Marijuana

Legal Marijuana Sales Totaled $1 Billion in Colorado Last Year

Pot is almost as big as craft beer, but the tax revenue it generates is still a tiny share of the state budget.

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Jacob Sullum

New numbers from the Colorado Department of Revenue show that marijuana sales by government-licensed stores in that state totaled nearly $1 billion in 2015, making marijuana almost as big as craft beer by that measure. Marijuana sales raised $135 million in taxes and fees for the state last year.

"These tax revenue figures are truly impressive," says Mason Tvert, communications director at the Marijuana Policy Project. "Just six years ago, Colorado received zero dollars in tax revenue from the sale of marijuana in the state."

While $135 million is indeed a lot compared to $0, it looks less impressive compared to the state budget, which totals $26.4 billion this fiscal year. In other words, last year's marijuana money, $109 million of which came from taxes on recreational sales, amounts to about 0.5 percent of state spending.

That comparison does not dampen Tvert's enthusiasm, because he ignores it. Instead he focuses on the 78 percent increase in revenue between 2014 (the first year of legal recreational sales) and 2015 and the fact that the 15 percent excise tax on recreational marijuana raised $35 million for school construction last year, just $5 million less than the maximum allocated by Amendment 64, Colorado's legalization initiative. In addition to the excise tax, Colorado collects a 10 percent special sales tax on recreational marijuana, plus a 2.9 percent standard sales tax (which also applies to medical sales). Local governments can impose their own taxes, which in Denver total almost 12 percent.

"The additional tax revenue far exceeds the cost of regulating the system," Tvert says. "Regulating and taxing marijuana has been incredibly successful in Colorado, and it represents a model for other states to follow. These numbers should put to rest the claims we keep hearing from opponents that marijuana tax revenue has fallen short of expectations in Colorado."

I understand why legalization advocates hype marijuana taxes as a new source of government revenue, but I still think it's a mistake. As I argue in a recent Reason feature story, the revenue will never amount to much, the desire to maximize it leads to tax rates that unfairly hit cannabis consumers harder than drinkers and make it difficult for legal merchants to compete with black-market dealers, and dangling found money in front of voters (most of whom will not pay the new taxes) tends to undermine the moral case for ending prohibition.

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35 responses to “Legal Marijuana Sales Totaled $1 Billion in Colorado Last Year

  1. The additional tax revenue far exceeds the cost of regulating the system…

    But does it outweigh the revenue certain entities made from its outright prohibition?

    1. Last summer, congress passed some cuts to the DEA budget as well as attempted other measures which would have prevented federal interference in State marijuana policy.

      the latter was blocked by Dems

      “In a near-sweep for reformers, the Republican-led chamber accepted seven of eight amendments to a large multi-agency spending bill that sought either to restrict federal enforcement of marijuana laws or restrain the anti-drug agency.

      The one narrowly defeated measure in the string of late Tuesday and Wednesday votes would have prevented federal prosecutors and anti-drug agents from blocking implementation of state recreational marijuana laws.

      That measure, introduced by Rep. Tom McClintock, R-Calif., failed 206-222, with 45 Republicans voting in favor and 24 Democrats, including Democratic National Committee Chairwoman Debbie Wasserman Schultz of Florida, voting against it.”

      I’m reminded of MNG/Bo/Tulpa/etc.’s repeated insistence that ‘Dems r better on weed’-issues.

      As to the specific cuts to DEA budget – they were minuscule. They have ~$20m earmarked for ‘cannabis eradication’ programs which was cut in half. But they still freaked the fuck out and moan that its the end of the world.

      1. Democrat voters seem to be better on weed issues. The people the elect really just aren’t.

        Here in NH, the republican dominated legislature has passed decriminalization bills (maybe more than one), more reasonable medical bills with own-grow provisions (the NH medical law is absurdly restrictive) and they’ve all been vetoed by that stupid twat Hassan.

        1. “Democrat voters seem to be better on weed issues. “

          Closer, but i think its just that they *poll* better on weed issues.
          (i.e. ‘stated preference vs. revealed preference’)

          when it comes to actually supporting things that matter – a la the aforementioned, “Reducing Federal Pressure on States”…or ‘reducing the size of government enforcement-arms’….they vanish because they prefer Top Down government & protecting bureaucratic institutions even if it runs afoul of their stated-preferences in certain policy areas.

