Colorado marijuana tax rates hit all-time low

Colorado’s nominal tax rate of 15 percent now yields DE FACTO a historically low tax of 49 cents a gram on flowers or bud, and a steady rate of 17 cents a gram for trim or leaves.  

From the official Colorado web site, https://www.colorado.gov/pacific/sites/default/files/AverageMarketRateFactSheet.pdf, we see the Average Market Rates that the 15-percent tax applies to:

Beginning January 1, 2017 the Department will adjust the AMR to the following:

AMR as of January 1, 2015 AMR as of July 1, 2015 AMR as of January 1, 2016 AMR as of July 1, 2016 AMR that will be effective as of January 1, 2017
Flower Rate ($/lb) $2007 $1868 $1948 $1816 $1471
Trim Rate ($/lb) $364 $370 $464 $505 $499
Immature Plant Rate ($/EA) $9 $8 $9 $10 $10
Wet Whole Plant Rate ($/lb) N/A N/A N/A $209 $223
Seed Rate ($/seed) N/A N/A N/A $2 $6

https://www.colorado.gov/pacific/sites/default/files/AverageMarketRateFactSheet.pdf

Colorado periodically calculates AMRs based on actual market conditions, then notionally applies a 15-percent ad valorem tax to those AMRs.  That means that Colorado’s de facto wholesale per-gram marijuana taxes have just gone down, to an all-time low of 49 cents for potent bud, or flowers. (You multiply $1471 by .15, and divide by 453, the number of grams in a pound.)

I have been predicting that marijuana prices will fall, writing, for instance:  “Later, the prohibition premium – the extra amount illegal sellers charge to compensate for risk of getting caught – will disappear. Then, as efficiency, amortization of startup costs, and economies of scale drive pre-tax prices down, price-based taxes will shrink proportionately. A percentage base may turn out to haunt drug policy uniquely. Low prices create availability of intoxicant that drug policy disfavors, at least for youth and for problem users.”

Note the relatively new category for wet whole plants, explained at https://newrevenue.org/2015/10/12/beyond-bud-trim/.

 

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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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