Tax hike: What it could mean for consumers, industry in Colorado
Cannabis consumers could be paying more Colorado marijuana tax come July 1. As with any proposed tax increase, the prospect has been met with some concern amid the news that one of the states pot taxes would increase 50 percent.
At issue is a proposal floated this week by Colorado Gov. John Hickenlooper that would raise the special sales tax on recreational marijuana products to 12 percent on the date it was scheduled to drop to 8 percent from its current 10 percent.
Unaffected would be the 15 percent excise tax on cultivators, the 2.9 percent standard state sales tax and any local sales taxes.
So the buyer wont be paying 50 percent more in (state) taxes, said Chris Stiffler, economist at the Colorado Fiscal Institute. For example, on a $20 pack of edibles, youre probably talking about another dollar in taxes.
But what does this tax uptick mean when put in the broader context of Colorados high-flying, record-setting marijuana industry? Heres a look at how this may play into factors such as supply and demand, black market pull, pricing, end costs and the states short- and long-term fiscal strategies.
Hickenlooper is seeking a way to fill a $135.1 million gap in K-12 school funding, according to the proposal from the Colorado Office of State Planning and Budgeting. A hike from the scheduled 8 percent to 12 percent could net an additional $41.9 million for the state as it seeks to fill a $135.1 million gap in K-12 school funding, according to the proposal from the Colorado Office of State Planning and Budgeting.
The Colorado Legislative Council previously projected marijuana tax revenue to be $193.9 million for the fiscal year 2017-2018, which starts July 1.
Separately, the 15 percent excise tax on wholesale marijuana transfers is earmarked for schools, with the first $40 million going to capital construction projects and any excess deposited into the public school fund.
The interplay between supply, demand, pricing and taxes is a delicate dance.
If taxes are too high, then regulated markets might not achieve the necessary pull from the black market. If theyre too low, the benefits for state programs take some hits.
If the special sales tax does end up climbing to 12 percent on July 1, it would represent a 2-percentage-point increase from what consumers are paying now.
While its not yet known what effect the other newly recreational-use states may have on Colorado, the cannabis industry here likely wont suffer a major blow from this proposed increase, Stiffler said.
I dont see sales tapering off, he said. I see sales continuing their strong trajectory.
According to information provided from cannabis sales-tracking firm BDS Analytics, as of November 2016, the per-gram cost of flower was $5.57, edibles were $14.87 and ...