          Its also notable that while Dem voters might poll well on things like weed, Dem politicians tend to be groomed and presented to the public as the representatives of public sector unions. and those orgs tend to call the shots once they have their puppet in office.

          1. That’s sort of my point. Very few people are so consistent that they see the conflict between letting states do their thing with weed and consolidating federal control over everything else. But I think that it is their actual preference.
            The problem is that, except for a few weirdos, legalization isn’t a top issue that people vote on.

  2. I’m fairly confident they’ll address the lack of tax revenue by jacking up the rates. It’s an inevitable result of cozying up to the increased regulation devil in return for legal weed.

    1. That’s been the case from the beginning in Washington. The tax rate on weed here is 25%. I don’t know what they’ve brought in, but I bet it’s not as much as they’d hoped, since such a prohibitive tax rate causes people to still continue to turn to black market sources or grey market sources (such as the delivery service I use, that just removed its website and went text message invitation only, presumably to avoid regulation). Washington does the same thing with hard liquor ever since the state liquor stores were privatized, but you can’t grow a bottle of gin in your basement, so they probably thought it would work well with weed too, because the State Liquor Board is a bunch of parasitic imbeciles.

      1. Can you get Girl Scout Cookies, Gorilla Glue, or any of the other supposedly clone-only strains in your area? Those are both wildly popular and sadly mostly out of stock in most markets.

        1. I just bought some Albert Walker on Friday, so…yes? And I have definitely seen Girl Scout Cookies on the delivery service menu as well.

  3. The ‘revenue’ they took in amounts to 13 – 14% of *sales*. that’s got to be 39 – 52% of *profits*, minimum. That’s just abominable.

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    1. Look, lop, I sent the pics like you asked – even re-did the ones where the lighting on the donkey wasn’t very good – and I still haven’t seen a damn dime off of ’em. “Regular weekly payments” my ass – more like “weak regular payments”. WHERE’S MY MONEY, LOP?

    2. We wants ze money Lop or ve fucks you up!

  5. You can’t make it legal! There’s too much money in it!

  6. the moral case for ending prohibition

    WTF have *you* been smoking?!

    /DEA

  7. The biggest quantifiable benefits are harder to measure than tax revenue.

    That’s about $1 billion in displaced sales that would have happened on the black market without legalization.

    How much money are municipalities and counties saving by not policing, arresting, processing, trying, and jailing people for possessing marijuana?

    It isn’t how much revenue they get from taxes; it’s how much money they’re saving.

    Then we start asking questions like, “What is this doing to the growth of street gangs?” Is it harder now for children to get their hands on marijuana?

    What is this doing to the cartels internationally? Did the quantity of black market marijuana demanded on the street shrink? Does that alleviate pressure on federal agencies battling traffickers?

    1. government enthusiasts hate the savings from non prohibition. to them, it’s the absolute worst part.

      1. Well, the lack of a profit motive clouds their thought. The difference between revenue and cost means that private companies tens to be obsessed with cost cutting–since raising prices drives customers to competitors.

        Still, you’d think even the unions would see an opportunity there. The government will still spend every penny it gets–even Keynes told us to count on that. If local government has more money to spend because of cost savings, then they have more money to spend on ludicrous pension benefits for public employee unions, etc.

        It’s like my girlfriends. They’ve always been able to think of something to spend money on.

        1. Not only will they spend every penny, they will overspend and start running a deficit from the revenues. Giving the government a new source of revenue is like giving a 16 year old a pack of condoms, bottle of whiskey and the car keys.

    2. How much money are municipalities and counties saving by not policing, arresting, processing, trying, and jailing people for possessing marijuana?

      None, because now they’re policing, arresting, processing, trying, and jailing real crimHAHAHAHAHAAA!! Damn, could quite get it out!

      1. If by real criminals you mean teens sexting, then yes they are simply shifting to other criminals.

  8. “The additional tax revenue far exceeds the cost of regulating the system,” Tvert said.

