Colorado Pot Tax Proving More Lucrative Than Expected

[bane]

So let's do some back of the envelope math

Colorado: 5,268,367 people (2013 est.)

Pot Tax Revenues: $98 million

That's $18.60 per person.

Assuming demand is constant across the U.S. (which is probably not true, but let's go with it)

U.S. population: 317,580,230 (current est.)

That's $5,906,992,278 in tax revenues for the entire country.

2014 is expected to be even bigger.

So what could the nation do with $6 billion+ extra dollars every single year?

Of course even a basic analysis of the situation shows that the money earned/saved is far greater than this: reduced need for enforcement, reduced prison requirements, reduced etc.

The U.S. spends about $74 billion per year on just prisons. What if we could reduce that number by 1/3rd? I wouldn't mind an addition $25 billion/year sloshing around in more productive uses (in addition to the $6b/year in sales tax).

I'm sure there's some more detailed analysis on what the actual numbers might look like, but I'm guessing nationwide, it's something nearing $100 billion/year of money that might be repurposed for things that aren't stupid.

[rdl]

Much bigger than the direct costs of arresting/prosecuting/imprisoning people is the economic loss they represent -- assuming those people could do something productive, they'd be contributing a lot more to society than they cost to lock up today. On top of the costs of locking them up. And, the competent people currently working in law enforcement who could be doing other things. And the deadweight losses, etc. from people (rightly, in many communities) being distrustful of law enforcement and the government.

Ending the drug war would be a positive of around the same order of magnitude that the War on Terror has been a negative; hundreds of billions per year on an open-ended basis.

[derefr]

Here's a longer, but still mostly back-of-the-envelope calculation: http://slatestarcodex.com/2014/01/05/marijuana-much-more-tha...

It turns out that the tax benefits pale in comparison to the slight reduction in car accidents caused by drunk drivers (because pot use seems to displace alcohol use.)

[rail2rail]

$6 Billion? Think of all the prisons we could build!!

[ch]

You know what will happen when the prison industry revenue and budgets get slashed and x number of prison employees are displaced? We will subsidize the industry. I can't substantiate that claim, but it just seems like the way it will go. Still I'd be for any movement which keeps substance a users out of prison if substance abuse was the only 'crime' that put them in prison in the first place.

[alexeisadeski3]

How about just giving the money back to taxpayers?

Nah, they'll probably just waste it.

[fsckin]

> So what could the nation do with $6 billion+ extra dollars every single year?

Bong hits for NASA

[yetanotherphd]

You could also raise that much money by raising income taxes.

There are good reasons to legalize pot, but the ability to raise tax revenue isn't one of them.

[gopalv]

Ugh, is this going to look like Big Tobacco in 50 years?

Vice taxes and revenue streams to be kept alive for the district?

That's going to be such a kick-in-the-backside for everyone who just wanted to decriminalize it & stop putting people away for years.

[tomphoolery]

I don't believe it will be quite the same. Big Tobacco really profits off the fact that most people can't grow tobacco year round, and thus must purchase it at some point throughout the year. That basic fact is what ensures those companies never die. Tobacco was always grown outdoors, and there was never a need to research how to cultivate it clandestinely, be it indoors or small numbers.

On the other hand, pot can be grown in a computer case or a closet. It's been bred for almost 100 years (maybe more) to be grown out of sight and out of mind. Given a very small amount of research and learning, almost anyone on the face of this planet can grow a marijuana plant. It's called "weed" for a reason.

edit: In other words, it's not exactly the same thing as what big tobacco was doing, which is marketing products on a mass scale, all the while knowing the kind of health damage that such products caused. That is what people had problems with.

[hershel]

Technically, there are ways to prevent some of the harms of marijuana: Using e-cigarettes and using marijuana strains who mostly contain CBD(which generally has positive effects) and little THC(which creates feelings of paranoia and might have mental health risks) , so there are possible regulatory means to reduce lots of the risks without reducing tax revenue.

