The decision of the Colorado Legislature in 2015 to delay the effective date of the decrease in state’s marijuana retail tax from 10 percent to 8 percent was inexplicable. The industry needs low rates in the early days, not later.
So Gov. Hickenlooper’s call to let the effective date expire meaninglessly, and for an increase to 12 percent, is sensible, and not surprising. Here’s that story:
By Brian Eason and John Frank, The Denver Post
Gov. John Hickenlooper on Tuesday asked Colorado lawmakers for a 50 percent increase in sales taxes on recreational marijuana starting July 1 to send an additional $42 million to public schools.
The Democrat wants to increase the recreation sales tax on pot to 12 percent effective July 1, the same day the levy is scheduled to fall to 8 percent. The current tax rate is 10 percent.
Colorado needs to solidify its weight tax, but that will take TABOR approval by voters. The Legislature has TABOR-authorized room to go to 15 percent on the retail tax without going back to the voters.
On April 24, 2015, I wrote the sponsor of that tax cut. I never heard back (and why should I, since I don’t live in his district, or even his state?).
Dear Senator Steadman:
I’m an out-of-state tax researcher. [A Colorado friend], whom I rely on for Colorado marijuana law, suggested I contact you with this question.
I don’t understand the thinking behind the delay in House bill that would cut the 10-percent tax rate to 8 percent in 2017.
http://denver.cbslocal.com/2015/04/23/pot-money-give-to-taxpayers-or-colorado-keeps-it/. I’m sure there’s some reason. Hit a budget target in the short term?
I would think rates should be low at first. Low taxes can help wipe out the black market. With that logic, rates shouldn’t go down over time, so long as we hope the black market gets weaker over time. This is in line with pages 88-93 of the RAND Report for Vermont, http://www.rand.org/pubs/research_reports/RR864.html, including the chart on 93.
In 1933, Congress deliberately kept the new taxes on liquor low at first — and then raised them repeatedly once the black market was marginalized.
Keeping rates low at first seems especially useful for price-based taxes, since prices will probably be higher now than in 2017. I could see a temporary cut to 8 percent starting ASAP, then bouncing back up later.
Thanks for any insight.