This November, Colorado voters will see two tax-related questions on the general election ballot. I’m campaigning in favor of Proposition AA and I hope you’ll join me in supporting this referred measure.
Prop AA contains the proposed excise tax for legal, regulated sales of marijuana as contemplated by voters with passage of Amendment 64 in November 2012. As allowed by Amendment 64, Prop AA establishes a 15% excise tax on marijuana cultivated in Colorado for retail sale to adults. Amendment 64 specified that such retail sales will begin January 1, 2014. Proceeds of the excise tax will be credited to the public school construction fund which supports the Building Excellent Schools Today program and makes capital improvements to schools across Colorado.
Prop AA also creates a special increment of sales tax for marijuana sold in licensed retail stores. The sales tax is set at 10%, although Prop AA gives the legislature the authority to lower the tax rate or increase it up to a maximum of 15% without further voter approval. Proceeds of the sales tax will be used to pay for enforcement and regulation of the legal marijuana industry in Colorado. The legislature added the sales tax to Prop AA because of a strong belief that this new industry should pay its own way and not rely on the state’s general fund to cover the costs of the regulatory program.
Amendment 64 was a constitutional amendment, and the legislature was required to implement it. I believe the new laws passed in 2013, including the referral of Prop AA to the ballot for voter approval, are in keeping with voters’ intent in passing Amendment 64. Moreover, recent policy guidance issued by the US Dept. of Justice indicates that the federal authorities are taking a stand-off approach to Colorado’s experiment with marijuana legalization. So long as states create and enforce a robust regulatory environment for marijuana businesses the federal government appears intent to not interfere. Passage of Prop AA will ensure that regulators and law enforcement agencies have the necessary resources to properly control marijuana sales in our state.
A few other things to note about the new marijuana taxes:
- First, medical marijuana patients will be exempt from paying them. Currently, medical marijuana is subject to state and local sales taxes, and that will not change. But medical marijuana will not be subject to the excise tax or the new 10% increment of state sales tax. Local sales tax decisions in this regard will be made by local voters, and results may vary.
- Local jurisdictions where retail sales occur will share in the proceeds of the new state sales tax. Some communities have opted out of retail marijuana sales, so they won’t see any revenue, but for those communities that participate, such as Denver, 15% of the new sales tax collected in that jurisdiction will be credited to the local community to assist with their costs of enforcement and regulation. Again, retail marijuana will be paying its own way.
- Amendment 64 specified that the first $40 million of proceeds from the excise tax would be used for school construction. Current estimates of revenue from the 15% excise tax do not exceed this amount, so all of the excise tax revenues will go to the BEST program. Economists struggle with revenue estimates in this case because there never has been a legal, regulated market for marijuana so no one really knows what level of sales volume to project, but an estimated $27 million in excise tax will be generated in the first full year of implementation. Sales volume would have to vastly outpace projections and the industry would have to grow quite a bit before the $40 million threshold is reached.
Naysayers worry that the tax rates are too high, creating an incentive for consumers to continue to purchase marijuana through illegal dealers that don’t collect these new taxes. Their concerns are valid, and if the tax rate really was too high we might see consumers reluctant to shop with legal, regulated merchants. But I think consumers are anxious for safe, legal sales and they’re willing to pay the taxes that go along with it. Marijuana purchased legally through licensed businesses will be tested and labeled for retail sale. People will know what they’re getting. That’s why over 55% of Colorado voters favored Amendment 64 last year. People want marijuana taxed and regulated, and they want to end the days of shady, black-market sales and the involvement of cartels and organized crime.
By referring Prop AA to the ballot for voter approval the legislature has acted consistent with voters’ intent in passing Amendment 64. Regardless of how you voted on Amendment 64 I hope you’ll vote in favor of Prop AA.
To read more about Prop AA, including the full text of the measure, estimates of revenues it will generate, and arguments for and against, Click Here to access the “Blue Book” analysis of the ballot measure as prepared by the nonpartisan staff of the Legislative Council, a staff agency of the Colorado General Assembly.