[noarchy]

In some ways it does resemble a bribe in exchange for freedom. There's also an exchange of power, where they introduce various permits and licenses associated with regulating the industry.

[sudomal]

I suspect that legalisation of weed is going to be a blip in history and they'll heavily tax it to phase it out. It just doesn't make sense to encourage people to breathe in smoke.

[chimeracoder]

> Vice taxes and revenue streams to be kept alive for the district?

In Colorado, the first $40M in taxes each year are required to be allocated towards school funding, per the state constitution.

The not-so-subtle goal is to make it politically painful to repeal this amendment, as any attempt to criminalize marijuana again can be spun as an attempt to cut funding for education.

> That's going to be such a kick-in-the-backside for everyone who just wanted to decriminalize it & stop putting people away for years.

But it's a big win for people who wanted true legalization and wanted to address the larger problems associated with the illegal supply of marijuana, such as drug cartels.

[carbocation]

Regarding the health aspects of marijuana, we of course lack the wealth of knowledge that we now have on the detrimental effects of tobacco on pulmonary function and lung cancer risk.

The experts with whom I have discussed this (a few pulmonologists) usually ask about marijuana smoke in the same breath as tobacco smoke, and consider it a probable carcinogen.

Fun somewhat-related fact that I learned last week: a one hour hookah session typically equates to a 5 to 10-pack cigarette equivalent.

[SDGT]

Eh, I think it's looked at as a compromise by people moreso than a vice tax. I would compare this to alcohol regulations before tobacco.

Most of us just want to be able to have a joint on the front porch and not be arrested; the tax revenue is just a necessary evil in this case.

[snarfy]

It won't work for pot like it does tobacco. If they tax it too high people will just grow it at home, illegal or not. This doesn't work for tobacco, which would require a small field to grow your own.

[SandersAK]

The "think piece" part of this article, which makes up most of the text, is pretty hilarious:

"A key question about the public health impact of legal marijuana is how does it change alcohol consumption patterns. To the extent that legal marijuana displaces legal booze purchases, you're going to see an offsetting decline in alcohol tax revenue. Which would be fine—a big win for public health, in fact—but not quite the financial bounty states may be hoping for. Alternatively, if legal pot leads to a complementary surge in beer drinking, you'll have lots of tax revenue but potentially large problems."

So we don't have any evidence or idea if this will affect booze sales, but you know, it could! Also, if it doesn't, there could be other problems, just in general for people...

[chc]

It isn't conclusively proven yet, but there is some evidence that marijuana use is correlated with less drinking. It isn't purely hypothetical, and in fact it's an argument I've heard from some legalization advocates in California.

I'm not sure where they came up with the "marijuana causes drinking" scenario, though. I've never heard of such a thing.

[tptacek]

Why is that hilarious? The article isn't advocating against legalization (no Slate article ever would). It's suggesting that you can't simply look at one revenue stream in isolation, because a regulatory change that boosts one revenue stream might suppress another. Which is obviously true.

[johnbenwoo]

Not saying it does, just "asking the question." Gotta love speculative journalism.

[lugg]

I gotta say, I scrolled up and down a couple of times before I realized there wasn't actually another half to that article I missed. It just stops.

Should have read top comments first ;/

[tumes]

I don't know if beer has any special rules regarding it's taxation, but assuming it doesn't and knowing the beer craziness here in Colorado, I'm not too concerned.

Furthermore, if we finally killed our remaining blue laws (Only one location of any chain store can have alcohol in the state) I'd imagine the alcohol revenue would bump back up.

[jonathanmarcus]

Marijuana should be legal because the US is supposed to be a free country and there is no reason it should be illegal. Tax revenue is a dirty justification that only demonstrates the extreme hypocrisy. It should never be the justification for legality or illegality. The whole discussion about tax revenue allocation is nothing more than red herring. A 25% tax is nothing more than extreme government theft.

[nirnira]

Well said. But that's the conflict of America - lip-service to freedom on the one hand, extreme moral conservatism and idiotic public policy on the other.

