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February 21, 2014

How might opponents of marijuana reform want Colorado to spend its $100 million in new annual tax revenue?

The question in the title of this post is prompted by the notable tax revenue news emerging from Colorado as reported in this New York Times piece headlined "Colorado Expects to Reap Tax Bonanza From Legal Marijuana Sales." Here are the basics (with some of the existing state spending plans highlighted):

For Colorado’s new flock of recreational marijuana growers and sellers, Thursday was Tax Day — their first deadline to hand over the taxes they had collected during their inaugural month of sales. And as store owners stuffed cash into lockboxes and made the nervous trek to government offices, new budget numbers predicted that those marijuana taxes could add more than $100 million a year to state coffers, far more than earlier estimates.

The figures offered one of the first glimpses into how the bustling market for recreational marijuana was beginning to reshape government bottom lines — an important question as marijuana advocates push to expand legalization beyond Colorado and Washington State into states including Arizona, Alaska and Oregon.

In Colorado, where recreational sales began on Jan. 1 with hourlong waits, a budget proposal from Gov. John W. Hickenlooper estimated that the state’s marijuana industry could reach $1 billion in sales in the next fiscal year, with recreational sales making up about $610 million of that business. “It’s well on its way to being a billion-dollar industry,” said Michael Elliott, executive director of the Marijuana Industry Group, a Colorado trade association. “We went from 110,000 medical marijuana patients to four billion people in the world who are 21 and up.”

In the budget proposal that Mr. Hickenlooper released Wednesday, his office said the state could collect about $134 million in taxes from recreational and medical marijuana for the fiscal year beginning in July. He proposed to spend $99 million on programs including substance-abuse treatment, preventing marijuana use by children and teenagers, public health and law enforcement.  “This package represents a strong yet cautious first step toward ensuring a safe and responsible regulatory environment,” Mr. Hickenlooper wrote in the proposal.

In Washington, where retail sales of marijuana are expected to begin in June, budget forecasters estimated Wednesday that marijuana could bring the state nearly $190 million in taxes for the four years beginning in the middle of 2015. That money would go to a variety of health and substance-abuse programs, and the state’s general fund. “Every governor and legislator in the country will be like, ‘Hey, check out these numbers,’ ” said Reuven Carlyle, a Democratic state lawmaker from Seattle who is chairman of the House Finance Committee.

For marijuana advocates, taxes were one of the major selling points of legalization. They have said that expanding the market for the federally prohibited plant could give states money for school construction, health care, substance-abuse programs and public health. Colorado’s legalization measure said $40 million in tax revenue would go toward school construction, and in November, voters across this otherwise tax-averse state overwhelmingly approved 25 percent taxes on recreational marijuana.

But opponents, and some skeptical economists, say the dreams of a windfall are far too optimistic. They worry that the higher costs of enforcement and regulation could outweigh any tax revenue from marijuana sales.

Officials in Colorado and Washington warned that the marijuana revenue numbers were only their best guesses for the moment and could shift, depending on marijuana prices, demand, the number of cities that prohibit marijuana retailers and other factors. In Washington, where retail sales have not begun, Mr. Carlyle said it was far too early to say how marijuana might affect the state’s pocketbook.

As this article suggests, it is likely far too early to assume that Colorado can expect to reap $100 million in extra tax revenues every year in the future. But it is now plainly not too early to start a robust discussion — in which I want marijuana reform opponents to play a leading role — about the best ways for the new state tax revenue from marijuana legalization to be used.

Given the limited evidence of success for youth drug education programs like DARE, I am not sure it is wise to invest too much of the new state money on programming to prevent marijuana use by children and teenagers. But I do think spending more money on law enforcement and public health and substance-abuse programs is a great idea, and I would expect that some very significant public safety (and other) benefits ought to be achievable with $100 million in extra tax revenues to spend on such programming.

I suspect fierce opponents of marijuana reform have a much different perspective than I have about the needs of a state like Colorado and its local communities as it move forward with its experiments in ending pot prohibition. Ergo, I am genuinely hopeful that readers deeply concerned with what is unfolding in Colorado and Washington and other states will express their views on how communities ought to be using its new tax revenues.

February 21, 2014 at 11:55 AM | Permalink


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This is outrageous gringo stuff. This millions should be coming to me --like in past--and to my big family to support my mujeres, mis hijos, and haciendas and cars. (I have new Escalade-that shoots bullets out back--wonderful fun). Colorado (even the name is Spanish!) is ruining my business of growing and selling grass to gringos. My good gringo law and order friends, Please help me and my friends. Please insist that federal prosecutor put in jail all Colorado officials for interfering with my business. Stamp out this craziness-like bugs--before spreads to other states. How can I afford my new cars, my beautiful women. Please help me.

Posted by: Pedro Escobar | Feb 21, 2014 2:17:53 PM

While I have no sympathy for Mr. Escobar's plight, I do concede that states that follow Colorado's lead will have an abundant new source of revenue. Like the taxes from the sales of cigarettes and alcohol, taxes from marijuana sales can be well spent to improve the general welfare of the citizens. Far better these revenues go to this end than to the Meican cartels of which Mr. Escobar is a tongue-in-cheek member.

Posted by: Dave from Texas | Feb 21, 2014 2:28:30 PM

Pablo --

Here's one suggestion for help: Go into the cocaine and human smuggling businesses.

Oh, wait. You're ALREADY in the cocaine and human smuggling businesses!

Never mind.

Posted by: Bill Otis | Feb 21, 2014 2:29:50 PM

Answer to Headline:

Spending it in increased litigation from victims of drug abuse that results from the new law, including people maimed or killed in auto crashes, families destroyed from "legal" drug use, lost production in labor that results in less taxes collected from THOSE venues.

That's just a start. Next question?

NOTE: I actually support a more Libertarian approach to laws, but only if there is responsibility by those who use the laws responsibly. Unfortunately, most of the time "freedom" means "enforced redistribution from producers to those who abuse their new privileges." So with the new laws allowing pot, should be laws that mandate a full accounting to those who abuse the laws and kill or maim my family member or myself.

So in reality, such new laws do increase the legal profession significantly, both from defense and prosecution.

Posted by: Eric Knight | Feb 21, 2014 2:35:07 PM

Dave from Texas writes " Far better these revenues go to this end than to the Mexican cartels of which Mr. Escobar is a tongue-in-cheek member."


Posted by: onlooker | Feb 21, 2014 4:41:49 PM

For good or ill, the great majority of states will eventually legalize possession of marijuana; the lure of millions of dollars of income --a reality now, and no longer a pipe-dream--cannot long be resisted.

Posted by: observer | Feb 21, 2014 7:35:09 PM

I suggest that 10% of tax revenues go into academic research on social, medical, economic impact of marijuana.

Posted by: Supremacy Claus | Feb 22, 2014 3:44:43 AM

Make a film called Reefer Madness 2 but this time tell the truth about marijuana!

Posted by: anon | Feb 22, 2014 5:50:53 AM

anon --

You hardly need to wait for a movie. This very moment, you can tell your own 15 year-old the "truth" about pot as you smile while he gets stoned. That'll sure help his success in life!

Will you do that today? The "truth" shouldn't have to wait.

Posted by: Bill Otis | Feb 22, 2014 9:13:09 AM

Bill a 15 yr old is a minor you are a lawyer you should know that. I really thought you would start with how next a person will be doing meth and heroin.

Posted by: Kailua Kid | Feb 22, 2014 9:55:17 AM

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