Colorado’s Marijuana Bait-and-Switch

Colorado retail marijuana excise tax revenues are substantially below what was predicted. They’re way lower than what voters were sold.

Anyone remember what Amendment 64 said?¹

The first $40 million raised each year by the excise tax on retail marijuana is supposed to go to public school construction. No other specific taxes, and no dollar amounts from other taxes, are mentioned in the amendment. The promise of $40 million for school construction each year is what voters were sold. If we keep going at the rate collected in February, maybe we’ll get $4 million each year. That’s not much school construction.

January’s marijuana excise tax revenues were $195,318, February’s were $339,615.² To get to $40 million in marijuana excise tax revenues for 2014, each month’s excise tax collections would have to be $3,333,333. Whoa – yeah, that’s almost 10 times February’s collections.

I was hoping that Pat Oglesby’s theory was right, and that January was the only outlier. (Seventeen times January’s revenues would get us to the right number.) Retail marijuana stores are allowed to make a one-time excise-tax-free transfer of inventory from the medical marijuana arms of their businesses to their retail arms. This happened with all the retail marijuana stores that opened in January. (Because it’s important that we… subsidize… this industry, by giving them… tax breaks?)

So what has happened? Why isn’t Colorado getting the excise tax revenues that were projected?

Since January 1, the number of Colorado residents on the medical marijuana registry has gone up.

More people are buying medical marijuana since retail marijuana stores opened, than before they opened. On February 28, 2014, the number of people on the registry was 2,462 more than the number on the registry as of December 31, 2013. (113,441 at the end of February vs. 110,979 at the end of December.)³

Why would the registry numbers go up? More sick people?

Well, taxes on recreational marijuana are much, much higher than taxes on medical marijuana. Probably what’s happened is that users who don’t want to pay the higher taxes of retail marijuana, but whose friends quit buying medical marijuana for them once recreational pot stores opened, put themselves on the registry. Maybe there were some others who thought they’d leave the black market once recreational became legal, but realized the taxes were too high, so they went the medical route instead.

Also, the marijuana industry remains primarily a cash industry, since many banks will not give marijuana businesses accounts, because marijuana is illegal under federal law, and banks are regulated by federal laws. Cash is easy to hide; it’s possible that business owners aren’t reporting all revenues and aren’t paying taxes on all sales. This is speculation on my part. But certainly it’s feasible. Marijuana business owners are willing to break federal law. Why would we assume they’d follow all state laws?

So why is this a problem? Why should this matter to voters?

Before Amendment 64 was implemented, the only legal pot we had was medical marijuana.

1. Medical pot can be sold only to Colorado residents who are listed on the Colorado Medical Marijuana Registry.
2. People who are not Colorado residents cannot buy Colorado medical marijuana.
3. Legal consumption by those on the registry is limited by law to private places. If a registered patient is caught using in view of the public, the state health agency will revoke her registry identification card (“Red Card”) for a year.⁴
4. There had been some police enforcement of laws against public use of pot.
5. Children could be given the impression that it was medicine, meant for “persons suffering from debilitating medical conditions.” (Oh, wait, we were all told that.)

With legalized recreational marijuana, we have:

1. Marijuana tourists coming from other places to buy pot here (including one teenager who came here from Wyoming to try pot, and died after jumping from a balcony following the consumption of a pot cookie).⁵
2. More public pot consumption – it’s now perfectly legal in the City of Denver to consume marijuana on your front lawn in view of the public – even next door to a school.
3. Testimony by Denver’s police chief that enforcement of illegal public consumption of pot (on public property) will be a very low priority for the police force.
4. More pot promotion – the Denver Post, our primary newspaper, is a big promoter of pot, and, since legalization, has featured articles about hosting catered events for marijuana users, and tips for trying marijuana-infused edibles.
5. More kids hospitalized due to consumption of marijuana edibles.
6. Less understanding among children and teenagers that marijuana remains illegal under federal law, and is harmful to the developing brain.

Voters were sold on big tax revenues for public school construction, but if February’s numbers continue, revenues will be well below forecasts. And it’s not that people aren’t consuming as much pot as predicted – medical marijuana sales tax revenues are higher than projected.⁶

Legalization, which many voters supported because of the promised tax revenue, has allowed more legal consumption in view of the public, has caused less enforcement of the few restrictions on public consumption that we do have, and has created so much commercialization and promotion of pot that the well-being of Colorado kids is at risk.

But Coloradans aren’t seeing the benefits (the tax dollars) that were supposed to outweigh these harms. Legalization of pot in Colorado turns out to have been a big bait-and-switch scheme, benefitting, to an extent, the roughly 10% of Coloradans who are consumers, but mostly benefitting those profiting from this industry – the marijuana store owners. The majority of Coloradans are left with nothing but the harms.

Notes:

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1. Amendment 64 Ballot Title: Shall there be an amendment to the Colorado constitution concerning marijuana, and, in connection therewith, providing for the regulation of marijuana; permitting a person twenty-one years of age or older to consume or possess limited amounts of marijuana; providing for the licensing of cultivation facilities, product manufacturing facilities, testing facilities, and retail stores; permitting local governments to regulate or prohibit such facilities; requiring the general assembly to enact an excise tax to be levied upon wholesale sales of marijuana; requiring that the first $40 million in revenue raised annually by such tax be credited to the public school capital construction assistance fund; and requiring the general assembly to enact legislation governing the cultivation, processing, and sale of industrial hemp? (emphasis is mine)  http://www.leg.state.co.us/LCS/Initiative%20Referendum/1112initrefr.nsf/c63bddd6b9678de787257799006bd391/cfa3bae60c8b4949872579c7006fa7ee/$FILE/Amendment%2064%20-%20Use%20&%20Regulation%20of%20Marijuana.pdf
2. Denver Post article on marijuana tax revenues for February: http://www.denverpost.com/news/ci_25532130/colorado-marijuana-tax-revenues-total-3-2-million
3. Medical Marijuana Registry stats: http://www.colorado.gov/cs/Satellite/CDPHE-CHEIS/CBON/1251593017044
4. “No patient shall… [e]ngage in the medical use of marijuana in plain view of, or in a place open to, the general public. In addition to any other penalties provided by law, the state health agency shall revoke for a period of one year the registry identification card of any patient found to have willfully violated the provisions of this section or the implementing legislation adopted by the general assembly.” Colo. Const. Art. XVIII, Section 14
5. Denver Post article on teenager who jumped off the balcony after eating a pot cookie:   http://www.denverpost.com/news/ci_25475533/denver-coroner-man-fell-death-after-eating-marijuana
6. Denver Post article on marijuana tax revenues for February: http://www.denverpost.com/news/ci_25532130/colorado-marijuana-tax-revenues-total-3-2-million

 

Posted by greatercapitolhillmom on April 11, 2014

https://regulateit.wordpress.com/2014/04/11/colorados-marijuana-bait-and-switch/