House panel sets pot tax at 30%

Posted: April 26, 2013 in Election/Votes, local news, Politics

By Joe Hanel Herald staff writer

DENVER – Coloradans ingest an estimated 70 tons of marijuana a year.

How much they smoke or eat now that it’s legal will depend, in part, on how much it’s taxed.

State legislators are struggling with a tricky job this week. They need to figure out how much to tax the newly legal drug in order to bring in enough money to pay for regulators. But they don’t want to make the taxes so high that pot smokers go back into the black market.

Representatives pushed a 30 percent tax rate through the House Finance Committee on Thursday, although it passed on the thinnest margin possible, 7-6.

Republicans unsuccessfully tried to lower the rate to 20 percent. No matter what the Legislature ultimately approves, voters will have to give the final say on the tax, thanks to the Taxpayer’s Bill of Rights.

Rep. Jonathan Singer, D-Longmont, sponsored House Bill 1318, which calls for the 30 percent tax rate.

Without the steep tax, Singer said, “we won’t actually be able to implement a model that will assure that our local communities are kept safe.”

Legislators are groping for ways to predict the size of the market for a product that has been illegal for decades. On Wednesday, a think tank at Colorado State University put out a report intended to help them.

The report by the Colorado Futures Center used data from surveys about illegal drug use to estimate that 670,000 Coloradans use marijuana every year, consuming about 2.3 million ounces, or 70 tons. The report estimates that demand will rise slightly now that marijuana is legal because the price will drop.

Even with a 30 percent tax, the average price per ounce would be $185, the report predicted. That’s slightly less than the $200 per ounce currently reported on the Price of Weed website, which the CSU report uses for comparison.

However, the report casts doubt on the idea that marijuana taxes will be a windfall for the state.

The government already has flubbed its predictions for the medical-marijuana market. It overestimated the revenue from licensing fees so much that it had to lay off all but 14 regulators, when the Legislature had budgeted for 55.

Amendment 64, which legalized marijuana under state law, told the Legislature it could levy an excise tax of up to 15 percent, with the first $40 million to go to the state’s school construction fund, known as Building Excellent Schools Today, or BEST.

But excise taxes are levied on wholesale sales, and the CSU report predicts that the state will collect only about half of the $40 million that Amendment 64 contemplated.

Legislators plan to ask voters for an additional 15 percent special sales tax on pot. But even that won’t provide a windfall.

“After meeting the obligations for BEST and funding the regulatory and other public health and safety budget demands, revenue from marijuana taxes will contribute little or nothing to the state’s general fund,” the report said.

Legislators are working on two other marijuana-regulation bills that they want to pass before their session ends May 8.


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