Localities in Colorado, which has been allowing local marijuana taxation for years, are figuring it out. In California, which legalized six years later, they are still stumbling:
Here is a nuanced and thoughtful proposal from Aurora, about to increase retail sales taxes.
“Under Lawson’s proposal, there would be a 25% tax increase on the local sales tax rate on recreational marijuana raising the tax rate from 4% to 5%. This increase would still allow our 24 recreational marijuana stores to keep a competitive tax rate. For example, even with the increase, Denver would still be half a percent higher than Aurora at 5.5%.
“The proceeds from the marijuana tax increase is estimated to be around $1 million in the first year replacing the $1 million lost revenue from the photo red light program to fully restore the funding shortfall for these critical Nexus programs.
“As Aurora’s new Mayor, I strongly support Council Member Lawson’s proposal and I will encourage our City Council to pass it.”
Mike Coffman is mayor of Aurora.
In California, meanwhile, a blunt approach in Costa Mesa doesn’t distinguish among retail, growing, and testing taxes: https://www.latimes.com/socal/daily-pilot/news/story/2020-02-29/costa-mesa-city-council-will-consider-lowering-tax-for-marijuana-companies
Look, there is some room for local retail taxation in any locality. Consumers aren’t totally mobile in the long run. Prohibitionists say there are negative externalities with consumption, and they can’t be persuaded.
Processing and distribution are different. They create jobs, with no negative externalities (right?), and they will drift to low- or zero-tax jurisdictions.
And here’s the thing: A tax on testing (also mobile in the long run) is a sure sign that lawmakers don’t have the long-term best interests of the community in mind. Testing is the kind of enterprise most localities want – clean, high-paying jobs. Those are positive externalities. Taxing testing is both primitive and unprincipled.
Tax growing? That’s pretty mobile, too. Is there a negative externality? Smell? Some people like the smell.