Dear Editor:
Before Coloradans voted in 2012 to legalize recreational marijuana, pro-legalization advocates aired a jingle: “Jobs for our people. Money for schools. Who could ask for more?”
The Campaign To Regulate Marijuana Like Alcohol promised that if Amendment 64 passed, tax revenues would pay for “the reconstruction of our schools.” In addition, many Yes on 64 ads featured pictures of classrooms and focused on the fact that legalizing pot would generate much needed revenue for programs such as education.
It’s no surprise then that with the passage of Amendment 64 and news headlines touting record tax revenues from the sale of recreational marijuana, that many, if not most, of Colorado’s citizens believe our state’s public school system is now flush with cash. Unfortunately, nothing could be further from the truth.
The truth is that Amendment 64 never promised a significant amount of sales tax revenue would flow into the K12 system. In fact, the language in 64 was clear: only the first $40 million in excise tax revenue raised annually must be credited to a state fund used for constructing public schools. It also said no excise taxes can be charged on pot cultivated as medical marijuana.
But because 64 required that the Legislature enact an excise tax to be levied on the wholesale sale of marijuana and because under TABOR, the state cannot raise tax rates without voter approval, in November 2013 voters were asked to support Proposition AA, which mandated a 15 percent excise tax on recreational marijuana. Supporters again claimed the passage of this measure “would help fund school construction,” and voters again believed it to be true.
Unfortunately, again, reality is far from truth.
Although the 15 percent excise tax applies to the wholesale price of recreational marijuana, that price varies, as it is “calculated on the basis of the category of the retail marijuana product being sold or transferred.”
In addition, pot shops are required to grow most of what they sell. Therefore, wholesale transactions are typically transfers within businesses where no money is exchanged. Businesses are also restricted in the number of times they can buy pot grown by someone else, and, because the tax rate on retail cannabis is so high, many people continue to purchase marijuana through medical providers.
Last month, the sale of recreational marijuana outpaced that of medical marijuana. Yet, a huge problem remains. A loophole was built into the system, which Jeremy Meyer of the Denver Post says, “has allowed thousands of pounds of pot to go untaxed and has cost the state millions of dollars that should have gone to a school construction fund.”
The loophole Meyer referred to is a Department of Revenue regulation, which lets medical marijuana licensees convert medical licenses to retail ones with a one-time tax-free transfer. The policy was created to place more pot on the retail market to raise more sales taxes.
It worked, but it did so to the detriment of the public school capital construction fund, which will now receive only $11 million of the promised $40 million in FY 2014-15.
Meyer said lawmakers are not proposing to stop the transfers until after Jan. 1, 2016.
So, when you’re reading headlines about a surge in Colorado marijuana tax revenues and when you hear stories about how Colorado’s recreational weed sales are exceeding expectations, as Gov. John Hickenlooper said, “Don’t break out the Cheetos and Goldfish too quickly.”
Recreational marijuana sales tax revenues may be higher than expected, but that certainly has not translated into pot for pencils.
Paula Stephenson
Executive Director
Colorado Rural Schools Alliance
Denver
