Everything Is Tax for Pot

Professor Doug Berman at Ohio State Law School, who heads up the leading scholarly law blog on marijuana policy, writes:  “I strongly believe the marijuana tax stories and regulations that that emerge in state and federal law and policies in the months and years ahead will be the most important predictor of whether pot prohibition eventually gets fully repealed or lives on and on in the United States.” That’s  here and at http://lawprofessors.typepad.com/marijuana_law/2014/02/everything-is-tax-seems-a-fitting-mantra-for-marijuana-reform-and-policy.html:

Marijuana Revenue Estimates — HuffPo

Marijuana Taxes: Time Will Tell  Here and at http://www.huffingtonpost.com/pat-oglesby/marijuana-taxes-time-will_b_4858405.html

While marijuana revenue could be a promising new source of income for states, a wide range of expectations underscores how little we know so far about what mature markets will look like one day. Last week, early projections for marijuana revenue in the first two legalizing states gave way to new ones. In Colorado, expectations rose; in Washington, they collapsed. As projections zig-zag, other states considering legalization don’t know what to expect. Continue reading Marijuana Revenue Estimates — HuffPo

On Public Radio Out West

Thanks to Austin Jenkins for putting me on the air about marijuana revenue:

Pat Oglesby runs a think tank in North Carolina that focuses on marijuana taxes. He cautions those numbers are bound to change.  “You’ve got so many uncertainties. You’ve got what’s going to happen with the medical market? What about bootleggers?” he said.

Audio here or http://kplu.org/post/pot-tax-revenue-estimates-likely-hazy

Transcript: Continue reading On Public Radio Out West

Washington Marijuana Excise Revenue: $129 million, not $1.6 billion

OK, this is confusing, so I have been tinkering with it (March 5).  The official Washington estimate of marijuana revenue at http://www.erfc.wa.gov/forecast/documents/rev20140219_color.pdf shows some $51 million through FY 2017 and some $190 million through FY 2019, but it omits the 81.7 percent of excise tax collections that do NOT go to the General Fund, and adds in general sales and B&) taxes.

But total marijuana tax collections are expected to be much bigger — $129 in excise collections alone, $28 million in other taxes.  That adds up to the current  total estimate of $157 million given to Austin Jenkins of Public Radio.

That $129 million for excises alone supersedes an old official estimate of $1.6 billion for  fiscal years through 2017.  (The new estimate goes through FY 2019, but that’s not relevant here.)

That $1.6 billon for excise alone was part of the  old  Washington estimate of $1.9 billion in total new taxes on account of marijuana for the fiscal years through 2017,  I never believed those old, high numbers.

Now for some details.  Of that new $157 million total through FY 2017, $28 million comes from sales and Business and Occupation taxes.  The $28 million figure peels off the official written estimate.  The $129 million requires subtracting that $28 million from the official $157 million figure.

Here’s how I figure that $129 million was arrived at.  I take $22.9 million from the official written estimate and adjust it,  getting only as close as $126 million — but that’s in the ballpark.

My guess at total marijuana excises for FY 2015-17


Add back discredited number for license fees


Sales and B&O taxes per estimate


Total for FY 2015-17


(actual estimate is $157 million)

That $157 million (or $154 million, as close as I can get) compares to the old legislative estimate of $1.94 billion in goal for the period through the end of FY 2017, http://www.ofm.wa.gov/ballot/2012/I-502_Worksheet.pdf.  Quite a change.  Less than 10 percent remains.

Here are my calculations, with spreadsheet retaining formulas here:  WA revenue Feb 24 2014 PO calculations.

Excises and license fees to General Fund per Feb. 2014 estimate


Less license fees from old, discredited http://www.ofm.wa.gov/ballot/2012/I-502_Worksheet.pdf — not a reliable number


Excises to GF


Fraction of excises apportioned to non-GF purposes per statute


Fraction remaining for GF


Calculated excises (inverse of .187 =5.347593583, multiplied by excises remaining for GF) before allocations


Various off the top allocations





My guess at total marijuana excises for FY 2015-17


Add back discredited number for license fees


Sales and B&O taxes per estimate


My slightly off Total for FY 2015-17


Among problems with my calculations are (1) numbers in the new, February estimate were rounded off, and I take them to be precise, (2) I’m using the license fee number ($483,000) from the legislative estimate that got to $1.94 billion, and the estimate is very sensitive to errors in that number.  But I’m in the ballpark.

New Colorado Marijuana Revenue Estimate

In Colorado, the revenue estimate for marijuana excise taxes went up.  An official 2013 legislative estimate called for $67 million for the first full fiscal year, July 2014 to June 2015.  As of February 18, math shows that the Governor is officially expecting $107,237,544 from those excises.  An officially reported $117 million number, linked below, includes taxes other than excises, and excludes amounts sent to localities.

Continue reading New Colorado Marijuana Revenue Estimate

Marijuana – How Much Revenue?

Old revenue estimates for marijuana taxes have just made way for new, more informed ones.  An official 2012 Washington State legislative revenue estimate called for $1.9 billion in marijuana taxes by the end of Fiscal 2017.  On February 19, the Governor drastically cut that questionable number, with a new, lower estimate calling for around $155 million during that time frame.

That $155 million number does not show up in print yet.  It comes from adding up and rounding off (1) the $28 million estimated to go into the general fund from sales and B&O taxes and (2) $125 million.  That $125 million number (this gets tricky) comes from knowing that the nearly 20 percent of excise revenues estimated for the general fund are $23 million — thanks to Steve Lerch, an old friend from Joint Tax Committee staff in D.C. who now heads up estimating for the State of Washington, who graciously clued me in.  (Multiplying by a little over 5, the inverse of 20 percent, gets to $125 million.)

The basis for those new Washington numbers comes from a thoughtful analysis led by Jon Caulkins, a top drug policy scholar who has gone out of his way to help me over the years, though we have met only electronically.  But even with all this expertise, the numbers are iffy.   For instance, the Washington estimate assumes that retail sales won’t start before mid-2015, and I would bet sales start much earlier.

In Colorado, the estimate for marijuana taxes went up, not down.  An official 2013 legislative estimate called for $67 million a year.  As of February 18, the Governor is officially expecting around $100 million a year — $184 million over the first 18 months.

Washington has more people than Colorado – and higher marijuana taxes.  Colorado’s wholesale tax rate is 15 percent; Washington’s is 25 percent.  Colorado’s retail tax rate is 10 percent; Washington’s is 25 percent.  Washington sometimes adds a third 25 percent tax, on producer sales.

Both states estimate that revenue will increase over time.  But both have percentage-based taxes, which shrink when pre-tax prices fall. Continue reading Marijuana – How Much Revenue?