Economist Marijuana Tax and Tax Again
States Push to Get the Well-nigh Out of Marijuana Taxes
DENVER — If marijuana is legalized and properly regulated, its proponents have long said, it could generate millions of dollars in land revenue enhancement revenue. But how the drug should be taxed has proved to be a thorny question.
In Colorado, where voters approved a measure in November legalizing small amounts of marijuana for recreational utilise, officials have been grappling with this issue for months as the state works to forge a cohesive regulatory code.
This week, legislators here volition consider excise and sales taxes on marijuana of up to 30 per centum combined. The proposal emerged from a task force of wellness officials, representatives of the state's quickly developing marijuana industry and others that was commissioned last year to help develop rules for marijuana.
The goal, task force members and lawmakers say, is to set taxes high enough to finance the administration of new laws, but not so high that customers are driven back to the blackness market place.
"We should see a financial benefit as a state that can aid pay for enforcement and other cardinal issues," said Christian Sederberg, a Denver lawyer on the console whose house helped draft Amendment 64, the measure legalizing recreational marijuana. "The other side is that if you lot revenue enhancement something too high, and then you simply oversupply out the regulated market. Nosotros're confident we'll find the right rest."
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Under the proposal, the start $40 million collected from a 15 pct excise tax would be used to build public schools. Revenue from a 15 percentage sales tax imposed, in improver to the state'due south 2.9 pct sales taxation and any local sales tax, would exist apportioned to local governments and for enforcement.
A legislative hearing on the proposal, which would give lawmakers the flexibility to lower the tax charge per unit, is scheduled for Thursday. The revenue enhancement measure is i of several proposals related to marijuana regulation being debated this calendar week.
Country Representative Jonathan Singer, a Democrat from Longmont and the bill'south sponsor, said finding the right tax rate was likewise a matter of public rubber.
"The big thing is that nosotros want to make sure we're able to put the appropriate safeguards in identify so that marijuana doesn't stop up in the hands of kids, criminals or cartels," he said.
Non everyone is sure that a tax is a good idea. Michael Elliott, executive director of the Medical Marijuana Industry Grouping hither, said he feared that besides heavy a tax could make information technology hard for any marijuana concern to survive, considering Colorado's black market place is and then entrenched.
Near all of the land's businesses that sell medical marijuana, which would be exempt from the taxes, will eventually shift over to selling the drug for recreational use as well. If taxes are as well high, Mr. Elliott warned, those businesses could struggle and eventually close.
"Higher taxes on the legal, commercial model will prevent the transition to a legitimate market from happening and continue more people buying it illegally," he said.
Prototype
Furthermore, if lawmakers laissez passer the tax proposal, it will nevertheless require voter approval. Under a state constitutional subpoena, tax increases are subject to a popular vote.
Meanwhile, projections over how much revenue the taxes might heighten vary widely.
In Washington State, where voters in November passed a like measure legalizing small amounts of marijuana for personal use, taxes will exist levied in 3 tiers of 25 percent each on producers, processors and retailers. Those taxes were laid out in the initiative that voters approved, and will result in an effective rate for consumers of 44 percent, according to the state's Liquor Control Lath, which volition administer marijuana regulations.
A state study found that acquirement from marijuana taxes could range from zero dollars, if Washington's marijuana laws are ultimately superseded by federal criminal law, to $2 billion over five years if a fully formed market develops. "Nobody knows for certain how it will work out, only there are people who say they could grow and process marijuana at a lower price bespeak than what is currently bachelor illegally," said Brian Smith, a spokesman for the lath.
Jeffrey Miron, an economics professor at Harvard University and a senior fellow at the Cato Institute, a libertarian group, cautioned that while both states' approaches seemed reasonable, he doubted the taxes would create a substantial windfall.
Dr. Miron, who supports legalization, said that every bit long as federal marijuana laws continued to be unsettled, collecting taxes would be challenging. Moreover, he said, in that location is no manner to predict how many customers would continue to purchase on the black market.
Later Prohibition ended in 1933, states levied taxes on alcohol, in function because they were desperate for revenue after the Nifty Low. But that shift, Dr. Miron noted, was undertaken with the full back up of the federal authorities.
"It's easy to get a little overexcited that legalizing marijuana is going to solve the world'due south monetary problems," Dr. Miron said. "But the question for the revenue enhancement revenue role of this will be how much the federal government allows these markets to come up completely higher up ground."
Source: https://www.nytimes.com/2013/04/25/us/colorado-considers-marijuana-tax.html
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