Pot Legalization Ain’t (Tax) Consequence Free

 

Like death and taxes, you can count on the state to fumble the libertarian holy grail of recreational marijuana legalization. Take Colorado, for example.

There’s a ballot proposition (Prop BB) for next week’s election that allows the state to keep revenues from excise and sales taxes on pot, rather than having to return the excess to growers and taxpayers under Colorado’s TABOR.

Here’s a good summary of the up/down consequences from BallotPedia:

If voters approve the measure and the state keeps the money, it would be used for school construction and state programs [isn’t it always?]. If voters reject the measure, the money would be refunded by temporarily reducing the marijuana sales tax, returning funds to marijuana cultivators and the average taxpayer would receive about $8.

Now, the careless voter may say, “Hey! What’s $8 to me?” — and just vote “Yes” on BB, as is being encouraged by nearly everyone, except Grover Norquist’s Americans for Tax Reform, on the basis it’s a tax increase. What else?

But, being the conscientious type, and not buying the “tax increase” argument, I did a little digging to find out exactly what the dopers consumers are paying as the effective tax rate on this now (locally) legal product. I mean, it’s their money, right? Why should I be getting even $8 of it, if it can be used for something good like school construction?

Care to guess? You have to remember the excise tax from grower to distributor is paid by the consumer, along with a sales tax just for pot, and then whatever the local city sales tax is. Mr. C guessed 10-15 percent. He would be wrong!

According the Tax Foundation, the effective rate in Denver is 29 percent. Here’s how it adds up:

Colorado collects tax revenue from marijuana sales through a 15 percent excise based tax on the average wholesale market rate; a 10 percent state tax on retail marijuana sales; a state sales tax of 2.9 percent; varied local sales taxes; and local marijuana taxes such as a 3.5 percent tax in Denver.

For comparison, cigarette taxes run 31 percent and beer taxes about 8 percent.

This is exactly what I feared when Colorado voted to legalize recreational marijuana — the state would overtax it to the point of encouraging a black market. If people are selling loosies illegally, you better believe there’s an underground market for pot with a tax rate nearly as high as that on tobacco. All the good that might have been done by taxing pot reasonably, regulating growers and distributors, and assuring the quality of their product is now at risk.

What’s the government equivalent of Murphy’s Law? Something about, `’If the state can screw something up, it will?” Well, if you think Colorado is messing up, Washington’s effective tax rate on pot is 44 percent — although its tax on tobacco is 104 percent!

I voted for Colorado to send me $8. We can’t trust these putzes with even that much.

Published in Economics, General
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  1. Fred Cole Inactive
    Fred Cole
    @FredCole

    And that common sense can only come from familiarity and common exposure.

    • #31
  2. Western Chauvinist Member
    Western Chauvinist
    @WesternChauvinist

    Spin:

    Western Chauvinist: but I wish Colorado had figured that out before legalization.

    The other day I made a comment on Facebook that we conservatives ought not compare each other to liberals. But now I am about to do so. Why, pray tell, do we need the government to figure out how to prevent all of the bad things from happening before we require them to legalize de-criminalize something? Should we figure out how to make sure there are no accidental deaths of children from handguns, before we let people own handguns? Should we figure out how to make sure every parent keeps their kid in a carseat before we let people buy a car?

    Fine, we can’t prevent bad things from happening. Can we agree on jail time for parents whose kids are hospitalized for consuming pot-laced candy? Don’t we have an obligation to do something to protect the innocent? What does that look like in this case?

    • #32
  3. EJHill Podcaster
    EJHill
    @EJHill

    It’s not been everything the libertarians prophesied either.

    The drug gangs have shifted to the production of deadlier drugs. Marijuana seizures are actually up 400% because Coloradoans believe it’s legal to grow and ship to neighboring states.

    Drug crime in Cololorado schools is up 7% and the rate of marijuana-related crime among middle schoolers is at a 10-year high (no pun intended).

    And then there’s the aforementioned spike in ER visits related to edibles.

    But hey, let’s overlook the wasted youth and argue about taxes, shall we?

    • #33
  4. KurtVH Inactive
    KurtVH
    @KurtVH

    Western Chauvinist: Fine, we can’t prevent bad things from happening. Can we agree on jail time for parents whose kids are hospitalized for consuming pot-laced candy? Don’t we have an obligation to do something to protect the innocent? What does that look like in this case?

    I would imagine that someone who isn’t deterred by the prospect of harming his own child is unlikely to be deterred by the threat of jail time.

    • #34
  5. BrentB67 Inactive
    BrentB67
    @BrentB67

    Fred Cole:

    BrentB67:Where are the black market cigarette cartels?

    For real?

    Cigarettes are $15 a pack in New York City. That’s from taxes.

