25 Sept 2013

Statist Shill's Understanding Of The Impact Of Legalized Recreational Marijuana On State Tax Revenue

By Tony Nitti: Writing in today’s sissified, politically correct environment ain’t easy. In the old days, you could just tell it like it was, and if people got mad, so be it. But now, make a comment about one certain group of individuals, and it’s immediately, “Boo-Hoo, I’m being repressed.”  Constantly crying discrimination, these people have become so hyper-sensitive that they will twist the most innocuous comment in order to brand me a bigot.
I’m talking, as a statist shill of course, about pot smokers. Who did you think I was referring to? (Angelo: Feminazis?)
See, every time I write about the tax implications of the recent recreational marijuana revolution – with Washington and my home state of Colorado becoming the first states to approve the sale and use of the drug for non-medicinal purposes – my obligatory slew of tired, predictable pothead jokes are met with a backlash that is far more intense than one would expect from what should be a laid-back weed-smoking community.
The argument goes like this: “Why do you have to perpetuate the same tired clichés by painting cannabis users as futon-dwelling watchers of inane television? Do a little bit of research, and you’ll find that there are millions of cannabis users who are high functioning members of society:  lawyers, teachers, politicians and yes, even doctors.”
Well, Spicolli, I’ve got three things to say to you.

First, stop calling its cannabis. It’s weed. The rest of your day you call it weed, so don’t start calling it cannabis when you want to establish some sort of legitimacy. You’re not fooling anyone.
Second, maybe upstanding members of society are smoking weed all the time, but society as a whole isn’t ready to process that just yet. There are certain people in positions of trust and power that we want, nay, need, to believe simply don’t dabble. Not just in weed, but in totally legal and socially acceptable booze. Trust me, as a guy who’s endured brain surgery, I welcome the idea of my neurosurgeon blowing off steam by ripping bong hits no more than I welcome the idea of him knocking back a handle of Jack. Doctors should live squeaky clean, or stop being doctors.
Finally, let’s get serious. There’s no way that many people really smoke weed, do they?
/googles
I stand corrected.
According to this study, it is anticipated that 665,000 Coloradans will use recreational marijuana in 2014 now that it’s legal. This number does not include those that continue to buy black market weed because 1) they want the rush that comes from tasting forbidden fruit, or 2) they’re morons.
No matter how you split it, that’s a lot of pot *ahem* cannabis users. The study then estimates that the average user will smoke 3.53 ounces in 2014. This puts total anticipated consumption at 2.3 million ounces for 2014.
Of course, the projected use of recreational marijuana is important for reasons aside from proving me an idiot. One of the primary arguments for legalizing weed has been to regulate and tax the hell out of it in a time when most states are struggling to stay in the black, and that’s exactly what Colorado intends to do. Back in May, Colorado Governor John Hickenlooper signed Proposition AA, which would assess a three-tiered series of hefty taxes on the new industry. This November, voters will head to the booths to either approve or shoot down the proposal.
Under the taxing structure, an excise tax of 15% would first be levied on all wholesale sales of marijuana from the grower to a retail operation.
Next , a special 15% sales tax would be levied on all retail sales from stores to the ultimate consumer. This was originally set at 25% before being lowered prior to finalization of the legislation.
Lastly, the state’s existing 2.9% sales tax would also apply on the retail sales, as would any local sales taxes.
That amounts to a staggering 32.9% in excise and sales taxing on a single life-cycle of weed as it makes the journey from seed to Von Miller’s lungs. Based on an estimated total market for recreational marijuana of $605 million, the various taxes would produce over $130 million in revenue in 2014 alone.

But here’s the kicker: it’s not enough.
As part of the proposed legislation, the first $40 million of tax revenue generated by the 15% excise tax would be placed in a coffer and used to rebuild Colorado’s schools. The analysis shows, however, that the excise tax won’t get the job done. In fact, the tax on growers will yield only $21.7 million, getting the state only halfway to their goal.
In computing its estimates, the analysis assumed a cost-to-produce of $600 per pound of marijuana. In order to generate the $40 million necessary to fund school construction, the production price-per-pound would have to increase to $1,100, which would send most pot smokers scurrying back to black market options — like this $8.4 million pot farm discovered 30 miles from my house — in search of better prices.
It gets worse. The study also determined that the high-water mark for tax revenue would be in the initial years, because as the “wow” factor of legal weed wears off, users are anticipated to decline.
As a result, the report ultimately concludes that the $130 million in tax revenue to be raised in 2014 from pot sales may not even cover the budgetary costs of legalizing recreational marijuana. These additional costs include implementing a new regulatory structure, public health and safety initiatives, human services responsibilities, and potential law enforcement needs.
Clearly, the legalization of marijuana is a hot topic among users and bureaucratic types alike. I’m guessing the nation’s other 47 states (it’s never happening, Utah) will be keeping a close eye on the budgetary impact of the choices made by Colorado and Washington. Ultimately, the decision to legalize marijuana in these states was not the culmination of some moral evolution, but rather a simple money grab. If that money grab proves not to be profitable, this may be the last we see of legal weed.

Source 

Art by WB7

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