One of the big selling points for the legalization of recreational marijuana use in Colorado was that it would represent a potential windfall in tax revenue which could be put to use addressing a host of other ills. Given how expensive the product now is and the steep taxes being placed on it, that probably sounded like a pretty good plan. (Apparently nobody there stays up to date on the experiences other states have had with excessive sin taxation.) Unlike tobacco, since there isn’t currently another state nearby with lower pot taxes, the state government hasn’t had to deal with smuggling problems, at least not above and beyond the issue of interstate traffic to places where it’s still illegal.
But they have run into a completely different issue, one rooted in the state’s rather libertarian tax laws. Colorado may be suffering from a literal embarrassment of riches and be forced to give some of the marijuana tax money back to the taxpayers.
Colorado’s marijuana experiment was designed to raise revenue for the state and its schools, but a state law may put some of the tax money directly into residents’ pockets, causing quite a headache for lawmakers. The state constitution limits how much tax money the state can take in before it has to give some back. That means Coloradans may each get their own cut of the $50 million in recreational pot taxes collected in the first year of legal weed. It’s a situation so bizarre that it’s gotten Republicans and Democrats, for once, to agree on a tax issue. Even some pot shoppers are surprised Colorado may not keep the taxes that were promised to go toward school construction when voters legalized marijuana in 2012.
If only all the states could have such “problems” these days, eh? For once, this one should be a no brainer. The GOP doesn’t like taxes and wants taxpayers to keep more of their money. The state’s Democrats want to be on the side of the popular plan which voters approved as a constitutional amendment more than 20 years ago, where caps are put on tax revenue so the good people of the state get some cash back in their pockets. Easy as pie, right?
Not so fast there, Skippy.
Republicans and Democrats say there’s no good reason to put pot taxes back into people’s pockets, and state officials are scrambling to figure out how to avoid doling out the money. It may have to be settled by asking Colorado voters, for a third time, to cast a ballot on the issue and exempt pot taxes from the refund requirement. Republicans concede that marijuana is throwing them off their usual position of wanting tax dollars returned to taxpayers. But they also tend to say that marijuana should pay for itself — that general taxes shouldn’t pay for things like increased drug education and better training for police officers to identify stoned drivers. “I think it’s appropriate that we keep the money for marijuana that the voters said that we should,” said Republican Senate President Bill Cadman. His party opposes keeping other refunds based on the Taxpayers’ Bill of Rights but favors a special ballot question on pot taxes.
My how quickly the worm turns when it gets hold of some cash. If there is a set maximum amount of tax money which the taxpayers have approved for you to conduct the state’s business and you’ve reached that cap, how is that not the end of the conversation? The Republicans should be the first ones on board with limiting how much to feed the beast and this should be the easiest call in the world for them. I understand that many of them probably opposed legalization in the first place, but once the product is changed from green leaves into green tax dollars, it’s all the same.
The one exception I could see which might excuse an exception in this case is hinted at in the article. If this new industry is actually driving up government costs for enforcement, monitoring, inspections, equipment to test drivers for impairment and other requirements, then maybe they could ask the taxpayers to let them keep some of the cash. But in order to do so there should be full transparency as to what those additional costs are and how much of the tax money is being doled out to meet those needs. If they can’t come up with that level of transparency, then there’s an even better plan available than just giving everyone a refund in perpetuity. Lower the taxes for everything else so you don’t go over the cap next year.
Colorado will continue to be a fascinating laboratory for the other states to observe for some time to come. If this actually winds up draining money out of the criminal shadow economy and helps them balance the books, maybe we can look at legalization in other states where the voters are interested in doing so.
Weekend Editor Jazz Shaw, author of the above editorial piece, started contributing to HotAir in 2010 and was appointed Weekend Editor in 2012. He became a full time contributor in 2014.
By Jazz Shaw - Hot Air/Feb. 9, 2015
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