FILE - In this Sept. 18, 2012 file photo a caregiver picks out a marijuana bud for a patient at a marijuana dispensary in Denver. Pot smokers in Colorado were the biggest winners in the vote that legalized the drug. Now state regulators are working out the details of exactly how to tax it, so the benefits are shared statewide in the form of increased revenue. A state panel meets Thursday to draft final recommendations based on the voter-approved marijuana legalization question that asked for excise taxes up to 15 percent to fund school construction.(AP Photo/Ed Andrieski)
Thursday, February 28, 2013 6:47 pm
Colorado task force ponders how to tax legal pot
By KRISTEN WYATTAssociated Press
A state panel set up to regulate marijuana in Colorado agreed Thursday to recommend the highest tax contemplated by voters last year - a 15 percent excise tax, with the profits going to school construction.
The tax question is far from settled, though.
Colorado lawmakers could set a lower tax, or they could add sales taxes beyond the current statewide 2.9 percent. Legislators could even create a special new "marijuana tax" for consumers, plus a series of required licensing fees for growers and sellers. Besides schools, the taxes must fund marijuana safety enforcement and drug education measures.
Any option would have to go back to voters for final approval.
Marijuana proponents and critics agree that taxes should be hefty. But if levies are too high, legal pot could be so expensive that people continue buying it underground.
"If this doesn't work and taxes are so high the black market still dominates, then what was the point?" asked Mike Elliott of Colorado's Medical Marijuana Industry Group.
Others argued that marijuana taxes should be sky high so that pot smokers pay for any damage to public health and safety. Task members got a visit Thursday from Gov. John Hickenlooper, a former brewpub owner who told the pot group that taxes and regulations in the booze business are exhaustive, too. Hickenlooper opposed marijuana legalization and has since warned of costs to society including teen drug abuse.
"I'm not saying the sky is falling and it's the end of the world. But most people expect ... there will be some negative consequences" from legal pot, Hickenlooper said.
Fiscal analysts have no idea where to begin predicting how much tokers could produce in taxes. The unknowns include how many people are buying pot now and what they're paying, how many people will start smoking marijuana now that it's legal, and whether prices will drop once commercial sales begin. If the federal government blocks commercial pot sales, the marijuana tax windfall would be zero.
Colorado regulators reviewed mixed tax projections and seemed exasperated at even trying to guess what the market will be.
"It's all a mythical figure. We're talking about an industry that doesn't exist today," said Tamra Ward, head of a Denver business group called Colorado Connect.
In Washington, the only other state to legalize marijuana for recreational use, the tax picture is clearer.
Voters there set 25 percent taxes at each of three different stages - from growers to processors to consumers. The measure also defined exact spending levels on things like education. For example, Washington will spend exactly $20,000 on Web-based education on the health and safety risks of marijuana.
Colorado's task force finally settled on a vague recommendation asking state lawmakers to set sales taxes and add licensing fees steep enough to cover the costs of regulation. They'll leave it lawmakers to figure out those exact costs.
Task force members also made recommendations Thursday on regulations unrelated to taxes, including a first-of-its-kind regulation on a "serving size" for edible marijuana. The task force agreed that a "serving" of edible pot should be 10 nanograms of THC, marijuana's psychoactive ingredient. Edible pot products will have to be sold in childproof packages with a label clearly stating there may be health risks from consuming it.
Kristen Wyatt is on Twitter at http://www.twitter.com/APkristenwyatt.