Taxing marijuana

When Colorado voters in November approved marijuana for recreational use, they thrust lawmakers into uncharted territory. Passing the amendment that legalizes marijuana use, possession and sales was one thing; implementing it is something far more complex.

Not least among the questions legislators must wrangle with is how much tax to levy on the sale of marijuana. For this and all the variables at hand in the implementation discussion, there is precious little precedent by which to guide the process. Accordingly, lawmakers are left to shoot in the dark and hope for the best.

The Colorado House of Representatives this week passed a measure that would assess a hefty tax on marijuana sales: 15 percent on wholesale purchases and 10 percent on retail sales. There is room in the tax structure, which must be approved by voters, for the Legislature to adjust those rates by up to 15 percent.

These are high numbers with much leeway and, if approved by voters, could generate significant revenue that will go toward school construction as well as paying for the regulatory framework necessary to manage recreational marijuana in the state. That voter approval is a big if, though, and without it, the state will be left to pay for the newly required oversight and regulation out of existing revenue.

There is the additional challenge of setting a rate that is not so high as to drive the marijuana market back underground. If retail sales are so costly as to be prohibitive, there is little incentive for users to participate in regulated commerce. That would undermine the intent and implementation of the law allowing marijuana use and sales in Colorado.

Republicans are by turns grudgingly supportive of the notion of taxing marijuana sales but opposing too high a number. Other lawmakers, from both parties, rightly worry about finding the sweet spot that will ensure voter approval.

While there is a strong history of voters supporting so-called sin taxes on such items as alcohol and cigarettes, there is an equally strong thread of tax resistance in Colorado. Lawmakers from both parties must keep that tension in mind when setting the rates presented to voters.

This effort is made all the more challenging by the lack of data to use as guidance. Regulating and taxing marijuana is a tabula rasa in the policy realm, leaving lawmakers short a significant tool typically used in the formulating new laws: that of looking at what has been done elsewhere and modifying it to suit the particular policy landscape in question.

Colorado legislators and the task force charged with developing recommendations for implementing Amendment 64 are taking this challenge seriously and appear to be meeting it as effectively as is possible in an emerging policy arena. There certainly will be mistakes and things overlooked, and these will inform future efforts here and in other states.

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