Pubdate: Fri, 26 Oct 2012
Source: Denver Post (CO)
Copyright: 2012 The Denver Post Corp
Contact:  http://www.denverpost.com/
Details: http://www.mapinc.org/media/122
Author: John Ingold
Page: 1A

SOURCES VARY ON POTENTIAL REVENUE BOOST

Proponents of Amendment 64, the marijuana-legalization measure, 
frequently promote their initiative by talking about the money it 
would generate for state and local governments.

They argue that the measure, which would allow marijuana sales to 
anyone over age 21 at special retail stores, would put tens to 
hundreds of millions of dollars into state and local government 
coffers annually. One Colorado think tank estimates the measure would 
generate $60 million a year to start.

But other experts who have examined the issue say it is deeply 
uncertain how much money the amendment could generate. A dizzying 
number of factors-the number of stores, the demand, the price, the 
amount of tax evasion, the federal government's response and even the 
measure's impact on other industries - go into determining how much 
new revenue the amendment would create. Though the measure would make 
it legal for adults anywhere in the state to possess up to an ounce 
of marijuana, local governments could ban marijuana stores.

"It's tough to put a precise figure on it," said Vanderbilt 
University law professor Robert Mikos.

Money is never far from the conversation in debates about the 
initiative. In one television ad for the amendment, dollar signs 
float out of an image of Colorado toward Mexico.

"We all know where the money from nonmedical marijuana sales is 
currently going," a narrator says. "It doesn't need to be that way. 
If we pass Amendment 64, Colorado businesses would profit, and tax 
revenues would pay for public services and the reconstruction of our schools."

The left-leaning Colorado Center on Law and Policy estimates the 
measure would generate $60 million a year initially in tax revenue 
and savings and $100 million a year after five years. The state's 
nonpartisan voter guide estimates that the amendment would produce $5 
million to $22 million per year in state sales tax.

But when Mikos looked at California's 2010 marijuana-legalization 
measure, which made similar revenue claims, he concluded: "Proponents 
have grossly overestimated the marijuana tax's potential by 
downplaying, or simply ignoring, the complexities of enforcing it."

Mikos said that holds true for Colorado's amendment. It's just too 
difficult to predict how the various factors would combine.

The tax revenue for the Colorado amendment would come from two 
places. Marijuana stores-which would be regulated by the state - 
would pay state and local sales tax. The store owners also might pay 
an excise tax of up to 15 percent when buying marijuana froml icensed 
wholesale growers. The first $40 million collected each year from the 
excise tax would be put toward public-school construction.

The state legislature, though, would have to refer that excise tax to 
the ballot in a separate election, and voters would have to approve 
it. The measure's opponents cast doubt on whether it will be 
implemented. Even if it is, it could cause some marijuana sellers to 
stay underground and avoid the tax.

How much money comes in would also depend on the demand for legal 
marijuana, the number of people who choose to stay in the 
medical-marijuana system, where cannabis is not subject to a state 
excise tax, and the price of marijuana - which could plummet with 
legalization, said Beau Kilmer, the co-director of the Rand Drug 
Policy Research Center.

"If the taxes are set too high, you still have to worry about a black 
market," Kilmer said.

The Colorado Center on Law and Policy writes in its report on 
Amendment 64 that its estimate accounts for price drops and tax 
evasion, which it concludes won't be substantial.

"Legalization will reduce production costs that will offset the tax, 
so there is little concern about evasion affecting revenue," the report states.

A report this year by the National Cannabis Industry Association, a 
trade group for medical-marijuana dispensaries, found that 
dispensaries in 10 cities in Colorado in 2011 paid about $10 million 
in state and local sales tax.

Carnegie Mellon professor Jonathan Caulkins said some factors could 
boost revenue numbers. For instance, if Colorado becomes a hub for 
marijuana tourism, demand at marijuana stores would not only 
increase, but those tourists would also spend money on hotels, 
restaurants and rental cars.

"It's possible that could be a bigger impact than the excise tax," 
said Caulkins, adding that overall revenue amounts are unpredictable 
in both directions.
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MAP posted-by: Jay Bergstrom