War on Drugs

CO and WA Politicians Count on Marijuana Revenue That May Not Materialize

It's an untested market with a underground history


In a widely cited study of the Colorado law, the Colorado Center on Law and Policy predicted that marijuana legalization would produce $60 million annually in new revenue and savings for the state each year until 2017.

The taxes on marijuana sales include a 15 percent excise tax (dedicated to school construction) and a 10 percent sales tax, for a total of 25 percent. According to the study, those levies would bring in $32 million for the state budget, $14 million for local governments and would result in a savings of more than $12 million in state and local law enforcement spending.

The first $40 million of the excise tax revenue is dedicated to school construction. Extrapolating from there, the study projected economic development based on anticipated tax revenue — counting on 372 new construction jobs to build schools. …

The $60 million estimate is still being discussed, but a more recent study tempered expectations. The Colorado Futures Center at Colorado State University concluded that while revenue will be raised, it may not meet the state's expectations, particularly the 15 percent tax targeted for school construction.

The report concluded that for the tax to raise the $40 million anticipated for schools, given current consumption estimates, the cost to grow a pound of marijuana would be in the range of $1,100 a pound, almost twice earlier estimates. That level risks raising the price of retail marijuana so high that it could send users back to the black market.