Why marijuana taxes are such a burning question

As Colorado struggles for an answer, pot advocates say too many levies could drive users back to the black market.

By Bruce Kennedy Jul 10, 2013 10:46AM

A medicinal marijuana user smokes at the Berkeley Patients Group in Berkeley, Calif., on March 25, 2010 (© Justin Sullivan/Getty Images)How much should legal, nonmedical marijuana be taxed? That's the question state and local lawmakers are now considering in Colorado, where voters last year agreed to allow the sale of marijuana for recreational use by adults starting in 2014.


The state is seen as a test lab for a lot of decisions surrounding the future of marijuana as a legal industry. In November, Colorado voters will decide on a proposed 15% excise tax, plus a 10% state sales tax, on all retail cannabis sales.


In addition, Denver might levy its own 5% tax on pot sales made within the city. City officials say that 5% tax, along with other fees and state revenue, could add over $9 million annually to Denver's coffers.


But advocates for legal marijuana say excessive taxes will drive people away from state-controlled cannabis and back to the black market.


"When you start thinking about it, in terms of what that's going to do to the cost to the consumer for cannabis, it's pretty ridiculous," says "William Breathes" -- the pen name for the marijuana industry columnist at Westword, Denver's weekly alternative paper. He also writes the very popular "Ask a Stoner" advice column.


Breathes says the current, average rate for an ounce of good marijuana in Colorado is about $200, and even at the state's legal medical marijuana clinics, the best quality cannabis is rarely above $300 an ounce, tax included.


In the Colorado counties that plan to allow the sale of recreational marijuana, he says, "it's like a bunch of hungry dogs looking at a steak, licking their lips" as they contemplate their revenue from future cannabis sales.


So, taxes that could add up to 40% on those prices, he says, might hinder recreational pot sales. "Why not start (cannabis taxes) at the lowest possible levels here, get the industry off the ground first," he suggests, "and then start talking about what else can we do with it?"


Colorado lawmakers admit they're breaking new ground with these proposed cannabis taxes.


"This is going to take a couple years of experience before we're really going to have a clear understanding on both the revenue side as well as the expenditure side," Denver chief financial officer Cary Kennedy told the Denver Post.


"I get taxing vices, I understand it. That's what we do in our society," says Breathes. "But to come out swinging this hard (with all these proposed taxes) ... it's been a little unbelievable."


MoneyNOW

78Comments
Jul 10, 2013 11:46AM
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Taxes, or even the total price of an ounce of marijuana is not the biggest concern.  I would just like to be freed from the criminal trap of marijuana prohibition.  As a recreational marijuana user, I have been forced into a life of "crime" even though I am not a criminal in any other sense of my life. 

 

I don't live in Colorado or Washington.  I would willingly pay 20-30-40% more for my occasional 1/4 ounce purchases if I did not have to risk jail for doing so.  Please, tax me but let me smoke in peace.

Jul 10, 2013 1:22PM
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Isnt excise tax paid to the feds? the same ones who wont legalize it? but they'll take the tax money? what hypocrites.
Jul 10, 2013 11:36AM
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Breathes is right.  If legal cannabis costs 50% more than black market, the state and local governments will see very little tax revenue from it.  It is simple economics, price is important.
Jul 10, 2013 12:52PM
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by not forcing the growers to pay such high fees to grow and sell the stuff and by making weed cheaper to buy including the tax will put the blackmarket for weed out of business basically sell it like cigarrettes
Jul 10, 2013 3:18PM
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The only drugs I use are prescription drugs and over the counter ones like Blood pressure medicine and knee inflammation drugs but I would like to see the war on people end.  It's ridiculous.  You drive home from California on vacation from your nuclear engineering civil service job with the Navy to visit with your parents and you get pulled over twice in 4 days with the only comment from the cops being "open your trunk" like I'm a drug dealer instead of a 14 1/2 gallon blood donor.  End the war on people.  Quit the stupid insultory random drug testing of employees that violates the Bill of Rights that our forefathers gave us and guillotine those who spit on the Constitution.
Jul 10, 2013 2:05PM
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When I go shopping for groceries I look at both quality and cost. When I buy a new car I start a bidding war between 3 or 4 dealerships. When purchasing household goods, computer accessories, shaving supplies, or shoes I scour ebay, Amazon, and New Egg for the best possible price. When it comes time to score another ounce I'll do the same. If given the choice of buying cannabis of comparable quality from either a legal source or the black market I will go with the most cost effective option. I've been buying my weed from illegal sources for nearly 40 years and am quite comfortable doing so. I have zero respect for the law where cannabis is concerned and see no reason to start playing by the rules now. If the state wants my money they will price my smoke below street prices or I will simply continue to conduct business as I always have. Get greedy and you'll pay the price.
Jul 10, 2013 11:44AM
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The consumer will always seek out the lowest price for something. If it's cheaper on the street the state will receive zero income and the criminal aspect will never go away. In order to regulate the market and profit from it the price point, including taxes, must be lower and the quality must be equal to or better than the street. Moonshine still exists because it is cheaper. Quality is the only thing limiting it's production.
Jul 10, 2013 1:28PM
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There should be NO tax...let the govt. fend for themselves!  What has happened to this country? Don't they tax the crap out of everything already?? You make money..taxed,spend it...more taxes...save it..even more taxes.. sick to death of earning money just to pay taxes.
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Problem is the government greed will tax it so high the illegal stuff will in the end be cheaper.
Jul 10, 2013 1:54PM
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there will be a study on this subject. then there will be a study to study the first study, then another study to study the second study , then another study to study the study that studied the study that studied the study that studied the study. and then they will come up with a plan. all the while we wait for the idiots that run this country to make a decision which will take countless dollars and the next 20 years.  I`l like to be able to be right in front of the white house on the sidewalk and light up a joint before I die.

