Katelyn Baker
Well-Known Member
Learn from Colorado's folly. Unless Arizona does something about medical marijuana, legalization won't produce promised revenues.
Here's how medical marijuana will hurt
Under Arizona law, a person who obtains a medical-marijuana card can purchase 2.5 ounces of marijuana, which is taxed at only 6.6 percent. If passed, this new initiative will allow any person - with or without a marijuana-medical card - to purchase 1 ounce of recreational marijuana.
However, here's the kicker: Recreational marijuana will be taxed at the much higher rate of 15 percent. Although there is no substantive difference between medicinal marijuana and recreational marijuana, the act will effectively create two markets in which the same good is sold for two prices.
So, if you could purchase 1 ounce of marijuana at $533 or 1 ounce of marijuana at $575, what would you do?
There's no need to guess. Colorado has provided us with the answer.
How Colorado's tax projections played out
Originally, Colorado predicted that it would receive in 2014 around $117 million in tax revenue from the sale of recreational marijuana. However, the state had to downgrade its estimate again, and again, and again. In the end, Colorado received only $44 million in revenue from the sale of recreational marijuana in 2014.
The reason? Not enough of Colorado's medical-marijuana users purchased recreational marijuana.
Similar to what Arizona may do, Colorado taxes medical marijuana at only 2.9 percent while taxing recreational marijuana at 27.9 percent. Colorado's significant tax differential incentivizes medical-marijuana users to not purchase the more expensive recreational marijuana.
What happened in Colorado will likely happen in Arizona if the Regulation and Taxation of Marijuana Act is passed. Around 70 percent of all marijuana is consumed by 20 percent of marijuana consumers, who smoke at least once per day.
Arizona's proposed initiative could still work
Any rational marijuana consumer who consumes this much marijuana would have long since gone out and obtained a medical-marijuana card, with complaints of "pain" and no other underlying medical condition. (In fact, 70 percent of all Arizona medical-marijuana users list only "pain" as the underlying medical condition.) With a medical-marijuana card in hand, why would any rational pothead give up purchasing pot at $533 per ounce for pot at $575 per ounce?
This is not necessarily an argument against the voter initiative.
Arizona can avert this tax-differential problem and still decriminalize recreational marijuana. One way to accomplish this is for state regulators to raise the sales-tax rate for medical marijuana to 15 percent. All that is required is foresight and action by Arizona policymakers to avoid the problem like the one Colorado.
Proponents for this act argue that we should regulate marijuana like alcohol. Because we don't tax the same types of alcohol at different rates, why should we do so with marijuana?
Unless the state properly incentives marijuana consumers who don't need medical marijuana to purchase recreational marijuana, we will simply be chasing a pot of gold.
News Moderator: Katelyn Baker 420 MAGAZINE ®
Full Article: My Turn: Legalize Marijuana For The Taxes? It's No Pot Of Gold
Author: Patrick Tighe
Contact: 602-444-8000
Photo Credit: Pat Shannahan
Website: The Arizona Republic
Here's how medical marijuana will hurt
Under Arizona law, a person who obtains a medical-marijuana card can purchase 2.5 ounces of marijuana, which is taxed at only 6.6 percent. If passed, this new initiative will allow any person - with or without a marijuana-medical card - to purchase 1 ounce of recreational marijuana.
However, here's the kicker: Recreational marijuana will be taxed at the much higher rate of 15 percent. Although there is no substantive difference between medicinal marijuana and recreational marijuana, the act will effectively create two markets in which the same good is sold for two prices.
So, if you could purchase 1 ounce of marijuana at $533 or 1 ounce of marijuana at $575, what would you do?
There's no need to guess. Colorado has provided us with the answer.
How Colorado's tax projections played out
Originally, Colorado predicted that it would receive in 2014 around $117 million in tax revenue from the sale of recreational marijuana. However, the state had to downgrade its estimate again, and again, and again. In the end, Colorado received only $44 million in revenue from the sale of recreational marijuana in 2014.
The reason? Not enough of Colorado's medical-marijuana users purchased recreational marijuana.
Similar to what Arizona may do, Colorado taxes medical marijuana at only 2.9 percent while taxing recreational marijuana at 27.9 percent. Colorado's significant tax differential incentivizes medical-marijuana users to not purchase the more expensive recreational marijuana.
What happened in Colorado will likely happen in Arizona if the Regulation and Taxation of Marijuana Act is passed. Around 70 percent of all marijuana is consumed by 20 percent of marijuana consumers, who smoke at least once per day.
Arizona's proposed initiative could still work
Any rational marijuana consumer who consumes this much marijuana would have long since gone out and obtained a medical-marijuana card, with complaints of "pain" and no other underlying medical condition. (In fact, 70 percent of all Arizona medical-marijuana users list only "pain" as the underlying medical condition.) With a medical-marijuana card in hand, why would any rational pothead give up purchasing pot at $533 per ounce for pot at $575 per ounce?
This is not necessarily an argument against the voter initiative.
Arizona can avert this tax-differential problem and still decriminalize recreational marijuana. One way to accomplish this is for state regulators to raise the sales-tax rate for medical marijuana to 15 percent. All that is required is foresight and action by Arizona policymakers to avoid the problem like the one Colorado.
Proponents for this act argue that we should regulate marijuana like alcohol. Because we don't tax the same types of alcohol at different rates, why should we do so with marijuana?
Unless the state properly incentives marijuana consumers who don't need medical marijuana to purchase recreational marijuana, we will simply be chasing a pot of gold.
News Moderator: Katelyn Baker 420 MAGAZINE ®
Full Article: My Turn: Legalize Marijuana For The Taxes? It's No Pot Of Gold
Author: Patrick Tighe
Contact: 602-444-8000
Photo Credit: Pat Shannahan
Website: The Arizona Republic
