Shortfall in Colorado’s 15 percent marijuana tax

Revenue from the 15 percent “wholesale” excise tax on recreational marijuana was supposed to run about $2 million every month ($13 million for the first six months, January through June 2014).  Instead, for the first four months, under $2 million was collected overall.

I don’t know the underlying assumptions behind that $2 million per month estimate, but four factors – beyond just the error inherent in any estimate – may contribute to the early shortfall:

1.  Sales are still growing.  New stores are opening all the time, so sales have not peaked.

2.  The “One-Time Transfer” hole in the wholesale tax is fading out.

3.  The black market is still strong.

4.  Medical marijuana sales (free of the excise tax) still far outweigh recreational sales — though recent sales have shown a strong trend toward recreational.

Meanwhile, the Governor expressed optimism recently that taxes will start flowing in big time:  “Hickenlooper estimates the state will reap between $60 million and $100 million in taxes from the marijuana industry this year, and $130 million in 2015.”  Those big totals include the 10 percent retail tax in addition to the 15 percent “wholesale” tax – and would exceed the $67 million annual run rate for recreational taxes estimated a while back.  Whether the Governor is right, I don’t know.  We shall see.