Designing Local Marijuana Taxes

If a jurisdiction wants to collect tax, it’s a good idea to tax something that is not easy to move.  Boulder, Colorado, is taking what seems to me a nonproductive path for revenue with a 5 percent excise tax on producers.

I’m thinking that a small local tax on purchasers, a retail sales tax, might not send purchasers out of the jurisdiction.  Each purchaser would make an independent decision about the burdens in time and money and the benefits of buying elsewhere.  Meanwhile, a small local excise tax on producers might be enough to discourage production totally for new entrants into the market.

The situation in Colorado is complicated, though, by a grandfathering of existing medical marijuana operations, which get first crack at the recreational market.  Existing producers in Boulder (if there are any) might pay the tax rather than incur the expense of moving.

If the Boulder Council, instead of wanting to collect tax, doesn’t want producers in town, a higher rate than 5 percent would be called for.

But everything depends on what taxes neighboring jurisdictions impose.




Author: patoglesby

From 1982 to 1990, I worked in tax policy for Committees of the United States Congress. In recent years, I was Adjunct Lecturer at UNC-Chapel Hill's Business School and then Adjunct Professor at its Law School.

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