California was the first state to legalize medical marijuana more than two decades ago. Colorado became the first state to legalize recreational use by way of a 2012 referendum. Their commercial market officially opened in 2014. Some seven years later, recreational marijuana proponents point to Colorado as a tremendous success. Seventeen other states have followed their example.
So, what is recreational use all about? That depends on your perspective. If you are a marijuana user, you can probably list all sorts of reasons why you do what you do. You probably use marijuana a lot like drinkers use alcohol. But if you are a state lawmaker, your reasons for going along with recreational use may be completely different. From the state’s perspective, the number one reason for promoting recreational use is almost always money.
Governments thrive on money. Not only that, but they also thrive on the ability to collect it. Why? Because the ability to tax is the ability to control. If nothing else, controlling people is the whole reason the government exists. If state government can do that and simultaneously take in billions of dollars in tax revenue, you can bet they will.
-
Record Tax Receipts in Colorado
Colorado legislators took the opportunity of the 2012 referendum to attach taxation to recreational marijuana. Why wouldn’t they? Just about everything else sold in the state is taxed. Recreational use marijuana would be no exception. Having said that, even state lawmakers were surprised by the amount of tax revenue marijuana generated.
During the first year of Colorado’s recreational market, the state collected just over $683 million in tax revenue. Just five years later, they collected $1.75 billion. That is almost three times as much. We can only imagine what their 2021 tax revenues will be. Common sense seems to dictate they will be well over the $2 billion mark.
Colorado taxes medical marijuana at 2.9%. They tax recreational marijuana at 15%, plus impose a 15% excise tax on top of it. That means recreational users in the state are paying an effective tax rate of 30% on all their marijuana purchases. That does not seem to bother them. Retail sales in 2019 exceeded $302 million.
-
Medical-Only States
It is not hard to imagine lawmakers in Colorado being against recreational marijuana when the 2012 referendum first passed. But nine years after the fact, how many of them are now thrilled to death over all that extra tax revenue they can play with? Intellectual honesty requires asking the question and insisting on answer.
Right next door is Utah. The Beehive State has a medical cannabis program; recreational use is still illegal. How long will things remain medical-only in Utah? As recreational use proponents continue to lobby state government, politicians have to be paying attention to the tax revenues being generated by their neighbor.
The good folks behind the Utahmarijuana.org website say that the state’s medical program has come a long way since its inception. They also say that support for recreational use is there. The question is one of how long it will take before lawmakers voluntarily embrace recreational use or are forced to do so by a new referendum.
We also cannot discount the possibility of Washington getting involved. Politicians may frame the decriminalization debate around the idea of reforming the criminal justice system or giving citizens more personal freedom but, in the end, money is likely to be the deciding factor. Marijuana generates a lot of tax revenue. You can bet there are plenty of Washington politicians salivating at the idea of federal marijuana taxes.