    Black market cigs are a huge business in NY. That’s what Eric Garner was selling when the police strangled him to death.

    That is good info. I am not a smoker and not aware of a similar black market in Texas.

    Edit: I don’t think Eric Garner rises to the level of a violent drug cartel.

    Does it count that some folks drive to indian reservations in Oklahoma to buy cigarettes?

    • #35
  6. BrentB67 Inactive
    BrentB67
    @BrentB67

    Fred Cole:Well at a fundamental level, it’s lack of familiarity that leads to the overdose. It’s not people in their 30s, sipping wine who need to get their stomachs pumped. It’s newbies who don’t know their limits.

    Unfortunately those of us and our families who don’t need our stomachs pumped get the bill for those who do, but hey, liberty!

    • #36
  7. Fred Cole Inactive
    Fred Cole
    @FredCole

    EJ, is there any one of those problems you cited that wasn’t created by or as a consequence of decades of prohibition?

    • #37
  8. Fred Cole Inactive
    Fred Cole
    @FredCole

    Don’t be so sure, Brent. I knew a girl in college who ended up with a $3,000 ambulance/hospital bill after playing “vodka checkers.”

    Kids make dumb mistakes and often pay big out of pocket for them. It’s not as if it all falls on the public purse.

    And not for nothing, marihuana is a hell of a lot safer than alcohol. You can have a really bad time if you’re dumb with edibles (see: Dowd, Maureen), but unlike alcohol, you’re not gonna get a lethal dose.

    • #38
  9. Wineguy13 Thatcher
    Wineguy13
    @Wineguy13

    As a voter in Colorado, I have a dog in this fight so allow me to chip in my two cents.  I think TABOR is the best thing we ever did in Colorado (many states have tried to follow suit, with little success)  In short, TABOR keeps tax increases from being pushed through without consideration from the voters (taxpayers).  It also deals with excess revenue.  TABOR’s beauty lies in its simplicity (relatively speaking), localities dealing with local measures can get revenue matters approved, if the locals agree, and many localities have overriden  TABOR for projects.  I have even voted in favor of such things in the 20-ish years since TABOR passed.  Prop BB would likely have my support if it weren’t for the 12 million dollars for ‘Marijuana education’ programs.  There is already money from Marijuana revenue earmarked for this.  The tax and spend types know this and also know how to get folks to support things.  To hear the supporters of the measure tell it, every kid in the state would get a new puppy from this pile o’ cash.  We know that 12 million will go to nebulous community organizations to spend (remember all that ‘voter engagement’ money for the ACA?).  I would have supported the $40 million for school construction, since that is tangible, but they needed to get people off the fence with the various feel good ideas.

    Some wonder about the efficiency of mailing everyone $8 to refund the money.  This is simply not the case.  When TABOR money is refunded is is done primarily by means of a line item on the CO tax form.  You simply subtract the amount of the refund from your taxes, pretty simple.  There is also a reduction in Marijuana excise tax, again pretty simple.

    TABOR’s simplicity is why politicians hate it.  Every year something gets refunded, taxpayers notice it.

    • #39
  10. Wineguy13 Thatcher
    Wineguy13
    @Wineguy13

    EJHill:It’s not been everything the libertarians prophesied either.

    The drug gangs have shifted to the production of deadlier drugs. Marijuana seizures are actually up 400% because Coloradoans believe it’s legal to grow and ship to neighboring states.

    Drug crime in Cololorado schools is up 7% and the rate of marijuana-related crime among middle schoolers is at a 10-year high (no pun intended).

    And then there’s the aforementioned spike in ER visits related to edibles.

    But hey, let’s overlook the wasted youth and argue about taxes, shall we?

    EJ I am not challenging your facts, but where did you find them?  I can’t accept the argument you make about ignoring wasted youth, when the point of discussion is excess revenue in Colorado.  By all means start that discussion.  I voted against the recreational use proposal, but it passed.

    • #40
  11. Western Chauvinist Member
    Western Chauvinist
    @WesternChauvinist

    EJHill: But hey, let’s overlook the wasted youth and argue about taxes, shall we?

    That’s just it. Colorado has always been pretty libertarian on the pot issue. At my daughter top college-prep high school, several students were caught pot-intoxicated at homecoming festivities a few years ago, prior to legalization.

    These are high-achieving students from Belmont, not Fishtown. They have all the advantages, including a community willing to publicly shame them for having made a bad choice. I doubt they’re regular pot users now that it’s been legalized.

    There’s a cultural problem not even prohibition can fix. We can talk about that, but it’s not on the ballot in Colorado next Tuesday.

    • #41
  12. Fred Cole Inactive
    Fred Cole
    @FredCole

    Why does there have to be shame associated?

