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Marijuana tax revenue lower than forecast so far

Author: Scarinci Hollenbeck, LLC

Date: May 19, 2014

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One of the strongest cases for the legalization of marijuana in Colorado was the untapped business tax revenue that might be had by states that allowed the drug to be sold. However, officials in the state are now scaling back first-year estimates for total sales and business tax revenue from the $1 billion in sales for the coming fiscal year predicted earlier this year, according to Bloomberg Businessweek. During January and February, the first two months that recreational marijuana could be sold in Colorado, the state collected roughly $4.2 million in sales and excise taxes – less than half of the range of $5.5 million to $8.9 million that was estimated by state legislators in 2013.

“I don’t think it’s the savior for state budgets,” Phyllis Resnick, lead economist at the Denver-based Colorado Futures Center of Colorado State University, told the news source. “It brings in additional revenue, but it also brings in additional costs for administration of the system and regulation and monitoring. It’s not free money.”

State officials are suggesting that the low sales levels are due to an unexpectedly slow licensing and approval process in Colorado for vendors to sell marijuana, Businessweek explained. Uncertainty caused by marijuana’s ongoing illegal status at the federal level may also have led to a shortage of supply.

It is possible that sales will pick up in coming months as more shops get licensed to sell marijuana and supply increases. In April, legislators expected to bring in approximately $134 million in taxes from the marijuana industry, Reuters reported. Around 30 percent of this sum is earmarked for school districts, with the rest going to treatment, school construction and deterring young people from using the drug. New revenues, however, will only make up about 1.4 percent of the state’s available general fund.

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