[late_groomer]

The key question posed by the author is presented as an either/or scenario, it omits a (IMO most likely) third possibility. Alcohol consumption stays the same, as does pot consumption, the only large effect is the revenue stream from pot sales shifts from illegal growers/cartels, to taxable entities. This is not a new drug, it's always been fairly easily attainable.

[serge2k]

How much is it going to save in legal expenses to charge people for posessing/distributing pot?

[andyl]

Pot, gambling, junk TV, junk food, social media.

Escapism and distraction.

[egypturnash]

The article notes that it's possible pot purchases may cut into beer purchases. To a certain extent I think that may happen, but I'm pretty sure there are a lot of people like myself, who smoke a LOT more marijuana than they drink alcohol. I suspect there's a lot more revenue to come from legalizing than there is to lose from people choosing weed over beer.

[jsmcgd]

It will be interesting to see statistics on law enforcement expenditure in Colorado.

[chimeracoder]

It'll be interesting to see how this windfall tax revenue is actually spent.

Under Amendment 64, the Colorado state constitution requires that the first $40MM of revenue each year be allocated towards public schools[0]. To my knowledge, the rest of the tax money has not yet been earmarked, so it's currently up for grabs.

[0] https://en.wikipedia.org/wiki/Colorado_Amendment_64.

[patio11]

Since money is fungible (a dollar is a dollar no matter from which hand it comes from or pocket it goes into), it doesn't matter. They'll simply have a bit of handwringing the next time the budget gets tight, then offset the education spending by the amount it is increased by the pot tax.

This happens with remarkable consistency across the US on earmarked taxes, generally sin taxes or lottery receipts. [+] It also happens in a variety of other contexts -- donating $1,000,000 to your university as cash or with the proviso "must be used ONLY for undergraduate scholarships" has the same effect either way.

[+] Edit to add: I wildly underestimated how many taxes were actually earmarked. See: http://mercatus.org/publication/effects-dedicating-tax-reven...

[kristofferR]

According to CNN:

$40 million to public school construction

$86 million for drug prevension, treatment

$12,4 million on public health

$3 million for law enforcement and public safety

$2 million for marijuana industry oversight

http://www.youtube.com/watch?v=eT6YYkFK4e0&t=2m0s

[cdash]

I think I had read some of it will be going to drug rehabilitation/substance abuse prevention programs.

[chc]

I have to imagine these revenues are inflated by the lack of competition. It will be interesting to see how revenues go when pot tourism isn't a thing anymore.

[tareqak]

The portion of the tax going to public education should have been $40 million plus a flat 5% of revenue to really scale if it's really that lucrative.

[hayksaakian]

I wonder how its doing in WA state.

[adventured]

If I recall correctly, the implementation in Washington isn't nearly as far along as in Colorado.

[nirnira]

I can't believe America sometime. Americans are supposed to cherish freedom. Yet they cravenly surrender and prostitute their freedoms at the slightest sign of moral outrage and censure from their fellow citizens. What free-minded person would support 25% taxation on a product which, if used correctly, has no negative effect on anyone other than that person (i.e. incurs no negative externalities) - and therefore no conceivable justification for taxation?

[Fomite]

Two thoughts:

1. Your objection applies to all sales tax. 2. Why do I think you would be equally outraged for staggeringly high laws on pollution-generating industries or firearms, which do have negative effects on other people.

[just2n]

I wonder if there is any (increased) consideration for stronger laws against smoking in public areas. Particularly on high traffic sidewalks.

Cigarette smoke is bad enough (and should also be banned in such areas), but Marijuana smoke is far more pungent. It's bad enough we have to deal with exhaust from cars that are clearly illegal (emissions wise), why is it OK to spray toxic fumes all over a sidewalk with a smell that is aptly described as a public nuisance?

[catshirt]

are you seriously proposing making something illegal because you don't like how it smells?

[cdoxsey]

Smoking Marijuana in public is already illegal in Colorado. No one bothers to enforce it in Boulder... but then again they never did before it was legal either.