    • #42
  13. Western Chauvinist Member
    Western Chauvinist
    @WesternChauvinist

    Fred Cole:Why does there have to be shame associated?

    Well, because they left the homecoming festivities to go do something illegal, and then were stupid (or intoxicated) enough to return to school and get caught.

    This is a school that emphasizes character, virtue, critical thinking, and good judgment. Shame and forgiveness are powerful players in forming up virtuous people.

    Maybe it’s not how you would parent your children, but do you support the rights of parents to send their kids to charter schools which adhere to these values?

    BTW, we’ve gotten pretty far afield from tax policy and its effects on marijuana legalization.

    • #43
  14. EJHill Podcaster
    EJHill
    @EJHill

    Wineguy – My facts came from an editorial in the Oklahoman (http://newsok.com/article/5404867).

    We’ve gone around this bend more than once. My main problem with this social experiment is that it’s TOO free wheeling. Fred loves to compare weed to alcohol, but wine, beer and spirits are heavily regulated in their manufacture. For pot, THC levels are all over the map. The potency is supposed to be on the label but there are 18 different labs in Colorado currently testing but they’re using so many different methods that the results vary too much for consumers (or law enforcement) to be certain.

    • #44
  15. BrentB67 Inactive
    BrentB67
    @BrentB67

    Fred Cole:

    BrentB67:When the lack of knowledge regarding proper use and dosage (good use of the word) result in people damaging their ability to be gainfully employed will the rest of us get the tab via the federal welfare state?

    Okay, so we need to have extra regulation on edibles because … people might overdose and not be able to get a job and go on welfare?

    Look, of all the people-smoke-pot-and-go-on-welfare arguments I’ve heard, that one takes the cake.

    I see what you did there. You can’t sneak one past me Fred Cole.

    I am glad you approve of the argument, it is a good one. Hopefully we can pick up their hospital bills first and then provide then with SNAP, TANF, unemployment, maybe some WIC for the ladies when they can’t pass pre-employment and random drug screens.

    • #45
  16. iWe Coolidge
    iWe
    @iWe

    Fred Cole:Why does there have to be shame associated?

    Shame is a great non-governmental tool for societal correction. I certainly disapprove of activities that redirect otherwise-creative energies, and I have no problem expressing this to people I care about.

    Shame is the perfect midpoint between celebrating libertinism and making things illegal.

    • #46
  17. Fred Cole Inactive
    Fred Cole
    @FredCole

    With regards to WC’s idea of jailing parents whose children accidentally ingest marijuana edibles: Would you also throw parents in jail if their kids accidentally eat cigarette butts?

    • #47
  18. EJHill Podcaster
    EJHill
    @EJHill

    Fred Cole:  Would you also throw parents in jail if their kids accidentally eat cigarette butts?

    Fred, now you’re reaching. Children do not eat cigarette butts because they don’t see their parents do it. But they DO see them consume marijuana edibles (unfortunately). A child assumes what his parent consumes is safe.

    Do we prosecute parents when children possess guns? Yes. Do we prosecute parents when children commit acts of vandalism? Yes. According to the DOJ, “Today, all States but New Hampshire and New York have provisions holding parents civilly responsible for youth crime, with an average maximum recovery amount of $4,100”

    So, you want to take another swing at that one?

    • #48
  19. Western Chauvinist Member
    Western Chauvinist
    @WesternChauvinist

    EJHill:

    Fred Cole: Would you also throw parents in jail if their kids accidentally eat cigarette butts?

    Fred, now you’re reaching. Children do not eat cigarette butts because they don’t see their parents do it. But they DO see them consume marijuana edibles (unfortunately). A child assumes what his parent consumes is safe.

    Do we prosecute parents when children possess guns? Yes. Do we prosecute parents when children commit acts of vandalism? Yes. According to the DOJ, “Today, all States but New Hampshire and New York have provisions holding parents civilly responsible for youth crime, with an average maximum recovery amount of $4,100”

    So, you want to take another swing at that one?

    Yeah, that and if your kid gets into the liquor cabinet and throws an underage party with his friends, I’m pretty sure parents can be legally held accountable if someone ends up in the ER. It’s a somewhat better comparison than cigarette butts(???).

    • #49
  20. Solon JF Inactive
    Solon JF
    @Solon

    EJHill:Fred loves to compare weed to alcohol, but wine, beer and spirits are heavily regulated in their manufacture. For pot, THC levels are all over the map.

    So then regulate the THC levels.  Treating weed like alcohol is the best course, in my view.

    • #50
  21. Fred Cole Inactive
    Fred Cole
    @FredCole

    EJHill:

    Fred Cole: Would you also throw parents in jail if their kids accidentally eat cigarette butts?

