state, where retail sales don’t begin for a few months.
Economic forecasters in Olympia predicted that the state’s new legal recreational marijuana market will bring nearly $190 million to state coffers over four years starting in mid-2015. Washington state sets budgets biennially.
In Colorado, Hickenlooper’s proposal listed six priorities for spending the pot sales taxes.
The spending plan included $45.5 million for youth use prevention, $40.4 million for substance abuse treatment and $12.4 million for public health.
“We view our top priority as creating an environment where negative impacts on children from marijuana legalization are avoided completely,” Hickenlooper wrote in a letter to legislative budget writers, which must approve the plan.
The governor also proposed a $5.8 million, three-year “statewide media campaign on marijuana use,” presumably highlighting the drug’s health risks. The state Department of Transportation would get $1.9 million for a new “Drive High, Get a DUI” campaign to tout the state’s new marijuana blood-limit standard for drivers.
Also, Hickenlooper has proposed spending $7 million for an additional 105 beds in residential treatment centers for substance abuse disorders.
“This package represents a strong yet cautious first step” for regulating pot, the governor wrote. He told lawmakers he’d be back with a more complete spending prediction later this year.
The Colorado pot tax plan doesn’t include an additional 15 percent pot excise tax, of which $40 million a year already is designated for school construction. The governor projected the full $40 million to be reached next year.
The initial tax projections are rosier than those given to voters in 2012, when state fiscal projections on the marijuana-legalization amendment would produce $39.5 million in sales taxes next fiscal year, which begins in July.
The rosier projections come from updated data about how many retail stores Colorado has (163 as of Feb. 18) and how much customers are paying for pot. There’s no standardized sales price, but recreational pot generally is going for much more than the $202 an ounce forecasters guessed last year.
Mason Tvert, a legalization activist who ran Colorado’s 2012 campaign, said other states are watching closely to see what legal weed can produce in tax revenue.
“Voters and state lawmakers around the country are watching how this system unfolds in Colorado, and the prospect of generating significant revenue while eliminating the underground marijuana market is increasingly appealing,” said Tvert, who now works for the Marijuana Policy Project.
Meanwhile, The Denver Post reported Wednesday that banks holding commercial loans on properties that lease to Colorado marijuana businesses say they don’t plan to refinance those loans when they come due. Bankers say property used as collateral for those loans theoretically is subject to federal drug-seizure laws, which makes the loans a risk.
Colorado’s two largest banks, Wells Fargo Bank and FirstBank, say they won’t offer new loans to landowners with preexisting leases with pot businesses. And Wells Fargo and Vectra Bank have told commercial loan clients they either have to evict marijuana businesses or seek refinancing elsewhere.
“Our policy of not banking marijuana-related businesses and not lending on commercial properties leased by marijuana-related businesses is based on applicable federal laws,” Wells Fargo spokeswoman Cristie Drumm told the Post.
Source | BusinessInsider