Colorado - Cannabis Tax Revenue Won't Be As High As Hoped

[The General]

It's been just three months since marijuana was legalized in Colorado, but economists don't think the state will raise as much in taxes as was hoped. They had expected to raise $22.7 million before July from special sales taxes on recreational marijuana, but state economist Larson Silbaugh is skeptical. About $3.4 million was raised in January and February, the only months for which sales have been reported so far. "If current tax revenues keep coming in at the same pace, we won't meet that expectation," Silbaugh said. Economists have also lowered the forecast for the full fiscal year ending in June 2015 to $54.7 million from $67 million. The forecast was cut because fewer people switched from buying medical marijuana to buying recreational marijuana than was first expected, Silbaugh said. Medical marijuana users need to get approval from a doctor to buy the drug, but the state taxes those sales at just 2.9%. Recreational marijuana is taxed another 25%.

Still, making predictions for such a new industry is tough. Colorado is the first state to legalize sales of recreational marijuana in the country. Early numbers may not accurately reflect what will happen when the marijuana market is completely developed. Sales in the first couple of months could be inflated due to the initial hype. But on the other hand, sales could be getting off to a slow start because only 24 retail stores were open for the entire month of January. Now, that number has more than doubled. Gov. John Hickenlooper's office has its own predictions, which put tax revenue at about $98 million for the first fiscal year. But the governor also recently lowered his forecast, too, by about $20 million. The tax revenue is slated for school construction, substance abuse treatment and programs aimed at keeping kids away from pot.

News Moderator - The General @ 420 MAGAZINE ®
Source: Money.cnn.com
Author: Katie Lobosco
Contact: CNNMoney.com: Contact Us
Website: Pot taxes won't be as high as hoped

 

[Governmentchz]

"Still, making predictions for such a new industry is tough."

I guess that's why only last week there were reports of far-exceeding expected revenues.

 

[Billyjack]

For the United States, my guess is as new states allow recreational marijuana, home growing will not be allowed just because of the lost tax revenue. It is really the same issue as alcohol. You can home brew beer and wine but you are not allowed to distill hard spirits without a permit. This is because the lost tax revenue on beer and wine is low, about $1 a gallon for beer and $3/gallon for wine. Spirits on the other hand are taxed around $25/gallon.