    Fred, now you’re reaching. Children do not eat cigarette butts because they don’t see their parents do it.

    Excuse me, lots of children do eat cigarette butts.

    From 2006 to 2008, the American Association of Poison Control Centers (AAPCC) reported nearly 14 000 injuries caused by tobacco products among children, 70% of whom were <6 years old. Most of these exposures (90%) were due to the ingestion of cigarettes or cigarette butts.25 The vast majority of these incidents were non-toxic and the children were not hospitalised. [Emphasis added.]

    No, they don’t see their parents eat cigarettes.  What they do see is parents putting cigarettes in their mouth.  It’s not a big leap to assume they’re eating them.  (Why else would you put it in your mouth?)

    With all due respect, 10 thousand injured children is a bigger cause for concern than a handful of cases about marijuana edibles.

    My point isn’t that I want to throw parents in jail, it’s to push back against this ridiculous moral panic over edibles.

    • #51
  22. Fred Cole Inactive
    Fred Cole
    @FredCole

    EJHill: For pot, THC levels are all over the map. The potency is supposed to be on the label but there are 18 different labs in Colorado currently testing but they’re using so many different methods that the results vary too much for consumers (or law enforcement) to be certain.

    Excuse me, but … so the hell what?

    Is this something mommy government needs to regulate?  Is there a reason the free market can’t handle it?

    • #52
  23. EJHill Podcaster
    EJHill
    @EJHill

    Yes. In this case Mommy government does need to regulate it.

    It’s still a drug, Fred. Would you make a case for unregulated OTC meds? Damn the consequences and let the free market sort out the dead?

    • #53
  24. Fred Cole Inactive
    Fred Cole
    @FredCole

    With regards to otc meds, I think dosages should be worked out between patients, doctors, and pharmacists, not government bureaucrats.

    And don’t think I didn’t notice your little switch up there. We were talking about regulating the potency of marihuana. So any talk of needing to “sort out the dead” is not only hyperbolic, but irrational. While you can have a really bad time, you cannot die from an overdose of marihuana.

    • #54
  25. Tom Meyer, Ed. Member
    Tom Meyer, Ed.
    @tommeyer

    EJHill: It’s still a drug, Fred. Would you make a case for unregulated OTC meds? Damn the consequences and let the free market sort out the dead?

    Wouldn’t the simpler solution be to treat edibles — which I confess I know very little about — like other hazardous substances around kids? I mean, like hard liquor and cleaning products.

    • #55
  26. Spin Inactive
    Spin
    @Spin

    Fred Cole: You don’t have to respect pot users, but I’d appreciate if you respected the subject enough, and the people you’re discussing it with, not to slur them

    heh heh…you said drunk…and slur…heh heh…

    • #56
  27. Spin Inactive
    Spin
    @Spin

    Tom Meyer, Ed.:

    EJHill: It’s still a drug, Fred. Would you make a case for unregulated OTC meds? Damn the consequences and let the free market sort out the dead?

    Wouldn’t the simpler solution be to treat edibles — which I confess I know very little about — like other hazardous substances around kids? I mean, like hard liquor and cleaning products.

    What about edible underwear?  That’s what I want to know.  What are we going to do about that little problem?  Huh?

    • #57
  28. Spin Inactive
    Spin
    @Spin

    Fred Cole: Is this something mommy government needs to regulate?  Is there a reason the free market can’t handle it?

    Slight twist in the convo:  you are against regulations that specify what is in the mariJuana.  Are you against regulations requiring certain labeling of mariJuana?  Say a law that required the sellers of pot to tell you how much THC is in the mariJ…in the pot?

    • #58
  29. EJHill Podcaster
    EJHill
    @EJHill

    The state highly regulates the food industry. There are purity standards, health and cleanliness inspections, etc. Drug and alcohol industries face the same – and all to the public good.

    In their zealousness to decriminalize, marijuana advocates want the door flung open NOW, no matter what. Damn the consequences, damn reasonable safeguards, just full speed ahead.

    And while your body may not shut down due to an overdose of marijuana, the likelihood that you may injure yourself due to heightened paranoia and/or anxiety climbs with increased usage of the drug. The problem is too many base their opinions on the marijuana of their youth, which was tame by today’s average.

    The intoxicating chemicals in the 70s was somewhere around 1%. Now it’s 13%. THC levels have tripled in the last 20 years alone.

    • #59
  30. EJHill Podcaster
    EJHill
    @EJHill

    Spin – Labeling IS required in Colorado. But there is no standardized test. It would be akin to having one test say your wine in 5% alcohol while another showed it at 18%. Conflicting information is about as useful as no information.

    • #60
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