The Success Of Colorado’s Marijuana Tax Dollars
Since 2012, when voters in Colorado passed Amendment 64 and legalized the first adult-use, recreational marijuana market in the U.S., the state has surpassed $10 billion in total sales. This not only represents a massive success and proof-of-concept for the future of the American cannabis industry, it also accounts for billions in tax revenues for the state of Colorado.
During the last six years, the Centennial State has collected over $1.6 billion – that’s just at the state level- in marijuana taxes and fee revenues. This untapped tax revenue stream was a pivotal selling point for Colorado voters in passing recreational cannabis legalization in 2012. So the question is: how has Colorado allocated these newfound tax dollars over the past six years?
To answer this we have to examine the Amendment 64. The text stated that Colorado would collect a 2.9 percent sales tax from both medical and recreational sales and a 15 percent excise tax when cannabis moves from grower to seller. The 2.9 percent sales tax on medical marijuana goes entirely into the Marijuana Tax Cash Fund. According to Amendment 64, the first $40 million or 90 percent (whichever was greater) was to go to a capital construction grant program, where schools, districts, and various education providers could apply for money to build new buildings or renovate existing facilities.
The recreational 15 percent special sales tax, minus a local share, goes to the state’s general fund. A fraction is taken for the Department of Education’s State Public School Fund, and the remainder goes to The Marijuana Tax Cash Fund. Since retail sales became legal in 2012, 16.4% of the Marijuana Tax Cash Cash Fund’s budget, has gone to education initiatives. According to the Colorado Sun, lawmakers also set aside $25 million to help school districts set up full-day kindergarten programs.
While marijuana tax dollars fund school maintenance and construction, they do not address Colorado’s per pupil funding ranking. Practically none of these tax dollars goes to school operating budgets, including teacher salaries, books, and school supplies. However, in 2018, more than $20 million went to grants for school health professionals, early literacy programs, and dropout and bullying prevention.
Interestingly, more than $2.2 million from this fund went to the state Department of Agriculture to fund the state’s industrial hemp regulatory and seed certification program. Recall that Amendment 64 legalized industrial hemp in Colorado two years before the passage of the 2014 Farm Bill did the same at the federal level.
Every Colorado jurisdiction appropriates marijuana tax dollars differently. Between 2014 and 2019, around $29 million of Denver’s marijuana tax revenue dollars went toward marijuana regulation and enforcement. Another $16 million went to youth prevention. Until 2017, those were the only areas outside of the general fund earmarked for marijuana tax dollars. After 2017, $16 million went to affordable housing, $3.1 million went to opioid intervention, and $19 million went to city capital improvements.
Local governments that allow marijuana sales impose local taxes. As Colorado’s largest city, and with such a high per capita of dispensaries, Denver has raked in the highest tax revenues from adult-use marijuana sales in the state. Since January of 2014, the city has collected north of $294.5 million in marijuana tax revenue. While a portion of those dollars have funded city infrastructure improvements, a good chunk goes to state revenue sharebacks, regulation and enforcement, and youth marijuana use prevention.
One criticism of how Colorado’s marijuana sales tax revenue is used is that lawmakers can change how these tax dollars get spent each year and introduce bills to create new programs.
While you might be inclined to point out that tax revenue generated by marijuana sales in Colorado accounts for only a fractional percentage of the state’s budget, we have to acknowledge this tax revenue stream did not exist ten years ago. As is still true for many states, millions of dollars in untaxed transactions took place in the black market. Colorado has pioneered a lawful, commercial, adult-use market generating billions of dollars in tax dollars for state. When you look at the hockey stick projections for what the U.S. cannabis industry will be worth in the next decade, and factor in that Colorado experienced record sales in 2020, you realize we’re just scratching the surface of future revenues. Between a growing market, the hope of federal cannabis policy reform, and the erosion of the stigma surrounding the plant, we’re still at the beginning of this industry in the United States. The future looks very, very bright.
Original story posted on: Forbes
by Robert Hoban