Jul 10, 2013 2:45PM
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Unless states are going to leave the prices as they are with taxes, no tax will be collected because people will continue to buy on the black market. Would you pay more something if you can get it at a lower value for the same quality.


Jul 10, 2013 2:19PM
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Once you begin taxing something and get used to those revenues coming in you don't reverse that and stop or decrease. That's historic.
Jul 10, 2013 1:22PM
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Dudes.........(inhale)....................I was thinking........

wait...............

what ?

Jul 10, 2013 12:50PM
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When did any Govt agency or taxing district think raising taxes was a bad idea?  Tax weed at the same level as cigarettes.  Otherwise you might think cigs are bad and weed is good?
Jul 10, 2013 3:13PM
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this country really needs to get over their warped perception of pot.  some many still believe the government propoganda of 30's, 40's and 50's as truth while keeping science out of it since its classified as a class a narcotic.  the answer to our ever growing, ever crippling national debt is tax revenue from legal marijuana sales.  if they tax it like cigarettes we could be in the black within 10-15 years just off that money alone.  the chemicals in a soda or mcdonalds hamburger will kill you way faster then smoking weed but somehow we push that $#*T on people like its air.  where the hell is the logic??
Jul 10, 2013 3:29PM
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TAX TAX TAX ...

They haven't even started to produce the product and they're already trying to tax it out of existence !!!

Jul 10, 2013 2:40PM
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Why not just treat it like tobacco. Every package must have a tax stamp and whatever the taxes are in the state for tobacco they apply to pot also. Sorry NY residents, you are hosed!
Jul 10, 2013 3:17PM
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even in places where it's 'legal' to use, employers can still random drug test their people and legally fire someone for a positive result. that's already been heard and upheld in the high courts. i have 2 friends who've had to stop entirely because their employer uses hair strand testing, which can go back (at least) 6 months.
Jul 10, 2013 1:45PM
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A couple of quick points (questions): 

Isn't the argument we hear all the time something like, "Pot should be legal, we could stop putting people in jail, tax it, and make some money off of it"? 

If it's legal to grow it, will it still cost around $200/oz.? What will it cost the guys who are gonna grow it for m****duction? Even after taxes, might it still be cheaper if grown on a major scale?

Do you know anyone who grows tobacco because it's so expensive to buy cigarettes? I don't. 

Yeah, I can make my own beer cheaper, but I don't. I buy beer because it's easier and safer than making it at home.

Maybe we all can just relax and see how this (first time trying this) plays out. 
Jul 10, 2013 2:01PM
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I don't know BUT it should be taxed, just like alchol, cigarettes, gas. Put the money towards quality rehab programs, domestic violence, and strict enforcement. As a matter of fact, CAN the entire 100 YEAR FLOP of the "drug war," make MOST of it legal, contain it, tax it, control it, and set up quality reahabs, drug, sex, parenting education, and START making this country a safer, better place to live BY putting the drug dealers and cartels out of business, stop interfering in central and south america, and put the billons in police and courts, which are jammed back 3 years, into the things I mentioned. Not only are the police outnumered, and the courts jammed up backwards for years, for every drug deal they bust or every drug dealer they catch, 10 others are still doing business. IF they caught most of them, the drug supply would dry up.
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