Pot taxes balance costs and predictions

By Jack Healy / New York Times News Service

Published Feb 21, 2014 at 12:01AM

DENVER — For Colorado’s new flock of recreational marijuana growers and sellers, Thursday was tax day — their first deadline to hand over the taxes they had collected during their inaugural month of sales. And as store owners stuffed cash into lockboxes and made the nervous trek to government offices, new budget numbers predicted that those marijuana taxes could add more than $100 million a year to state coffers, far more than earlier estimates.

The figures offered one of the first glimpses into how the bustling market for recreational marijuana was beginning to reshape government bottom lines — an important question as marijuana advocates push to expand legalization beyond Colorado and Washington state and into states including Oregon, Arizona and Alaska.

In Colorado, where recreational sales began Jan. 1, a budget proposal from Gov. John Hickenlooper estimated that the state’s marijuana industry could reach $1 billion in sales in the next fiscal year, with recreational sales making up about $610 million of that business.

“It’s well on its way to being a billion-dollar industry,” said Michael Elliott, executive director of the Marijuana Industry Group, a Colorado trade association. “We went from 110,000 medical marijuana patients to 4 billion people in the world who are 21 and up.”

In the budget proposal that Hickenlooper released Wednesday, his office said the state could collect about $134 million in taxes from recreational and medical marijuana for the fiscal year beginning in July. He proposed to spend $99 million on programs including substance-abuse treatment, preventing marijuana use by children and teenagers, public health and law enforcement.

“This package represents a strong yet cautious first step toward ensuring a safe and responsible regulatory environment,” Hickenlooper wrote in the proposal.

In Washington state, where retail sales of marijuana are expected to begin in June, budget forecasters estimated Wednesday that marijuana could bring the state nearly $190 million in taxes for the four years beginning in mid-2015. That money would go to a variety of health and substance-abuse programs, as well as the state’s general fund.

“Every governor and legislator in the country will be like, ‘Hey, check out these numbers,’” said state Rep. Reuven Carlyle, D-Seattle, chairman of the House Finance Committee.

For marijuana advocates, taxes were one of the major selling points of legalization. They have said that expanding the market for the federally prohibited plant could give cash-strapped states money for school construction, health care, substance-abuse programs and public health. Colorado’s legalization measure said $40 million in tax revenue would go toward school construction.

But opponents, and some skeptical economists, say the dreams of a windfall are far too optimistic. They worry that the higher costs of enforcement and regulation could outweigh any tax revenue from marijuana sales.