Marijuana

Colorado Task Force Favors Heavy Pot Taxes and Opposes Cannabis Cafés

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Jacob Sullum

The Amendment 64 Implementation Task Force met for the last time Thursday night, approving its final round of recommendations to the Colorado General Assembly about how best to regulate the recreational marijuana market that is supposed to start operating next year. In a word, strictly.

The Denver Post reports that the task force wants marijuana to be heavily taxed. Amendment 64 calls for an excise tax collected at the wholesale level "not to exceed 15 percent prior to January 1, 2017, and at a rate to be determined by the General Assembly thereafter." The task force says the initial rate should be the full 15 percent and recommends a special tax at the retail level on top of that, in addition to the standard state and local sales taxes. "Though the task force did not endorse a specific amount for the sales tax," the Post says, "it gave a 25 percent rate as an example." Both taxes would have to be approved by voters.

Since the task force also has recommended retaining a rule that requires marijuana sellers (who currently supply patients under Colorado's medical marijuana law) to grow 70 percent of the cannabis they sell, the distinction between wholesale and retail is pretty fuzzy. Amendment 64 says the excise tax should be "levied upon marijuana sold or otherwise transferred by a marijuana cultivation facility to a marijuana product manufacturing facility or to a retail marijuana store." But if the cultivation facility and the store are both part of one operation, as required by the 70-percent rule, the same entity will act as both wholesaler and retailer, collecting the excise tax from itself and then turning around to collect the sales taxes from customers. Depending on what the markups are at those two stages, the combination of a 15 percent excise tax and a 25 percent sales tax could raise the retail price, which is around $25 for an eighth of an ounce in dispensaries, by 50 percent or more. Since black-market prices are about twice as high as dispensary prices, that might be getting into dangerous territory.

The task force is also recommending that the state legislature ban pot smoking in marijuana stores, bars, restaurants, and even social clubs, which would seem to rule out Amsterdam-style cannabis cafés. On the brighter side, it previously recommended that visitors from other states be allowed to purchase marijuana.

The Post does not say how the task force came down on issues such as advertising, labeling, child-resistant packaging, limits on THC content, or what it means to consume marijuana "openly and publicly," which remains illegal under Amendment 64. I will follow up with more details when I have them.

Addendum: This post has been corrected in light of new information. See this update.

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  1. A huge portion of state revenue will of course come from the endless flow of of cannabis DUIs. Well, prepare to be welcomed to the club, potheads, within in a few years you understand the limitations we alcohol users have lived within for decades. Don’t worry, you’ll get used to it though. You just can’t drive for hours and hours after partaking. It’s going to be a very hard and tough learned lesson for many of you, though. Heh heh.

  2. Pot’s as legal as cigarettes now!

    Oh…well, pot was fun while it lasted, huh?

  3. This is why I think the notion that legalizing drugs will reduce crime (and hurt the cartels) dramatically to be flawed.

    As long as there is all these regulations and taxes and such, buying from an illegal dealer is going to be cheaper (and probably easier).

    1. My sarcasm/humor meter may be broken, but illegal cigarette cartels haven’t crowded out Walmart or 7/11 in the tobacco trade just yet, though Obamacare’s nanny tax may add a bit more incentive ($.62 per pack, to be exact) for lawbreaking.

      And, since cannabis is notoriously easy to grow, I can’t see prices per pack/joint remaining terribly high for long unless/until the government cartelizes the cultivation process. It’s not Libertopia, but we’re at least getting one step closer to Friedman-topia.

      Not having friends’ kids killing themselves out of despair following an arrest for drug crimes will be a welcome change of pace.

      1. As the cigarette taxes go up, places like NYC are seeing a huge increase in the black market. Chicago is eagerly approaching this level of taxation, and the IL-KY border is a conduit for cigarette smuggling already.

  4. Fifteen percent plus 25 percent equals 40 percent…….as with cigarettes, the government – with zero production costs – will be making more money off pot that the growers/retailers. Who could have predicted such a thing?

    1. It’s enough to make you get a bunch of buddies together, pick up a few guns, and go into the government business yourself.

  5. And when it remains cheaper to buy from a dealer who isn’t going to charge you taxes. Colorado will be used as a model of why “legalization” is a “failure”.

    1. My first thought on reading the headline was that the task force is stacked with people who want to sabotage legalization. Taxes are just the way to do it, for exactly the reason you describe.

  6. The task force is also recommending that the state legislature ban marijuana consumption in pot stores, bars, restaurants, and even social clubs, which would rule out Amsterdam-style cannabis caf?s.

    If I remember correctly, Amendment 64 states that

    MARIJUANA SHOULD BE REGULATED IN A MANNER SIMILAR TO ALCOHOL

    . So it makes me wonder if the regulations will hold up in court. Last time I checked, you could get a drink in a bar. I have no idea about taxes on alcohol, but I doubt they are at this level. So I don’t think this is “similar” to alcohol at all. Should be interesting.

    1. Exactly. It’s actually much worse than cigarettes. Basically anything outside of strictly licensed used–licensed stores, in-home consumption only, limited amount–is banned.

  7. That jsut sounds like a lot of crazy smack to me dude.

    http://www.NetAnon.da.bz

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