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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
They can tax drugs at 73% and I am fine with it.
I ain’t axin’ whats legal!
Yeah, I know. The other spelling was courtesy of autocorrect on my phone, and I was too lazy to fix it.
Although every time it spelled it the other way, I felt like Harry Anslinger.
Simply because someone has to do it:
“Troy: Fred, you’re a libertarian, I assume you have weed.”
Including alcohol and asprin?
And prescriptions? Like Grandma’s life-saving heart medicine?
But you’re not talking about regulating this like we regulate the safety of a can of corned beef hash. You started this by mentioning the amount of THC and then comparing it to alcohol regulation.
The limits we put on ABV are a relic of prohibition era thinking. It has nothing to do with purity and cleanliness. It has nothing to do with labeling and standardized testing. It has to do with control. It’s nanny-ism at its best.
Agree. And a part of it was based on age limitations on purchase based on alcohol content. Anybody remember 3.2 beer?
Let’s remember we’re talking about an industry that is currently not regulated at all, and there are no deaths as a result of that lack.
I’m going to talk to Jon about a new TMI criteria for the CoC. ;)
What the…? I turn my back for a couple minutes (hours) and this whole thread degenerates. It’s like Rico is inhabited by unruly children ‘er somethin’. ;-)
Not true. From that uptight conservative rag, The Huffington Post:
There is also the story of Kristine Kirk, who was murdered by her husband while he was hallucinating on edibles.
I won’t vouch for edibles. Or for people like Maureen Dowd who eat the entire platter sized brownie intended as 16 servings.
That’s not completely true. Yes, there’s a prohibition premium, but there’s a fair knowledge and craft base involved in getting the desired profiles of active components. You could also say that there’s little objective difference between a great California cab and Two Buck Chuck, or that oolong tea is “just leaves” though for decent stuff you’re paying better than $300/lb, sometimes much better.
Thanks for the info, I read the article, and indeed there are costs to Colorado and neighboring states. I take issue with some of them, but statistics are always thus. There is (or was) a case against CO from neighboring states due to costs associated with enforcement of laws where the drugs were illegal.
I remain steadfast in my belief that the criminalization of drugs is a state issue, and federal prohibitions are unconstitutional, though I understand that this is a losing argument in the 21st century. Although my evidence is purely anecdotal, I know of no pot user (and I know a lot of them, I am in the alcohol biz after all) who has used more or less than before, nor do I know of any person who refrained before and uses it now. There are tragic stories of edibles being found by children, or over-used owing to the dosage being entirely unintelligible by most consumers. Though the subject of my original comment dealt with the tax refund issue, I will simply say that the predictions of calamity were exaggerated and the proponents were also wrong about how smoothly this would go.