    I checked the link, that is exactly what he said. Odd that for all the facts and figures and statistics given in the press release on how much money the state took in, there’s not a single citation for that statement. So how much did the state pay out for what it took in? I’m going to guess Tvert is silent on this question not because he doesn’t want to draw attention to it but because he has abolutely no basis for that claim, he has no idea whatsoever what the state spent – and nobody knows how much the state spends on any damn thing.

    1. There must be line items in a published budget somewhere.

      https://www.colorado.gov/pacific/osc/ financial-reports

    2. I imagine that taxing and regulating marijuana costs far, far less than enforcing prohibition and jailing people.

      I am also pretty sure that if the social costs of legalizing marijuana are less than those of prohibition. If they were significant, we’d be subjected to a barrage of evidence of Colorado reefer madness by now.

      That’s not to say that legalization has been good for everybody. It could be argued that marijuana legalization is evidence of a wider war against cops in particular, but there are other victims of legalization. Legalization has no doubt created hardships on cops, politicians, and other gang leaders and has adversely impacted the job security of criminal defense attorneys, corrections officers, and bail bondsmen.

      1. “”I am also pretty sure that if the social costs of legalizing marijuana are less than those of prohibition. If they were significant, we’d be subjected to a barrage of evidence of Colorado reefer madness by now.””

        When The Independents were on the air, someone came on the show and repeatedly insisted that car-accidents would skyrocket. The “driving while high”-panic seemed to have peaked in late 2014/early 2015 but people are still parroting it

        1. Also remember that toddler who ate the marijuana cookie that someone left in her yard the first week pot was legalized in Colorado ?

          1. The fact is that even if the Fed’s drug-enforcement budget is trimmed and their claws taken out of state weed-policy, some other arms of government will demand greater powers and regulatory oversight “to protect children” or drivers, or …livestock… air quality…i don’t know, but i can guarantee you = there will never be a total secular “decrease” in spending on ‘enforcement’ – it will simply change from one form to another.

            Alcohol has been ‘legal’ since the end of prohibition. yet i can say with some certainty that the amount spent “regulating it” since then has never really diminished.

            Hell…. in Colorado, “Liquor law violations” racked up more arrests than drugs last year.

        2. That was always stupid. As if there aren’t tons of stoned drivers on the road already. It’s almost like they think that laws like that are actually effective at controlling behavior.
          Since legalization brings more awareness that drivers might be stoned, and often includes enhanced enforcement for DUI on weed, I’d think that if anything, stoned driving would decrease.

          The other thing about stoned driving is that pretty much either you can deal with it fine and it makes no difference to your driving ability. Or you can’t and you avoid it.

  9. make it difficult for legal merchants to compete with black-market dealers

    Can’t allow them to sell it cheaper than black-market dope or the black marketers will buy the legal stuff and sell it to children! Or something.

    1. Oh god, not the children!

      It’s like all the pot prohibitionists are stuck in this 1920s frame of mind. It’s that, or some paranoid urge to incarcerate passive drug users. “Stop relaxing and forgiving people of their transgressions! We won’t tolerate it!”

      Anyway, I would assume Bic and Pyrex would be lobbying super hard for legalization. Razor and blade anyone?

      1. I blame Harry Anslinger.

  10. I understand why legalization advocates hype marijuana taxes as a new source of government revenue, but I still think it’s a mistake.

    there’s no other way you’re going to get legalization over the finish line. So, its a mistake only if you think I think highly-taxed legal pot is worse than 100% illegal pot. Reasonable minds can differ on this, but don’t kid yourself that isn’t the choice you are making.

    1. Given the choice of apparently real possibilities for legalization, I think that what they have in DC right now is the best. No commercial sales (and therefore no taxes), but really very few other restrictions. It’s not perfect, but it’s what I’d choose out of the things that have happened in the US so far. Of course, that came about in an odd way that is not likely to happen in any states.

  11. Here in CO they sold Amendment 64 in part to “regulate marijuana like beer and liquor” . But beer and liquor have much lower taxes .

    BTW : I didn’t realize it for years , but CO still has 3.2 beer which is all grocery stores can sell .

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