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Colorado is missing $21.5 million in marijuana taxes

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NEW YORK (CNNMoney) — Colorado is missing $21.5 million in pot taxes.

Voters legalized retail marijuana (pot for everyone, not just medical patients) in 2012. And they were told the state would pull in $33.5 million from two new taxes in the first six months of 2014. It turns out, the projections were way off. Here’s why.

Pot smokers are still buying on the black market: The state thought more people would migrate out of the black market. But only 60% of people who want pot in Colorado this year will buy it through legal channels, according to an estimate from the Marijuana Policy Group.

One big reason: Legal pot costs a lot more than illegal pot — mostly because of taxes and fees.

Legal retail marijuana is taxed more than 27%, so it’s easily cheaper on the black market.

And there’s more than one way smokers are scoring pot without paying taxes.

Some are likely procuring it under the table from medical marijuana patients who buy it on the up-and-up and then resell it illegally — depriving the state of tax revenue.

Plus, any Coloradan over 21 can grow up to six plants for personal use. If they are selling it on the black market, that’s even more tax revenue the state’s missing out on.

More are buying medical marijuana: Medical marijuana is taxed far less than recreational pot, to the tune of 2.9%. On average one ounce of medical marijuana costs $200, while the price of an ounce sold for recreational use is $220, but prices vary widely.

And while Coloradans must visit a doctor to get a medical marijuana card, that currently costs just $15. About 23% of the estimated marijuana users in Colorado (or 2% of the state population) have medical cards, according to the Marijuana Policy Group.

The state won’t say how many more people got cards since retail pot was legalized, but the number is growing, according to state economist Larson Silbaugh.

Lawmakers were too optimistic in their revenue forecasts: State law requires the government to refund taxpayers if it collects more than expected.

Wanting to avoid returning money collected from retail marijuana sales, lawmakers made “rosier” projections, state lawmaker Jonathan Singer said recently.

To be fair, Colorado is in uncharted territory as the first state to legalize the drug for recreational purposes, and it’s only been six months.

While lawmakers are examining the the tax structure, “it’s too early to be worried,” said state Rep. Dan Pabon.

5 comments

  • opinin8d

    And what about the ‘costs’ assciated with regulating the market and the addtional ‘costs’ of police, courts, etc to deal with the problems surrounding pot use? Also, the State won’t say how many people got cards??? Oh, that’s right, it’s part of HIPPA, but everyone wants gun owners to register their guns and to be able to see who has them…..maybe it’s time gun ownership falls under Health Care!!!

    • urdumb

      I will never register my weapons. History proves time and time and time again it leads to unjustified confiscation. And the healthcare stuff.. So because I took ridellin for 3 months when I was 12, I automatically lose my right to self defense is just insane

  • Chris

    So I like made up numbers as much as the next guy but where does this “60% of people who want pot in Colorado this year will buy it through legal channels, according to an estimate from the Marijuana Policy Group” information come from ? I google searched and can’t find any organization by that name. I’d like to see the actual data. Does it exist or did you just make it up ?

    • BigJohn

      My guess is that they are probably talking about the Marijuana Policy Project, the MPP. I’ve not seen any sort of study, but after all an estimate is a guess basically. Any data on black markets is likely to be way off because black market suppliers aren’t providing sales data to anyone. They can only look at drug use numbers from surveys and and try to come up with the total number consuming the intoxicant and average amounts consumed to try to guess at the total consumed in a state and then look at how much is being sold through the legal system and assume the difference in consumption estimates and the amount sold through legal channels is product purchased on the black market. It’s a lot of guesses and assumptions built on guesses and assumptions.

  • BigJohn

    Just give it time. Legal pot will get cheaper. It’s new and people are charging what they can get away with charging. As the industry matures the market will become much more efficient and competition and the economy of scale will drive prices much lower. Taxes will be the only way to keep prices anywhere close to current medical/black market prices.

    From what I’m reading it looks like medical dispensaries are way outselling recreational retail establishments. Mostly tourists buy from the latter. I wonder why Colorado doesn’t try to put a damper on medical sales? Voters modified their constitution and allowed for medical marijuana, but not a massive dispensary system. I don’t know all the ins and outs, but have looked at Amendment 20 and it doesn’t say a thing about dispensaries or seem to allow them. It doesn’t mention taxes either. It looks like their legislature has broad latitude to shut down medical dispensaries or raise taxes or do a little of both. They could have small nonprofit coops that supply those really sick and in need. Most with medical cards aren’t really that sick or in need. They’re just taking advantage of a tax loophole, basically.

    Legalization across the nation is inevitable. States would be wise to get the jump on medical marijuana and legalize recreational first. Then there would be hardly any push for medical pot. Loose medical marijuana systems really aren’t that bad though. Nobody goes to a doctor and gets a recommendation just try try pot unless they are really sick. There is no need to do that because pot is so easy to find everywhere without going to all that trouble. Those who aren’t really sick who get medical cards tend to be dedicated pot smokers to begin with, the heaviest users. With alcohol 10% of the drinkers consume something like 50% of the alcohol. I’m going from memory and those percentages may be off some, but the fact is a small percentage of heavy users consume a huge amount of the total alcohol consumed in a state. The same is true with marijuana. Those heavy users are the ones who dominate in medical marijuana systems, which is good for taking business from drug cartels and keeping more money in your state, but not so good later when you want to steer people toward recreational shops where taxes are likely much higher. If you already have a medical card and get your product at a substantial discount over regular retail prices, why in the world would you want to give that up? Colorado should make it harder for people to get those cards and either do away with medical dispensaries in favor of small nonprofit cooperatives that supply those really in need, or make it much more expensive for medical dispensaries to do business. If not, their heaviest users will stay in the medical system and they’ll never generate big tax revenues.

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